Just looking at the many challenges that the US has encountered over the last several years including the dot com bust, Wall Street’s meltdown, corporate scandals, recession and layoffs, SARS, trade wars, wars in Afghanistan and Iraq, government budget deficits, and tensions with EU countries, one can begin to realize the pressures that have been exerted on its leading national brands. From Coca-Cola to Tide to Bounty and even Johnson and Johnson, the biggest and most respected category leading brands have been feeling the pinch of a highly interconnected, rapidly changing and volatile competitive landscape. Literally no major brand is immune. Even mighty P&G has had taken the unprecedented step of reducing its brand portfolio by up to 25% to help it deal with the new market realities. But, with the turbulent competitive landscape finally looking manageable, another, possibly more significant, challenge is on the horizon that could change the nature of the “brandscape’ completely: the rise of private label brands. Known as “house brands”, “no-name”, “generic”, or “retailer’s own”, these brands have been around for decades- usually eeking out an existence with their poor packaging, no marketing support, basic quality, and reliance on price competition. They were commodities- no real competition for the mighty national brands with their sophisticated marketing campaigns, brand management systems, advertising budgets, and fancy packaging. The key word here is “were” commodities. Not any more. And this is the hurricane on the horizon, or the paradigm shift, that could be the single biggest challenge national brands have ever come up against. And the signs are everywhere that this reality is well under way.
Already, for the last decade or so, successful private brands have been turning to brand marketing and management as the key tools to elevate their products to the next level- and it has been working. In Canada, Supervalue’s President’s Choice house brand has taken category leadership away from some of the mightiest brands there are in everything from biscuits to orange juice to cola to salty snacks (chips, peanuts, etc.) to candy and chocolate. How? By a focus on brand marketing, quality and innovation. The packaging is not the black and white, cheap-looking “no name style”, but is high quality, message and personality intense, integrated with the marketing platform (usually innovation and quality), and core value based. Strategic use of integrated communications has also been used with great effectiveness including image and informational advertising, relationship marketing programs (in–store cooking schools, demonstrations, taste testings, samplings, mailings), PR (including a President’s Choice Magazine), in store promotions, tie-ins, and couponing. The results have been significant- yet, entirely predictable for brand marketers. What surprises me is that after a decade of warnings, many national brand CEO’s suddenly seem shocked. But why should they be? It has been known for decades by leading brand managers that brand marketing actually works- apply the principles correctly, with skill and diligence, and the brand becomes successful. No surprises.
For me, the reaction of the leading national brands is like being surprised by the fact that a plant sprouted after someone planted some seeds in dirt and regularly applied some water. The fact is that private brands, after watching the bounds of success and benefits experienced by many national brands over the decades (including higher prices, profits, guaranteed marketshare, strong customer loyalty, and “power”), also want their piece of the pie. And have realized, like any smart brand builder, that price alone is not the way to achieve it- a brand marketing orientation is. Thus, we are now seeing the en-masse equipping of private label brands with brand management systems, brand managers, and marketing strategists- and the national brands getting ready for the possible fight for their lives over the long term. For me, the scariest thing about this whole situation is not just the private labels’ adoption of a brand marketing orientation, but the integration of this tool with the many other advantages they already possess and intend to continue to use. What are these other advantages? Knowledge of their markets; guaranteed, low/no cost, premium shelf space; powerful, low cost and established distribution channels; large financial resources; known corporate brand names to leverage off of; and the ability to “shut out” national brands from their shelves if they decide to. Private brands have learned their lessons the hard way over the decades- mostly by losing ground to the “branded product”. But this has also been a blessing, as by watching and learning from the sidelines one can see where mistakes are made and what forces are at play. For instance, without the national brands’ budgets, private labels have been unable to use the “fire tool” their branded competitors have relied exclusively on for so long- massive national advertising campaigns. In theory, if P&G wanted to sell more Bounce, they would just go out and spend $100 million on a new ad campaign. And viola! They would sell a million- at least that’s how they would interpret things. So, without this “magic fire tool” at their disposal, private labels had to find another way to sell product- usually price. And that’s where a big part of the learning curve was developed- private labels came to understand the price game (both its great limitations, dangers, and benefits) better than anyone else (especially the national brands). At the same time, the few private labels that focused on early forms of relationship marketing (like Supervalue) got to learn its powerful advantages and became experts in its skilful usage. Better, yet, is the fact that all private labels have witnessed the common fallacy of “advertising cures all”- without using their own money. Private labels like Wal-Mart’s Sam’s Club and President’s Choice have watched the likes of Tide, Purina, McCain’s, Tropicana, Nescafe, and Kleenex pour mountains of money into ads that seemed to do less and less for their brands every day. And they quietly noticed from their privileged perch that this reality seemed to be getting worse. And they were right. The mighty, magic “fire tool” that the national brands have depended on for so long has in reality been weakening by the hour due in part to: the increasing segmentation of media vehicles (more channels with less reach) CAUSING “SPLINTERING” OF REACH & FREQUENCY; the cluttering of messages with so many vehicles; the fact that advertising’s credibility is very low; and the reliance on and proliferation of creative gimmicks and “look” that has both numbed/de-sensitized the consumer and done little to build brands and brand-consumer relationships of substance.
