Here’s an interesting article from Deloitte aimed at name brands that are losing market share to house-branded, private-label products. (I love reading articles like this, and perhaps you do too.)
The article advises brands that if they’re losing sales to comparable store products, they may wish to… reduce sales and coupon promotions?
Reduce reliance on price promotions. While price promotions remain an important marketing tool, if overused can steadily undermine your brand’s perceived value. Excessive promotions train consumers to wait for deals and shift the focus from product attributes to price – a shift that plays to the strengths of your private label competitors.
The full article stresses the need to push your product’s “uniqueness” over a store brand. But when consumers have trained themselves to buy on price, and then the promotional pricing they enjoy is reduced, what happens? To me, it seems logical that many of them may then turn to store brands if the price points are different enough. What do you think?
bpinargo says
When that happens I will turn back to Aldi, Trader Joe’s and Costco as my primary stores….and may only go to a traditional grocery store a few times a year.
christina23 says
there are very few product brands that I am so loyal to that I’ll buy regardless of price and it is getting fewer all the time. Another thing I’m noticing is that even the consumers who aren’t using coupons and who shop for what they need each week have a huge percentage of the private label brands in their shopping carts.
So to tell the manufacturers to reduce promotions and things seems counter productive in my opinion. That may have worked a few years back before the recession hit but we aren’t playing by the same rules any longer.
An example, I happen to like and use the Mio water enhancers and I watch carefully for sales and promotions to stock up. I prefer the Mio but will buy store brands if Mio isn’t on sale or no coupons available. They are flooding the market right now with promotions. One store in my area has store coupons for Buy 2 Mio get case of water free. They have had in store coupons for $1/1 and $1.50/1 and there is a catalina that is now in its second month of running. Also this week’s inserts had $1.50/1. Guess what I’m buying a lot of right now…Mio and when the coupons run out and my stash is gone if it isn’t on sale, I’ll buy the store brands until it goes on sale again.
Perhaps I’m in the minority but I seriously doubt it…
llamalluv says
It depends on the consumer’s motives, really.
A straight price conscious consumer is going to go for the cheapest offer, no matter what brand.
Prestige conscious consumers actually shy away from buying things that they perceive as “cheap” or inexpensive, so discounts discourage them from buying.
I’m more value conscious than price or brand conscious, and that extends to clothing and non consumables, such as appliances and vehicles. Even if I could get a deal on a luxury car, I would not buy because the maintenance costs (especially replacement parts) are higher than a mid-range vehicle. I cannot tell the difference (nor do I care to) between a Coach purse or one bought at Payless. I will pay a little more for Tide per oz because I know I can use much less than a value brand for better cleaning power.
snoopyfan says
Oh yes, JC Penney. How is that brand differentiation and customer training going for them??
uasklisa says
For me, it’s all about the price as long as the quality is good. I really could not care less about the brand name..with the exception of a very few items. Lowering coupon values will force me to the store brands. Many of which have coupons available on a regular basis!
Their philosophy may work in the bigger cities, but in the suburbs where the economy has taken an especially big hit they will not do well to employ this methodology.
nix12618 says
Don’t the name-brand companies make the store brands anyway? This article assumes that the store-brands are made by some “other” company other than the name-brand company, which, if I read it correctly somewhere, is not the case. If I am correct though, the name-brand companies make money when the store-brands sell don’t they?
Perhaps I am wrong.
Maureen32164 says
. . . with the article’s point that constant low-price sales promotions diminish a brand’s perceived value, but I don’t agree that lowering coupon values and scaling back sales promotions on branded products will win customers back.
I’ve been thinking about the issues raised in this post for days, and I have a mixed bag of thoughts on the subject. Warning – long comment.
To be fair, now that I am firmly rooted in the world of strategic and systematic couponing, my perceptions of product value have undergone a sea change and because of that, I don’t know that I am able to put myself in the shoes of a typical consumer. And even before I was a strategic coupon user and before the current recession, I was never a “prestige” consumer even if I made more impulse buys in the past than I currently do. I have always clipped Sunday insert coupons (although I used to get about 5% of the bang out of those coupons that I am currently getting), always stocked up when shelf-stable items were on sale, mainly ate fresh foods in season, and frequently purchased store brands. With strategic couponing, I am doing all those things, but buying more Sunday papers for the coupons, trading coupons, paying close attention to sales cycles, using Internet printable coupons, and taking full advantage of my stores’ coupon policies (learning I could use coupons on both items in a BOGO, use competitor’s coupons, stack a store with a manufacturer’s coupon, etc.). My grocery budget has been reduced by a good 75% over what it was a year ago, and I am donating a lot of what I buy. I am also buying more branded items than I ever purchased before because of the pricing strategies described in the Deloitte article.
The only branded non-food product I am loyal to is Secret deodorant. When other deodorants are free or nearly free with various promotion combos (store sale, coupon, special promotions, etc.), I buy them to donate, but not to use myself. I never pay full price for Secret, but I would.
