Private Label

For my research topic I would like to look at private label brands and the customer connection or experience with the products. Private label brands have become more accepted recently in the United States, and have been very popular in Europe for decades. In economic times like now customers are willing to trade off brands in order to save money, and the growth potential of private label brands continues to grow.

Consumers tend to be brand loyal to a brand that they believe gives them something more and are willing to pay a price. Moms choose Crest toothpaste for their kids believing that it is better at protecting their kids’ teeth while others might be brand loyal to Quaker Oats oatmeal, believing it to be healthier than the store brand. Customers usually claim an experience with a branded product, which makes it harder for private label manufacturers to gain the same level of connection and experience.

An AC Nielsen study found that private label growth rate is five percent while manufacturer brand growth is fairly stagnant at two percent. The savings for customers buying private label brands ranges from sixteen percent to forty-six percent less than brand name products. This creates a lot more value for the customer, but many customers are hesitant to accept these private label products as comparable in quality.

An exception to the private label plague is Ol’ Roy dog food, which is manufactured by Wal-Mart. Ol’ Roy is the top-selling dog food, but many customers do not realize that it is a private label; this might be due to the nontraditional private label packaging of the product. Ol’ Roy packaging does not look like the typical packaging that often plagues private label goods. It is likely that Ol’ Roy has differentiated itself from being known as a private label brand, and the success of this strategy has paid off.

This topic is important to me because I think consumers often put too much emphasis on brands and are not willing to try a product that might be more beneficial in price for them, consider these people brand snobs if you will. In the over-the-counter medicine industry my friend in the PharmD program at UT has told me that many private label products are made by the same manufacturers of products that may be three times more expensive because they carry a well known brand name. This topic is also interesting to me and I think there is a lot of future potential in marketing private label products.

The AC Nielsen article was interesting and provided an excellent analysis of private label goods, ranging from growth rates by country to the percentage of savings versus other brands. The article also states that in nine of fourteen countries almost all households have purchased private label goods in the past year; besides lower income households there is no typical private label consumer as well.

The research on the topic will be interesting too, as more and more stores realize how profitable store brand goods can be. A few concerns that I have about the topic are that the information between sources may be similar or product specific; in the course of the project I may decide to focus on one segment of private label goods in order to better understand a segment.

Source:

Nishikawa, C., & Perrin, J. (n.d.). Private label grows global. Retrieved February 23, 2009, from AC Nielsen Web site: http://us.acnielsen.com/pubs/ 2005_q4_ci_privatelabel.shtml

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The ideal life in America is well defined and has been instilled into peoples’ minds since childhood: two-story house, white picket fence, 2.3 children, a perfect lawn, new car, and of course the corner office. I know from my experience so much emphasis is placed not on following this model exactly, but at least coming close to meeting the expectations. While not all of the expectations are material, most of them are. I have become disillusioned with the idea that success is not measured in material objects. Think of examples of people that are thought to be successful: Bill Gates, Warren Buffet, Richard Branson and Martin Luther King. More often than not the first person to come to mind when the word success is mentioned is a billionaire. Examples like MLK, Mother Teresa and M. Gandhi exist but they are often not the examples that come to mind first even though they are great examples of being successful.

Fortunately for everyone people have been successful in the pursuit of bettering the lives of others, but I think most people define success by owning a certain item further defined by the brand and price. Is it all marketers' fault that people believe this? The answer is definitely no, but it likely plays a part in it. There are many questions I am asking myself lately about marketing products to people and if I think it is something I will say forty years from now was a worthwhile devotion of my life. The answer changes from day to day but has really shifted as of lately. Although we haven’t had any articles that pertain to this subject I think it is important that students realize there are many ethical questions to ask themselves when marketing a product.

Take today for an example: I went on a hike with my roommate and close friend and we had a great time. It didn’t matter what brand of shoes we wore, what kind of water bottle we used, or the names on the backpacks we carried. The things that mattered most were the memories and the experience; I know we have talked a lot about experience in class, but this was a different type of experience. On the trail not much else mattered for those six hours, even the fact that we brought barely enough food to be considered a lunch was fine with me. I was with two of my best friends and we were having a great time; if an experience like that could be marketed then I’m sold. But maybe the reason that we all enjoyed it so much was that we were able to enjoy so much with so little, which could be looked at as a greater value to bring this thought back to marketing terms.

To tie everything together I think often success is viewed as too material and sometimes the best things in life cannot be branded. Many times I find that I am not chasing after my own idea of success, but others. Some people like Bill Gates and Shirley Polykoff are able to find success and help others in products, while other people are not. They believed in their products, something that often diminishes down the ranks of a company. Many insights can be drawn from this, but they are not the type most marketers want to face. Although I wish products and brands didn’t play as large a part in my life the fact is hard to ignore. It was nice to escape everything for a few hours today, but I know that is something I can’t find happiness in everyday. Although students will find their own version of success and happiness in different careers and ways I think it is important for us to evaluate and pursue our own individual definitions.

Paradox of Choice

Customers have never had as much access to product information as customers do now. People can research a car, a book, or shoes online now before they decide to make a purchase, all at the click of a mouse. There are now so many online stores with reviews and websites solely dedicated to reviews that a customer may have trouble even making a decision about which site to use and trust, and at this point the decision of which product to buy still looms in the near distance.

This example would likely be embraced by Barry Schwartz in his podcast about the excessive amount of products customers must decide between. His examples of how an outing to buy a regular pair of jeans turned into a multi-hour ordeal and being bombarded by 65 million choices of home stereo possibilities at just one store bring the topic into light.

Answers to which product will benefit a customer the most do not magically appear, but rather the customer must make the decision, usually in the store, between many products. Obviously the customer will bring some preconceived ideas into the decision like brand name, past experience with the brand, and intended use for the product. These all contribute to the decision making process but other factors such as options available and the almighty price can influence the decision as well. Different customers make decisions in different ways and by different processes and some can handle having millions of options while others simply cannot.

Research by a McCombs Ph.D. student, Jae-Eun Namkoong, which studies decision making and regret, compliments Mr. Schwartz’s segment on regret after a decision is made. In Ms. Namkoong’s studies respondents are given choices on how to get to work and the path taken. If the respondent is later told that the path they chose was the fastest they feel good, while on the other hand if they are told the path they took had heavy traffic and the other option was faster they feel regret. A familiar or routine path can often lead to regret in the study. The Paradox of Choice contains a segment about how customers may try to reduce their risk of regret by choosing a certain familiar brand or option, which is reasonable. The problem occurs when customers are overwhelmed with the 65 million home stereo options described before, and no clear preferable choice exists. Even when bringing in past experience a choice with this many variables can be too much.

I have experienced the paradox of choice in one of the simplest places where low-effort purchases are made: the supermarket. I look at my shopping list and realize I need bread; once I turn into the bread aisle I am greeted by more than fifty brands and types of bread. The same goes with canned soup. Often I just scan the display and find three flavors quickly just to be done. Can anybody be expected to make a solid decision when faced by a wall of over two-hundred red and white Campbell’s soup varieties?

Another example of when I faced the paradox of choice was a few months ago when I opened a savings account at a national bank. There were so many choices at first and so many options, but fortunately the financial meltdown helped narrow down my prospects. When I decided on a bank that seemed as if it would survive into the new decade I was forced to decide between over ten saving plans. I compare what I wanted in a savings account to what Mr. Schwartz wanted in a pair of jeans, just the regular model, but unfortunately this seems to never be an option anymore.