Minimize consumer confusion
Not all that long ago, private brand options were limited to knockoffs of the best-selling national brand items. Consumers could save a little money by opting for the store brand but often had to settle for less than national brand quality.
But retailers’ store brand programs have grown increasingly sophisticated in recent years. National-brand-equivalent (NBE) items have realized significant quality improvements. And in many stores, these items are no longer the only store brand alternatives on the shelf. Premium tier, value-tier and niche items also can be found within retail banners boasting a multi-tier private brand program.
The consumer perspective
On the plus side, multi-tier private brand programs do give consumers freedom of choice when it comes to a price point that fits their needs. But do consumers truly understand a two-tier, three-tier or three-tier-plus structure?
They likely do not, suggests Lauren Beitelspacher, Ph.D., assistant professor in the Marketing Division of Babson Park, Mass.-based Babson College.
“When stores add multiple layers to their private label strategy, it’s confusing to customers from a quality perspective,” she says. “By designating one brand as ‘premier,’ it minimizes the quality perceptions of the other private brands the retailer offers.”
Consumers might also have a less-than-clear understanding about the price/value relationship among the various tiers, as many retailers do not adequately explain it, says David Ciancio, senior customer strategist for global customer science company dunnhumby. Even when retailers position their private brand tiers clearly from a price standpoint, efforts around the other three “P’s” tied to brand marketing — product, placement and promotion — often muddy tier-related consumer perception.
“One retailer offered a premium line of private branded ice cream but frequently promoted that top-tier line at prices that matched or beat both the lower-quality branded and mid-tier private labels,” he offers as an example. “So consumers didn’t trust that the quality was truly ‘best’ in the category, which undermined the position of the premium tier not only in that category, but also in others.”
The number of tiers also impacts consumers’ understanding of a multi-tiered private brand program, suggests Todd Maute, a partner with New York-based brand agency CBX. While they might get the gist of a two-tier program, consumers likely will struggle in understanding a three-tier or three-tier-plus scenario. But few categories would have private brands representing three separate tiers, he contends.
Of course, consumer understanding also varies according to the retailer and the marketplace, Maute stresses.
Also compounding the problem is the fact that the consumer packaged goods (CPG) industry is in “a season of SKU proliferation,” says Susan Viamari, vice president of thought leadership for Chicago-based market research firm IRI.
“There are so many options on retail shelves these days,” she notes. “Consumers are bombarded with marketing messages throughout the day. But when they’re not relevant to the shopper, they cause confusion and even disappointment.”
Enhance clarity
Retailers could reduce tiering-related consumer confusion in a number of ways. To begin with, Beitelspacher contends, they should develop each private brand completely on its own.
“To create a premium brand, for example, retailers should market and position it in the same way they would a premium national brand,” she says. “They should not use a family branding strategy.”
And they need to clearly communicate the good, better or best message tied to each tier, Ciancio stresses. This effort becomes even more important when a private brand newly launches.
This messaging goes hand in hand with marketing efforts. As Maute points out, there often is a lack of marketing support for private label, and packaging, merchandising and pricing are generally retailers’ primary marketing tools here.
On the pricing front, Maute also cautions retailers to be consistent. For example, if a retailer’s product is positioned as a match to Tide detergent but is priced at 50 percent less, consumers will tend to erroneously view that item as a lower-value offering.
Storytelling that goes beyond the basics also can be effective in minimizing consumer confusion, notes Mark Singleton, vice president of sales and marketing for Rudolph Foods, Lima, Ohio. To be effective here, retailers need to address consumers’ desire for the authenticity they associate with certain mainstream products.
“Store brands with strong backstories and real brand attributes will capture the attention of today’s consumer,” he says. “This also gives store brands the opportunity to differentiate themselves from their larger CPG brand competitors in the eyes of shoppers.”
Rethink the structure
If the multi-tier structure is not working — and efforts to build clarity among shoppers aren’t helping — it might be time to pare it down.
“Too many tiers or too many private brands can be counterproductive to building loyalty to a retailer,” Ciancio states.
He points to UK-based Tesco as one retailer that went a bit too far with its own-brand tiers, In addition to its value, NBE and premium tiers, the retailer introduced free-from and organic brands. That was all well and good, as Tesco marketed the brands well, but subsequent launches of dozens of other private brands positioned between the “good” and “better” tiers weren’t so well received.
“Shoppers became confused about the broader tier and brand strategy,” Ciancio says, “and the differentiation to competitors was lost.”
And consumer relevancy is critical when it comes to any private brand tiering strategy.
“Issues arise when the assortment of products isn’t relevant to the shopper,” Viamari stresses. “Private label marketers need to invest to understand what their shoppers want, how much they will pay [and] what types of packaging/attributes meet their needs. Really, less is more, but the products that are there must be the products the shopper is looking for.”