Before I began couponing seriously early this year, I happily used Suave Professionals shampoo and conditioner and would occasionally splurge on Pantene when it went on sale. I am currently swimming in Pantene products that were either free or nearly free this summer at CVS and Publix thanks to sales + coupons (MQ and retailer) + other promotions (like get $10 ECBs wyb $30 P&G at CVS or B3G1 promotions at Publix in combination with store sales and coupons). My current perception of Pantene products is that they are good shampoos and conditioners that I would never, ever pay more than fifty cents for. That is the sort of perception shift that is making P&G panic, and I understand why they are desperate to reverse it. But even if P&G started issuing $.25/1 Pantene coupons instead of BOGO, $1/1, and $3/2 coupons and stopped all store sales, my perception of Pantene as a splurge product is gone forever. My new splurge hair product is Nexxus, and my “buy” price (again thanks to CVS and Publix) is around $2 or less after all deductions for a full-size product that normally retails for $10-12. If Pantene and Nexxus were only available at full price or a slight price reduction, I would go back to Suave Professionals in a tick.
In contrast, P&G seems to have preserved the perceived high value of Tide by not trying to compete on deep price cuts and promotions as other laundry brands have done. If asked by a pollster to name the best laundry detergent on the US market, I would say, “Tide,” without hesitation, but I don’t buy it because good brands of detergent are available for a small fraction of the price of Tide. I am currently well-stocked on 50-ounce bottles of branded liquid detergent that I bought at low prices ($1 bottles of All and $1.32 bottles of Wisk). Even though I don’t believe they are as good as Tide, they are decent products that get the job done.
I can’t recall ever seeing the 50-ounce bottles of Tide on sale for less than $4.99 (usually they’re on sale for around $5.99, down from $8.xx), and the Tide coupons can be hilariously low given the high price of the product (like the $.25/1 coupons that still show up in the P&G brand saver inserts). Tide has a very high perceived value among consumers, and the size of the Tide shelf space in all my local supermarkets suggests either people are still buying a lot of Tide despite the high price or P&G is paying stores a hefty premium for all that space in the hope that people WILL buy it. Maybe it’s true that P&G is paying a premium to maintain the space in the face of falling sales because I have notice some better-than-usual Tide coupons lately (like $2/2 Tide liquid).
I still have a few indulgence foods (Fage Greek yogurt because store brands don’t even come close to the quality) that I will pay full price for, but my savings are so stunning on everything else that I can absorb those few preferred, higher-price foods and maintain a grocery budget that is a small fraction of what it used to be. If a strongly-favored branded food is shelf-stable (Newman’s Own lite balsamic salad dressing, Ken’s lite olive oil dressing, Hellman’s olive oil mayonnaise, and Kashi GoLean cereal are some of mine), I save coupons, wait out the sales cycle, and stockpile when the price is at its lowest point in the year (e.g., summer months for salad items).
Even if manufacturers adjust their strategy and the future sales of branded items are not as good as they are now, I would still stockpile my few branded favorites when the price is lowest because value perceptions involve more than price. Fage yogurt makes me very happy, so I pay as much as $6.99 for a 35-ounce gram tub (that’s the “value” size, and it occasionally goes on sale for $5.99 – coupons are rare). I don’t like most bottled salad dressings, so the two I do like are must-haves. I love Secret deodorant.
But in my experience, many private label products are just as good as branded products, especially staples like sugar, vinegar, salt, molasses, oatmeal, etc. Also, I mainly shop at Publix, and their private label products are excellent, so that plays a part in my buying decisions. In fact, they frequently run “Buy theirs, get ours free” promotions to show people just how good their products are compared to branded products. I could not tell the difference between their bran cereal and Fiber One or between their applesauce and Motts in some recent promotions. Some private-label products in other chains are not quite as good as branded products for me (or as good as Publix brand), but if the quality difference is very minor, the lower price is adequate compensation and would prevail.
For me, the revelation of serious couponing has been that branded products can be had for much lower prices than private-label counterparts with the right sale + coupon combinations, in which case, my grocery savings have been higher of late when I buy brands. But I am not, for 99.9% of the items I buy, developing brand loyalties even if I love the products (to the regret of manufacturers who offer sales and coupons for that purpose). If brand manufacturers lower coupon values and cut back on store promotions, my shopping strategy will remain what it is – to buy items I perceive to be the best value, and for me, that equation does not include many branded items at full price or at a price reduction that is still higher than a good private label counterpart.
I should note that sale + coupon combos have exposed me to many products I have come to love and would never have tried at full price, like Birds Eye Voila Sweet and Sour Chicken. I would never pay full price for it ($5.89), and I first tried it on a BOGO + coupon deal that made nearly free, but I have bought it several times since that first sale, and I would buy it again on a decent promotion that dropped the price to around $3. If it never goes on sale again, I’ll live without it.