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Variety of Brands and its impact on Retail
(a) brands which offer increased compatible variety are perceived as having 2 . symbol. Brand variety depends ony y y y y y Corporate slogan Products and services Product names Product features Positionings Marketing mixes (including pricing. A brand can take many forms. The word brand began simply as a way to tell one person's cattle from another by means of a hot iron stamp. or design. sign.it affects the personality of a product. media and advertising execution) These differences will depend upon: y y y y y y y y Language differences Different styles of communication Other cultural differences Differences in category and brand development Different consumption patterns Different competitive sets and marketplace conditions Different legal and regulatory environments Different national approaches to marketing (media. symbol. service. enhances their perceived quality and purchase likelihood. color combination or slogan. service or company (name. company or service.Variety of brands and its impact on Retailer Brand A brand is the identity of a specific product. or combination of them) and how it relates to key constituencies: Customers. distribution. Six studies support this proposition and demonstrate that compared to brands which offer fewer products. in turn. pricing. distribution. Brand is the personality that identifies a product. The Influence of Product Variety on Brand Perception and Choice We propose that the variety a brand offers often serves as a quality cue and thus influences which brand consumers choose. term. or business. etc. sign. Staff. Specifically. including a name. The word brand has continued to evolve to encompass identity . brands that offer a greater variety of options that appear compatible and require similar skills tend to be perceived as having greater category expertise or core competency in the category.) IMPACT OF VARIETY OF BRAND ON RETAIL1. which. Investors etc. Partners. A legally protected brand name is called a trademark.
while 22% claimed to increase assortment options an average of 3%. region. even among consumers who select options that multiple brands offer and (d) product variety also impacts post-experience perceptions of taste. shrinks shelf space so other areas of the store can be larger (33%) and keeps up with other retailers who are doing it (4%). One-third of retailers claimed to have maintained the assortment status quo. In 2009. high profitability/cost savings (52%). Despite media hype anticipating double-digit assortment decreases. category and brand. The findings suggest that in addition to directly affecting brand choice share through influencing the fit with consumer preferences.higher quality. Sixty percent of retailers indicated they downsized to alleviate shopper confusion. makes more room for store brand products (48%). 3 . Too Much Choice and Variety: Assortment Realities What size is the right size to downsize? Assortment challenges vary by format. (b) this effect is mediated by product variety¶s impact on perceived expertise. four out of ten food retailers surveyed claimed to have decreased assortment roughly five percent on average. the actual total percent of item changes for the year across major categories in the grocery channel averaged a very reasonable 1%. provides better inventory control (71%). (c) the higher perceived quality produces a greater choice share of the higher variety brand. but the objective is the same: satisfy the shopper need for choice and innovation without drowning in an unmanageable sea of SKUs. There were many reasons fueling the frenzy. 2. product line length can also indirectly affect brand choice through influencing perceived brand quality. The other reasons cited were mostly internally-driven operating decisions including: gives better facings/merchandising (75%).
water (-6%) and shampoo (-4%) categories. certain segments saw their product counts increase. weighing competing pressures from consumers. 23 experienced an average decrease of 2% in the number of items offered. or plan reductions of up to 10% of all SKUs on the shelf. In the midst of economic malaise. not all categories are created equal. 4. avoiding cutbacks. Even as redundant products were eliminated. Store brands enjoyed a 2% expansion over the prior year. When More is Too Much The old school assortment philosophy summed up by one retail executive was simple: ³bigger. The biggest losers were the cookie (-8%). According to the Nielsen study. assortment smartly? More than 90% of retailers who claimed to 4 . More than half of those retailers surveyed in the 2010 Nielsen Retail Assortment Survey claim to have. Concurrently. while premium national brands held their own.3. some added SKUs and some lost items. of the 32 categories analyzed. manufacturers and retailers. Many began aggressive SKU rationalization efforts to decrease overhead costs and reduce in-store clutter. the biggest winner categories expanding SKU count included carbonated soft drinks (up 3%). The Variety of Brand Reality When it comes to downsizing. each growing its product roster by 6%. which saw the highest number of items removed from the shelf. retailers found an overwhelming number of consumer product choices at odds with delivering customer value and profits. bigger²how much money can I get for new items?´ This ³more-is-better´ approach eventually evolved into a ³more-is-too-much´ outcome. 5. Working Smarter Variety of brands downsizing is a difficult puzzle.e. The major question faced by retailers is simple: how do we cut variety of brands i. shower gel and yogurt.
