That promise has traditionally been worth something in the marketplace. It has enhanced customer loyalty, which lowers costs and increases margins for the producer and it has carried an implicit promise of higher quality or reliability - or both - which has enabled those with sufficient brand equity to charge more than competitors with a similar product.
But a funny thing has happened on the way to the self-check-out register: studies are reporting a dramatic increase in consumers' purchase of 'store' or 'house' or 'private label' brands. Those are the less expensive, often generic looking knock-offs provided by retailers to capture more of the customers' bill for themselves.
The reports are - and should be - disturbing for any business with a commercial brand. A majority of consumers - 64% - declare that they no longer believe brand names offer better quality. And perhaps even more disturbing, only 51% claim that they trust the brand name more than the private label store brands.
This raises a number of questions, the two most salient of which may be why the loss of trust and belief in brand names has occurred - and what the heck has happened to the billions spent on advertising in support of all those brands?
Needless to say, the answers are connected. Technology has dissipated the impact of advertising. Consumers have more information and get that information from a wider variety of channels than they ever have before. This diffuses the impact of the message for which the advertisers of brands are paying. In addition, the house brands, part of whose cost advantage comes from not being advertised per se, are concentrated in one platform - the store - which, if the consumer trusts the store, enhances the power of that message.
The decline in household income has also played a role. Customers may no longer be willing to pay a premium for products they do not perceive to be of greater value - and some of their attitudinal shift may be self-justification for actions that are really based more on financial necessity than choice of feature attribution. But the lingering fear is that consumers feel increasingly alienated from the businesses that sell them stuff - and the executives who run those businesses. The corporate disconnect from local, regional and national communities may have juiced profits, but every action has a cost. JL
Barry Silverstein reports in Brand Channel:
Makers of name brand products beware: Store brands continue to be accepted and embraced by consumers.
Last July, we reported on a study by Accenture indicating that 64 percent of shoppers' grocery carts were at least half full of store brand products -- and 39 percent said they had bought more store brands in recent years.
Now a new study by marketing agency The Integer Group, in association with the market research firm M/A/R/C Research, shows that consumers increasingly believe store brands can match brand names in quality. In fact, in the 2012 study, 64 percent of shoppers said brand names are not better quality products, versus 57 percent in 2010. Only 51 percent of shoppers say they continue to buy brand name products over store-brand alternatives because they trust the brand name, according to the study. Only 20 percent of shoppers agree that they go right for their brand name choice and get what they want.
Just as important, there seems to be a broad change in the perception of store brand or private label products. As store brands have grown in popularity, groceries and retail chains have created their own branded lines. Target, for example, sells its own Archer Farms brand, and Whole Foods pitches its 365 Everyday Value line.
In recent years, such retailers have paid more attention to packaging so their products can be competitive on store shelves. It must be paying off. Only a year ago, 68 percent of shoppers agreed that brand name packaging was more attractive than store brand packaging, according to the study. This year, the percentage dropped to just over half — 52 percent of shoppers.
More good news for store brands according to the study: They are favored by women, who do the majority of the shopping (a factor in Kimberly-Clark's European pull-out of its Huggies brand). While 77 percent of all shoppers consider both brand name and private label products before making a purchase, 90 percent of women consider both prior to purchase.
The study did show, however, that brand name products are stronger in some product categories. For example, when it comes to detergents, 69 percent of shoppers prefer brand names to store brands. That could be a testament to the brand marketing acumen of Procter & Gamble, far and away the leading maker of brand name detergents. Similarly, 65 percent of shoppers prefer brand names in the health and beauty products category.
Still, there was a glimmer of hope for brand names. A majority of shoppers (65 percent) do not believe brand names are more expensive than store brands. The reasons for this are varied; for example, almost half of shoppers (45 percent) say it is because they can get coupons for name brands, while 41 percent indicate the name brands they like are often on sale.
The Integer Group and M/A/R/C Research conclude that "the lines between private-label and brand names are blurring," but that "trust is still a mainstream influencer and brand names hold an edge." But if the trend toward store brands is any indication, brand names may not hold that edge much longer.
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