Do brands need to reward consumers to keep them?

November 11, 2009

Did CPG brands give private labels an inch, and they took a mile?

Did CPG brands give private labels an inch, and they took a mile?  

Let’s look at the evidence:
Fewer than four consumers in 10 say name brands are more reliable (37%) and better quality products (39%) than store brands.  More than eight out 10 (84%) believe name brands are more expensive.

Therefore, consumers who are “buying more private label brands say they won’t return to name brands in the foreseeable future,” report The Integer Group and M/A/R/C Research, who are jointly conducting a year-long shopper experience study.

The solution is twofold for name brands, suggests Randy Wahl, executive vice president, M/A/R/C:  “Deliver consistently on brand promises, and offer financial rewards such as coupons and discounting.”

Wow. These firms are raising a yellow flag and saying the situation is more dire for name brands than most experts are discussing. They’re saying that most consumers no longer perceive a quality advantage in name brands, so why pay more. “Almost eight in 10 shoppers report seeking products on sale and comparing prices between name brands and store brands when buying groceries or household products,” notes Craig Elston, senior vice president, The Integer Group. “Name brands need to act now in order to keep consumers—and beyond the recession, entice consumers to return.”

Without price incentives, they say, these consumers may be lost to private labels indefinitely. We’re not so sure we agree with this at Certainly, private label has potential to grow in the United States; look at the higher shares in parts of Europe.

But that day could only come when retailers more consistently offer enticing private labels. When they market them as brands rather than price alternatives. When they innovate and grow categories, rather than leach on the backs of name brands that bring new users to product types. And when, in a period of economic prosperity, it is demonstrated that consumers willingly continue to choose store brands over name brands. That’s not yet the case.

We believe the interpreters of these survey findings might be getting ahead of themselves when they suggest the abandonment of name brands is near—when the plain fact is, financial conditions are driving the trial and possibly the repurchase of private labels today. To us, this doesn’t mean they’re beloved or that people will stick with them once they have more dough in their pockets, and freer financial choice again.