McKinsey research: Winning over consumers for the long term

Price has always been a differentiator for private brands when it comes to competing against bigger brands, yet its importance became even more apparent during COVID-19. With millions of American consumers being impacted by layoffs or furloughs during the pandemic, spending decreased and consumers were more mindful of their purchases. McKinsey’s findings showed that 30% of those who tried new products during COVID-19 did so because of better prices or promotions, with an additional 25% doing so because the new product offered a better value. To keep these consumers in the “new normal,” private label brands should maintain their price offerings and emphasize the value their products offer compared to other brands. With the economic fallout expected to continue for months, if not years, this will be a way to win over permanent consumers and cultivate long-lasting brand loyalty.

Shoppers were also drawn to brands and retailers that supported their employees during the pandemic, such as increasing wages, giving extra sick leave, or repurposed their facilities to help slow the spread of the virus. In the U.S., 27% of consumers cited this as a reason for switching to a new brand. To keep these socially conscious consumers, private label brands should lead with authenticity, boldness and purpose. Brands with a core purpose are much more able to create effective messaging and stand out from the other brands that they share shelf space with. This also allows them to create unique labels and product messaging, which helps consumers connect with brands on an emotional level and get a better understanding of the brand’s message.

Private label retailers should also emphasize themes around hygiene and be transparent about their hygiene practices. Our research found that 79% of consumers intend to continue or increase their usage of self-checkout in retail after COVID-19, with Millennials and Gen Z being the biggest adopters of contactless activities. For private label retailers, this means having clear signage at the front of the store that explain the store’s hygiene practices and actively demonstrating the store’s cleaning practices, such as wiping down carts after each use, spraying checkout lines and having all employees wear masks. If possible, private label retailers should install a few self-checkout lanes to cater the needs of those customers who are looking for contactless checkout.

As private label brands create the blueprint for navigating the next steps of the COVID-19 crisis, it is important that they take the lessons learned from the new consumer behaviors that emerged and incorporate them into their plans. However, perhaps the most important piece of their blueprint should be sticking to their core and serving as an alternative to more expensive brands. Economic recovery will not occur overnight, so private label brands should maintain their “price-friendly” image and showcase the value they can bring to consumers. This will go a long way in creating brand loyalty that will go far beyond the pandemic.