It is essential to trim variety of brands counts by eliminating non-incremental items. 5 . And retailers should be concerned: over half of the respondents (in our 2010 Consumer Shopping Survey) said they are less likely to shop a retailer if they perceive a decrease in assortment. However. expect to see a continued SKU rationalization effort targeting economy brands. One executive described these moves as ³one big draconian flow-through´ designed to get ³rid of low hanging fruit. 7. interlinked chain of decisions balancing manufacturer and store goals with consumer needs. then it is essential to trim SKU counts by eliminating non-incremental items. as well as a closer analysis of store brand offerings with an eye on possible expansion and a revamping across categories that have suffered sales losses as a result of overly drastic changes. Taking products off a shelf might impact category or aisle sales positively or negatively and the interaction of products on the shelf must be taken into account when choosing where to delist. but to also provide a cleaner shelf for consumers without creating customer frustration. On one hand.5 billion in sales. Nielsen analyses show that not all categories actually benefit from store brand expansion. while almost 70% targeted third and fourth tier brands. And a well thought-out assortment strategy can make a big impact. 6. Shopper Reaction Assortment is a complicated. Focusing on distribution Strategies For 2010. pack sizes and the like within brands. and where to add. If assortment downsizing is necessary to not only reduce retailer costs.have reduced assortment made their decisions through simple reductions in variety. by getting rid of flavors. Achieving even a one-half percent improvement in shopper closure across the grocery channel translates into an additional $1. the often unstated objective of many retailers is the desire to increase store brand sales and profit margins.´ While retailers cite cleaner shelves and easier assortment management activities as the stated reasons for such downsizing tactics. One of the major pitfalls to overly aggressive de-listing is consumer response. shopper attrition is a major retail concern (indicated by 77% of retail respondents in Nielsen¶s 2010 Retailer Survey). Incrementality is the concept that no single product action (addition or elimination) occurs in a vacuum.
To achieve these objectives.´ they also argued the case that ³fewer choices provide higher levels of satisfaction: People like to have lots of variety. Others felt that outside the world of digital products and services. 8. the market will be driven by the consumer and increased consumption around the world will result in more products and hence more variety. retailers. retailers will have to step back from the historical approach examining SKU rankings up to a category and focus on a more strategic. they may want 31 options instead of six. Also. they tend to vacillate and delay decisions. people have got used to having ever more variety and are going to resist having it taken away from them. but when faced with too many choices.A. Some recognized that it might be true in certain fields such as the automotive and fashion industries but would not apply in areas like food and electronics.´ In many sectors. the future role of choice editors and choice curators became a strong area of discussion. a shift to less not more choice is credible. Winning retailers will be those who better leverage the concept of incrementality when designing their assortment strategy. not the greatest or fewest number of products. The winners will be the ones who 6 . media organizations and consumer product manufacturers. with the likes of TMaxx and Primark. Consumers are making a trade-off in a smart way and cost is winning. as retailers and manufacturers provide an increasingly edited portfolio of products through ever more efficient channels ³the realities of global retailers are all too clear and we can see the end of variety. the desire for labels and the latest products is in many ways already stronger with certain parts of the market than in the US: ³The Shanghai shopping experience is even wider that that in L. it was argued a number of times.´ In multiple subsequent workshops and discussions with food companies. Some experts argued that consumers will always want more choice: ³We see more individualization and more personalization taking place in many sectors and this can only lead to more variety´ was a typical comment. Especially in the West. but not less interest. The future of choice is about less variety. many others saw credibility in the argument that greater efficiency within the retail sector will inherently drive towards more effective discount stores providing lower cost products. in fashion. and one that points to a future of more informed but reduced choice in many fields. the role of the retail buyer as the ³choice editor´ on behalf of the consumer is critical. This is already evident in food retailing with companies such as Aldi and Lidl and. especially in China. We therefore face the challenge of how to deal with a reduction in the number of options in the categories of consumption but an expansion in the number of categories. segments and brands Success lies with offering the right mix of products. In fact they can see a changing balance between variety and cost. ongoing approach of balancing incrementality opportunities across departments. Less Variety Breaking vicious cycle. but they find it easier to choose one of six than one of 31. Within this context. However. some highlighted that. there was wide ranging debate and reaction to this suggestion. As such. categories. but with less variety.
more informed. it was argued. Supermarkets and other food retail outlets are reevaluating everything from largescaleexpansion plans down to the products that fill store shelves in an attempt to maximize efficiency. This is the increasingly influential sustainability agenda: At an event in The Netherlands we heard that ³from a sustainability point of view. an increase of over 50% from 1996. according to The Wall Street Journal (June 26). shops that have provide a wider choice but at higher prices will. more than double the amount introduced in 1998. We need to start on small things while sharing more knowledge about the big things and their inter-dependencies. 7 . especially in the food industry. However this does not mean less interest. Publication: The Food Institute Report The retail industry is currently in the process of enacting wide-reaching changes. Consumers will most likely trust the brands that make the more informed choice possible. Retailers cut variety to increase efficiency. We can then optimize supply chains and production for the core and make the non-core the expensive luxury that can subsidize others. By devoting more resources to a limited amount of goods and brands that occupy the same space.000 distinct products filled a typical food retailer's shelves by 2008. A multitude of factors are forcing food retailers to make adjustments to their philosophy just as consumers adjust their own purchasing considerations. As one workshop participant put it. Taking the 2020 view. the retail environment changed since retailers addedmore and more items in an attempt to compete with Wal-Mart and COSTCO WHOLESALE CORP. and KROGER CO. possibly permanently. more efficient channels and a push on waste reduction. Consumers will want to trust more companies to make choice on their behalf and so choice editors will become more significant. the less variety option must be the way to go. 9. Some of the largest retailers. Unless they can in themselves be the destination magnets and anchor brands that malls are built around. are expected by industry executives and analysts to reduce product assortment by at least 15% thisyear. have less impact in the future physical retail world. including WAL-MART STORES INC. towards for example more sustainable living. there was another issue that was consistently seen as a catalyst for less variety. requiring more products to fill space on more shelves.´ Many agree that the combination of increasingly competitive business models. Designing the next big thing for the next decade will be tougher than ever. Nearly 47. ³going forward they may want less choice but they will need to transfer their trust to the retail and product brands that best limit their choice. in the 1990s. then we need to both change the system and encourage the individual to make wiser decisions. The system needs to be change by moving the boundary conditions to allow better.Although the prospect of reducing variety in supermarkets is not particularly new. according to data from the FOOD MARKETING INSTITUTE.. retailers hope to benefit through addition by subtraction.´ The role of the department store and its equivalent is therefore limited.113 new products last year. MINTEL data found that producers in the packaged goods industry launched 47. influenced by the varied repercussions of the 2008-2009 recession. will drive the vast majority of us to a future of less variety. To offer consumers greater choice and provide one-stop shopping.´ At another workshop it was stated that ³If we want to encourage consumer choice to have a major role in changing the system. better incentivized individual decisions that enable the right thing.choose the right mix without misses. many supermarkets built larger stores. Reacting to the need for more products.
