BRANDS VS
Private labels
HBR ARTICLE
Just because you are
paranoid doesn’t
mean they are not out to Get you
Well…………This was reaction of Brand-Name Manufactures to competion from private labels.
At times there is a reaction &
At times it Goes over
The over reaction comes when one of the two things are forgotten………
Firstly…..Private Label strength
varies with economic
conditions.
*Secondly… Brand Manufacturers can
control Private Labels.
Threat such as what follows threatens…….
Classic cola ,offered at 20%lower cost , had 65% share at Sainsbury & 15%at UK Market.
An over reaction or an under reaction is
not the Solution.
Managers should consider……
Lifetime of private labels whether it will grow or fade
Strength of Brand Name which is far
from dead.
Threats since 1990’s global context……
Narrowing gap btw Private Labels & Brands
Development of private label lines
Emergence of new channels such as mass merchandiser & e-commerce favors private labels
INDIAN CONTEXT……..
Private labels are at a nascent stage in India
Influence of retailers is huge and they favor it due to higher profitability
New channels such as e-commerce favor private labels such as Myntra
But the quality served by private labels is almost equivalent to the ‘ Kirana Stores’ we generally buy from
The private labels employ western ideas considering what favors the organization & not what Indian consumers desire
Thus….
Private Labels have way to go in India……….
&
Returning to global context……………..
These threats doesn’t mean an end to Brands !
- HBR CASE: What are brands good for ?
How can we forget the Brand Power?
Brand Power is
territorial
ownership of
values with the
ability to
influence masses
Strength lies in its name : It has a running start
Purchase process favors brand name
product.
Brands have value for retailers as
these are the traffic building agencies.
What would be more convenient , some retailer
argue, than to have consumers remember a
single store name
Retailers can’t overemphasis
on Private Labels
After all these……
Still Brands are tempted to enter Private Label manufacturing arena in order to…..
Use excess capacity
Invariably use private label opportunities to increase profitability
Consequences faced !
For manufacturers seeking only to use
excess capacity ,Private
Label Production can eventually become
narcotic
Supply of private-label goods in categories that are life blood of manufacturer’s branded sales
fate of the company…….
Company’s strategy becomes
confused &
it cannibalizes its brand name
products
After the pros & cons , what should a Brand
Name Manufacture do
?
The only recommendation
is……….
If you Don’t , Don’t start
Then, how to stem any further share gain by Private Labels ?
Whether a Dual Manufacturer or National Brand Manufacture only….
Follow the following…….
Invest in Brand Equity
Consistent investments
in product improvements raises costs
to Private Label Imitator
.
Innovate Wisely
Say ‘ NO’ to worthless
trade extensions
Use Fighting Brands sparingly
They take away purchasers of National Brands & rarely make profit.
Build Trade Relationships
Know about your end
customers, more than
anyone else.
Manage the Price Spread
Knowing the shape of your brand’s price
elasticity curve is
essential for smart pricing & maximizing
profit.
Exploit Sales Promotion Techniques
Enhance merchandisin
g of Brand
Manage Each Category
What works for
detergents, wont
necessarily work for soft
drinks.
Use category profit pools as a performance measure
Brand’s objective
should be to maximize
overall category
profit pool & its share of
that pool.
Take Private Label Seriously
Brands should
include in their
marketing plan on how
to limit Encroachment of Private
Labels.
Private Labels
Taking firm considered action, Brand-name manufacturers can
successfully fight
Private Label Challenge
RECAP
Stem Encroachment
by Private Label by
Innovating Wisely
Sparingly usage of Fighting Brands
Investing in Brand Equity
Managing Each
Category
Managing the Price Spread
Use category profit pools as a Performance
Measure
Take Private Label
Seriously
Building Trade
Relationship
Exploiting Sales
Promotion tactics
DISCLAIMER
Created by
Khushi Sahu
IIT BHU,during an internship by
Prof. Sameer Mathur, IIM Lucknow.
www.IIMinternship.com