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Private Label Brands

Professor Carl Mela BA 460 Product Management Fuqua School of Business. Brand Management System On Building A Brand Managing Across Brands. Private Label Brands. Agenda. Extent of problem. How to combat private label threats. Private Labels. Until 1950’s more common than national brands

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Private Label Brands

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  1. Professor Carl Mela BA 460 Product Management Fuqua School of Business Brand Management System On Building A Brand Managing Across Brands Private Label Brands

  2. Agenda • Extent of problem. • How to combat private label threats.

  3. Private Labels • Until 1950’s more common than national brands • About 20% of grocery sales (Hoch paper) • Problem exacerbated in weak economy • More common in categories where risk is not a factor (as opposed to shampoo)

  4. Strategies for Combating Private Labels Provide More for the Money Innovate NATIONAL BRAND Reduce Price Gap Quality Do Nothing Introduce Value Flanker Make Premium Private Label PRIVATE LABEL 1/Price Source: Stephen Hoch

  5. Strategies for Combating Private Labels • Do nothing • Wait for economy to improve • Retailers are sufficiently diffuse, their power is low • In small categories with little potential return, retailers not likely to invest in private label • However, share loss may occur

  6. Strategies for Combating Private Labels • Differentiate • More for the money • New and improved • Advertise • Eliminate weak brands and focus on strong • Better retail support

  7. Strategies for Combating Private Labels • Reduce price gap • Lower costs • It is often not profitable for retailer to close price gap (mfr brand loses high margin, store brand loses volume) • Me too strategy • Fighting brands (Kodak Funtime Film) • Protects brand (+) • Cannabalization (-); Revenues do not cover product introduction costs (e.g., advertising and slotting fees)

  8. Strategies for Combating Private Labels • Make a private label (Dunne and Narasimhan) • Can test formulations as a P.L. • Can increase price on premium brand w/P.L. entry • Can formulate to target competitor, not self • Can obtain cooperation on shelf positions (P.L. to right hand side of competitor - as 90% right handed) • Key threat: retailer owns customer, threatens to drop you without price concessions

  9. Summary • Solutions to the private label problem • Do nothing • Better retail support • Differentiate • Reduce price gap • Fighter brands • Can’t beat ‘em, join ‘em (source the private label)

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