Question

1. Define a private label brand, 2. Describe the role that they play in marketing and 3. Discuss why private label is a threat to branded products and services. Give an example of a private label brand that you have used/consumed in the past. Compare the quality and price with a leading brand alternative.

Answer 1

A private label product is manufactured by a contract or third-party manufacturer and sold under a retailer’s brand name. As the retailer, you specify everything about the product – what goes in it, how it’s packaged, what the label looks like – and pay to have it produced and delivered to your store. This is in contrast to buying products from other companies with their brand names on them.

For example, Target sells a variety of branded snacks from companies like General Mills and Frito-Lay, but it also sell its own chips and crackers under the Archer Farms brand – Target’s private label brand.

Hair salons often create their own branded line of shampoos, conditioners, and styling products for their customers to buy and take home. Restaurants often decide to private label condiments or mixes that have become popular with customers. Maid services could private label a line of household cleaners and pet stores could private label a line of pet foods and grooming tools.

The growth of retail is both due to and the reason for the changes in the consumer lifestyle and buying pattern. The success of a retailer would lie in his ability to attract, engage and retain the customers. Private labels are one such tool to build competitive advantage through creating cost leadership. In building customer relationship, the Private labels provide a win-win solution. The retailers gain better bargaining power over their suppliers and better margins while the customers get a wider choice of prices

1. High Margin: The advertising and promotional costs are done away with the private labels and so they offer high margins.

2.      Customer Loyalty: If the private labels are assuring quality products, the retails ensure a high degree of loyalty. Studies have also shown that private label buyers are more store-loyal and not as easily influenced as brand buyers.

3.      Differentiation: The private labels provide the retailers with an opportunity to come out with unique products that cater to the local tastes and preferences. Thus they can differentiate themselves from other stores.

4.      Better Bargaining Power: A successful retailer with private labels can leverage his margin and is in a better position to negotiate with his suppliers of branded products

While low-priced competitors are a common threat around the world, it is only now that private label is becoming accepted outside Western Europe. The success of private label has primarily come as retailers have seized the opportunity to create strong brands of their own.

Good quality products and lower prices have been a successful recipe for European retailers such as Tesco, Carrefour, and Auchan. Today, own-label brands often comprise the majority of volume sold in many packaged goods categories.

Tesco is particularly notable for its reliance on market research to drive its business. The company relies heavily on analysis of shopper behavior — both visual and using shopper loyalty card data — conducts in-store research and intensive product testing. Other retailers are beginning to emulate Tesco's approach, eroding brand marketers advantage as the voice of the consumer.

However, growing retail power has added a new dimension to successful marketing of branded goods. Marketing today requires a win, win, win: a win for the consumer, the retailer, and the manufacturer.

The challenge for brand marketers is to stay ahead of the retailers in terms of innovation, while maintaining a strong relationship with their end-consumer. Increasingly companies like P&G and Kraft publish their own consumer magazines

Searching “sparkling water” on Amazon Prime Now today gives you two options for twelve-packs: 365 Everyday Value brand water, priced at $3.99, and LaCroix, priced at $5.69.

From beverages to apparel to pet food and other categories, customers are prioritizing price in their buying decisions, and trusting retailers that the products they offer will be made as well as — if not better than — their brand competitors.

Price — not quality or brand — has in the last several years become the top factor influencing consumer choices when it comes to beverages, most prominently alcohol, bottled water, and caffeinated drinks.

and maintain databases, which allow them to communicate directly with their most loyal consumers.