has over a dozen varieties of its cookie stocked at certain stores. 8 . Technological improvements. who for many years tweaked existing product lines with minor variations to fill shelf space and increase exposure through volume. CAMPBELL SOUP CO. mostly for its top three sellers: condensed tomato. This shift in retail strategy is also having a significant impact on producers of packaged goods. also expects to gain about 10% to 15% more shelf space at large retailers this fall. believes it is in aposition to thrive in a more selective environment. Catherine Lindner. but the numberpurchased per trip increased only 2% as customers end up buying nothing when forced to select from such an assortment.Customers can be confused by the large number of products available. retailers claim. according to a company spokesperson.often making product selection more difficult than is necessary. the number of items in a Walgreen store rose more than 19%.G. Over the past 10 years.Currently. Lindner claimed. they also grant leverage in negotiations with distributors. consumers are shopping with slimmer budgets and investors are responding more to sales growth in existing stores than to new store expansion. while TARGET is reformulating its private-label household goods line. shelf space is occupied by house brands more often. PROCTER & GAMBLE CO. With the perception of quality of private label brands approaching that of national brands in the minds of consumers. for instance. stated that the constant addition of more items to shelvesonly left customers feeling bombarded. Research conducted by Wal-Mart found that customers spent an average of 22 minutes in a Wal-Mart store and suggested that wide product variety decreased the number of items a customer placed in their shopping baskets. Retailers are also having an easier time identifying which products are worth keeping and which are not through the implementation of customer information databases containing sales and individual shopping behavior. and in this scenario industry leaders are disproportionately favored and P&G "generally end(s) up with share and sales growth." according to former chief executive A. Ms. Another change in the contemporary retail environment is the success of private label and house brands.Today. The viability of private labels is allowing retailers to be more selective with inventory decisions and provides power for retailers to wield over distributors and manufacturers Retailers are now working to pare down the multitude of products introduced since the 90's. made this information more accessible than ever before. combined with the advent of loyalty cards and customer membership programs. NABISCO's Oreo brand. WalMart is re-launching its 5.000-item Great Value brand. Lafley. appealing to bargain-seeking customers who want to simplify their shopping trips and return to what is familiar. Not only does the information in the databases predict surges in demand and prevent items from going out-ofstock. WALGREEN's divisional vice president for marketing development. Some manufacturers are now benefiting from the decreased selection while othershave their products pulled. and inevitably national brands will be removed tomake room for the higher margins possible with house brands. chicken noodle and cream of mushroom soups. Private label goods will occupy a larger portion of those bigbox retailer's shelves.
Haagen Dazs offers more than a dozen different flavors while Breyers only offers acouple. in certain product categories a reduction in assortment has been shown to lead to reduced sales (Borle et al. The Impact of Brand Product Variety on Brand Evaluation and Choice of consumers. offering more options is better(e.. They are confronted with an onslaught of options. with flavors ranging from Vanilla to Rum Raisin and brands from Haagen Dazs to Breyers.g.. But what if they decide they want a flavor offered by both brands (e. other things being equal (e. the choice is easy. which brand will they choose and how will the variety the brand offered influence their decision? If they know they want Rum Raisin and only Breyers offers it. Kekre and Srinivasan 1990.Supporting the notion that consumers like variety.2005). hence. Lancaster 1990).. their brand choice? These questions apply broadly because most purchase situations involve brands that offer different levels of product variety. shelf space).10. with the level of variety easily observed by the consumer. 9 . Consider a consumer shopping at their local grocery store who decides that they would like to buy some ice cream. costs. A good deal of research has assumed that.Vanilla)? Could the amount of variety each brand offers influence their perception of those brands and.g. Assuming the consumer has no prior brand preference.g. On this particular day.
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