IRI reports that the recession has created a new "generation" of consumers. Even as the economy improves, many who have adopted more frugal spending habits are likely to continue. Consumers who are pleased with store brands will continue to purchase them.
Upshot: well-managed retailer brands have the power to become as important as national brands. Just look at what Kroger and Safeway are doing to confirm this. So what's a national brand to do? Strike back, of course.
National brands must employ the following key strategies to offset lost sales and potential loss of shelf space at retail.
Pricing. The first reaction is to cut pricing, and many national brands have done so. Competing on price with store brands makes some sense, but it isn't the best long-term strategy. Constant cost-cutting cheapens the brand's image and cuts into profits.
Innovative product/packaging features and structures. Additional quality, innovation and benefits are critical components of new product offerings. These types of attributes make products less subject to price considerations, as long as they are substantive, not fluff.
For example, by adding a grinding mechanism into its bottles of whole peppercorns and sea salt, McCormick made it unnecessary to invest in a separate grinder.
Adding features might add too much cost, or they might be more difficult for retailers to copy. Thus, national brands can truly differentiate themselves from private-label.
Structural packaging is an "ownable" aspect of branding. When eyeing a sea of products at retail, consumers readily identify packaging with distinctive structures.
How many juices are there in the marketplace? Yet, Jamba Juice is packaged in a uniquely structured, "twisted" bottle. Method broke the mold completely with cleaning products presented in highly visible, uniquely structured, transparent packaging.
Innovative New Products. Breaking new ground in consumer products isn't the easiest challenge. Understandably, an iPod isn't born every minute. But great ideas have led to revolutions in the most mundane commodity categories.
OXO redesigned the measuring cup, and had a hit on its hands. Finding that people often craned their necks while measuring dry ingredients and liquids in measuring cups while having to make constant adjustments, OXO simply positioned the measurement marks on the inside of their cups. Simple, but highly effective.
Despite the fact that Apple was late in the game against competitors like Nokia and Motorola, the company's killer apps made consumers lust for the iPhone. The best part: many of the available apps were designed by users.
New Media Channels. Manufacturers haven't had the opportunity for direct interface with consumers in the past. Retailers acted as "middlemen" between manufacturer and consumers. This relationship has helped savvy retailers glean information to develop strong store brands.
Now manufacturers can use their Web sites to foster direct communication with consumers as never before. Smart marketers are engaging their customers in direct communications, via active email correspondence, blogs, Twitter and Facebook. They are actively soliciting feedback and gaining new insights, as a result.
Negative comments can be used to rectify problems quickly, building trust. Positive comments can lead to constructive dialogue and ideas for product innovations. This interaction should be leveraged to develop and maintain a loyal customer base, just as brand loyalty is beginning to slip away.
Engagement, connectivity and community building will work to reverse this trend and help keep national brands front and center with consumers as retailers seek greater sales and share with their own brands.
National brands have a choice: they can conduct business "as usual" and prepare themselves for additional lost sales and brand erosion, or they can strike back, adding strength and vitality to the entire marketplace.