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