With this reality, and the implications it has in regards to removing from national brands a historical key competitive advantage, it is safe to say that “the playing field has become close to being levelled”. With the news that private labels are en masse taking on a brand marketing orientation clearly tells us that the playing field is levelled. Taking into consideration the assets and competitive advantages that many private labels have in terms of knowledge (industry, market, and consumer), price, guaranteed shelf space, channel advantages, finances and resources, etc. and some would be tempted to say they may eventually have the playing field tilted in their favour. Especially with the news that many of the top national brands, to stay in business, now often produce the products for the private labels they compete against. That’s right- the private label taco chips just may be the same ones in the Doritos or Old Dutch bag! The same with batteries- the Sam’s batteries just may be off of the Energizer or Duracell lines, but at half the cost. The result of all of this? The national brands are worried and have been for some time- if they are smart. The new brandscape reads very clearly: “No-Name- No More!”
Does this mean that the mighty Tide, Energizer, Dove and Coca-Cola are done for? No, not at all, but it does mean that more than ever the successful brands will be the ones with the best brand strategy behind them (with the “givens” of operational efficiency and innovation assumed) and strongest brand-consumer relationships. For P&G, and the like, to guarantee having strong brands against the new private label onslaught will involve understanding more than ever the key drivers of their brands and brand-consumer-market and society relationships. And brand evolution. Instead of just throwing out an ad campaign to build relationships with consumers, brands like Tide will have to go far deeper into consumer behaviour to the point of understanding how they learn about the brand, think about it, emotionally relate to it, incorporate it into their lifestyles, and interact with it. They will have to discover where the complex patterns of brand-consumer-market-and society interaction occur. Literally, where the actual brand contact points exist across multiple dimensions and how they work both individually and together to create the desired brand identity, experience, promise and emotional bonds. National brands will also have to discover how they address key goals of consumers; and how they are used by them to achieve these goals. For instance, a large part of Starbucks’ success is due to it realizing from day one that its brand and products were not just solving consumption needs…but in fact had a far deeper role in the lives of their consumers. In an age of stressed-out, on the go, over-communicated, time-short, dual working families, the two biggest goals are for “decompress” or “recovery” time and a chance for “self pampering” for “me”. Starbucks exactly manages to allow its customers to fulfill both of these goals with incredible convenience and with little time required. In reality, Starbucks is sort of a “pampering” and “decompress” “pit-stop”. And does so with complete differentiation, a unique personality, and a great sense of style that are all matched by the innovation and quality of their products. Not to mention the usual pleasantness of their staff. Starbucks truly is a functioning brand that has achieved great benefits - without even so much as a single advertisement - that the national consumer product brands should learn from. With the right skills (brand marketing wise) anything is possible.
As for the private labels? Achieving any great victories against the entrenched national brands will be no cake-walk. It is one thing to have a big stick- and another to know how to use it effectively. I akin them to being like a small child with a “hand grenade”- without the proper guidance and skill to show them how to handle their new advantages and marketing technologies, they could not only take themselves out but others in the vicinity. For a good case study, one only has to look at the infamous “Marlboro Friday” back in 1993 when Phillip Morris foolishly slashed prices on its cigarettes 40% (in an attempt to fight off encroaching generics and smaller brands) and the resulting chaos, financial losses, category destruction, and general market instability this created. The same scenario could be waiting with the private labels if they do not understand their proper place in the market and their obligation to create well placed/positioned brands that add stability and balance to categories, as opposed to all-out brand and price war instigation. Phillip Morris now realizes that its outrageous price slashing was the reaction of an amateur desperately lashing out at the enemy- a primal, reactionary, commodity-oriented and non strategic act of desperation –as opposed to the skilful “moves” of a brand strategy leader. In retrospect, what PM should have done is first address the price-based competitive inroads of the generics and private labels via brand architecture as RJR so successfully did…launch non-associated (non PM branded) attacker brands in the same price range (just slightly below the generics’ price) to go head to head with them on price. Such a strategy would remove their price sensitive customers, financially marginalize them, and would seal their fate by positioning/dragging them further into the “commodity abyss” from which there is no return. Sort of like what Sergio Zyman at Coke did when he used Tab Light to take down Crystal Pepsi.
