Private Label Strategies and Responses

PRESENTED BY:

Mudassar Mahmood Khan; ID No: 41018003

Muhammad Golam Kibria; ID No: 41018060

Md. Wahid Ebnay Nazrul; ID No: 41120021

PRIVATE LABELS:

Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in a wide range of industries from food to cosmetics to web hosting. They are often positioned as lower cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands.

ADVANTAGES OF PRIVATE LABELS:
Control over pricing of the product/service,  Put forth own ideas on marketing plans,  Create personalized image which in turn leads to higher customer loyalty,  Higher control on production, marketing, distribution and profits,  Give their own inputs, additional materials, logos, tag lines, etc.  Customer's changing preference - drive towards private label products.

WHY PRIVATE LABELS:

Branding isn’t everything; it’s the only thing. The decision to brand or not to brand drives the question, “What business are you in?” The decision to pursue a private label strategy places a company in a production driven mode.

Both branded and private label strategies have risks and rewards.

WHY PRIVATE LABELS: (CONTD.)

The Private Label Marketing Association says that one in five items sold in supermarkets is private label. Further, 75 percent of consumers think store brands are real brands and 83 percent have purchased store brands.

If retailers can be successful marketers of brands, surely producers can be.

PRIVATE LABEL STRATEGIES:

Strategy is everything. Positioning and planning are the two overarching principles to marketing success. Positioning statements define a brand and the company.

Positioning happens with or without a company’s efforts.

PRIVATE LABEL STRATEGIES: (CONTD.)

In these tough times, consumers are demanding greater value—which often translates into lower retail margins or loss of sales. Private label is not for everyone. Retailers are attempting to take matters into their own hands, continuing to build private labels that compete with well-known brands.

PRIVATE LABEL STRATEGIES: (CONTD.)

Leverage customer insight to drive innovation and differentiation. Conduct sourcing to boost innovation and gross margins. Structure a development process that is fast and that meets ever-changing consumer needs. Using Customer Insights to drive more profitable Private Label development.

PRIVATE LABEL STRATEGIES: (CONTD.)

RESPONSES BY MAJOR BRANDS TO PRIVATE LABEL STRATEGIES:
Strategies taken by major brands:

Attempt to decrease cost and reduce price.

Competitive advantages over private labels because of other favorable brand perceptions.
Cutting prices on older brands to make them more appealing.

RESPONSE FROM PROCTER & GAMBLE(P&G):

Value pricing program to combat competitive inroads from private labels and other brands. Cut prices on a number of old standbys (e.g. Joy dishwashing detergent, Era laundry detergent, Luvs disposable diapers and Camay beauty soap) by 12 to 33 percent.

P & G eliminated jumbo packs, streamlined package designs, simplified printings, and trimmed promotions, increasing retail margins from 3.3 percent to 8.6 percent as a result.

RESPONSE BY HEINZE:

Emphasizing both innovations and relevance throughout their marketing program. Use of “Hipper” advertising to announce the innovations. Keeping the price gap with private labels at under 20 percent.

OTHER TACTICS ADOPTED BY MAJOR BRANDS:

Increase R&D expenditures to improve products and identify new product innovations. Increase advertising and promotion budgets. Eliminate stagnant brands and extensions and concentrate efforts on smaller number of brands.

OTHER TACTICS ADOPTED BY MAJOR BRANDS: (CONTD.)

Introduce discount “fighter” brands. Supply private label makers.

Track store brands’ growth and compete market-bymarket.