I, personally, would go a step further and attack them on a front where they have no resources whatsoever and is probably where both their greatest weakness and PM’s greatest strength lies: the emotional and relationship aspect. This is where brands ultimately have their greatest power over commodities. Hence, I would simultaneously launch strategically designed brand marketing campaigns and initiatives (within the constrains of the tobacco advertising laws) for my key core brands like Marlboro. These campaigns would involve relationship marketing, geographic marketing, pr programs, strategic communications, etc. that would only strengthen the most valuable core brands’ status as:
-essence and core value based personalities, thus being unique and highly differentiated
- serious, focused and original branded products (as opposed to imitations) with strong emotional aspects at every touchpoint
- literal promises of quality, innovation, and trust
- lifestyles and a way of life
- vehicles to achieve personal goals with
- standard setters
- being the basis for/at the very heart of quality and rewarding relationships
The marketing initiatives most importantly would make the brands more deeply emotionally attached to their consumers, and vice versa- the real power of the brand. In reality, Marlboro does not get its power from price, attributes, or quality, but from its unique and differentiated personality, emotionally based relationships at every contact point, brand promises, and lifestyle offered- based on the “wide open spaces”, “cowboy lifestyle” and “freedom”. It should never have allowed the generics to trick it into “giving all of this up” (abandoning its very basis for success and key brand assets) in favour of a trench price war that commoditized it. It’s sort of like blowing up your home to get rid of a mouse problem; and Marlboro has never been the same brand since. Indeed, brand strategy skill would have stopped this from happening and the generic and private label cigarette brands would be long gone by now- or at least regulated to being in the “clearance bin”. Most importantly, the destabilization of the entire industry and the significant consequences financially, brand wise, and in terms of competition would have been minimized and the fallout no where near as destructive.
The private labels must also be prepared to actively engage and conquer the other main traps awaiting them as brands including:
- too much reliance on product attributes, innovations, and price which can easily be copied as opposed to emotionally based brand-consumer relationships
- not developing strong consumer insight capability
- dismissing essence and core value basing
- failure to create strong emotional ties at every brand contact point
- inconsistency of tactical and strategic applications
- arrogance
- settling into a “status quo” and “path of least resistance” thought mode (brand wise)
- over-use of line extensions
- falling into reliance on advertising
- failure to brand plan
- lack of dedication to brand evolution
- failure to continue to generate and evolve deep brand-consumer, market and society relationships
- making marketing change for change’s sake
- flooding the shelves with unfocused and non core-value based product in too many categories
- failure to constantly ask themselves “what business” they are really in
…these are only a few of many traps.
But, probably, the most important trap they must avoid is: not progressing and continually updating their brand marketing knowledge, skill, and capabilities. Even the mighty Kellogg School, in its marketing consulting practice which has worked with some industry leading brands, warns that all of the brand building and marketing firepower that it can equip a firm with are no guarantee of success when the firm is examined over the years. In a study of numerous clients, Kellogg reported that the results were “variable” and the main reasons for this revolve around the correct and dedicated implementation of the brand marketing knowledge, and the continuous dedication to marketing excellence. Companies that did not possess this simply did not generate the benefits and success rates that could have been expected and readily achieved. A main quote that sticks in my mind from Kellogg on the relentless pursuit of marketing and brand building skill, that sums up what the private labels must strive for, is: “The better you are at Marketing, the better you have to be” .
If the private labels truly dedicate themselves to an educated brand strategy orientation, and its continued implementation, generation and evolution, then for sure the new mantra for the next brandscape saga will surely be “No-Name- No More”…
-Stefan Paul Jaworski, Masters Degree Marketing, is Partner and Brand Officer with Studio X Branding-Temporal Global Brand Consulting- a 20 year old, leading global/multinational Brand Marketing Consultancy serving the USA, EU, Canada & Asia. Clients have included Coca-Cola, Anheuser- Busch, FCB, CP Rail, Citibank, Burger King, Motorola, Panasonic, Ralston Purina, Hewlett Packard, Apple Computers, Bosch, John Deere, JBL, Exxon, and Microsoft.
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