PRIVATE BRANDS LECTURE 11

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PRIVATE BRANDSLECTURE 11
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Private Brands

• A major distinction in brands is the national
  versus private brand category.

National Brands Store Brands -
Manufacturer - Distributor - Strong
Equity - Weak Equity - High Quality - Low
Quality - High Price - Low Price - Strong
Packaging - Weak Packaging
Primary difference ? who owns the brand.
Private Brands Slide 1
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Private Brands

• Based on the ownership distinction, we have the
  following definitions
• A manufacturer or national brand is a brand
  owned and controlled by an organization whose
  primary economic commitment is manufacturing
  Schutte (1969).
• Alternately, a private brand is a brand owned by
  an organization whose primary focus is on
  distribution.
• From this definition, we see why private brands
  are sometimes called store brands or
  distributor brands and nationals called
  manufacturer brands.

Private Brands Slide 2
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Private Brands

• Some Additional Issues on Definition
• Generic brands are products which are unbranded
  and unadvertised and are typically found in
  supermarkets.
• Licensed brands are brands owned by a given
  organization (either distributor or manufacturer)
  and licensed to another organization (either
  distributor or manufacturer). E.g., controlled
  labels are private brands licensed to other
  retailers.
• The term own brand is used in the UK.

Private Brands Slide 3
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Private Brands

• The success of private brands varies by
• Type of Store and Nature of Retailer
• Grocers 20
• Mass Merchandiser, Drug Stores, Department Stores
  10
• Sears and Target heavier emphasis
• Country
• Private brand share is higher in UK/Europe than
  in U.S.
• State of the Economy
• As disposable income increases, market share
  decreases

Private Brands Slide 4
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Private Brands

• Private and national brands are different
• Nature of Promotional Activities
• Profit Margins and Price
• Profit margins slimmer for private brands
• GMROI Gross Margin X Inventory Turnover
• National ? 250 GMROI (2.5 100)
• Private ? 352 (44 8)
• Use of Family Branding Strategies
• Perceptions of Quality

Private Brands Slide 5
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Private Brands

• Benefits of Private Brands to Retailers
• Retail differentiation (e.g., Craftsman)
• Enhance store loyalty
• Additional control over promotions
• High quality brands enhance store image
  (Nordstrom)
• Higher profit margins
• Benefits of National Brands to Retailers
• Consumers want them
• Increased store image traffic flow
• Advertising promotion is done by mfg.

Private Brands Slide 6
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Private Brands

• How should national brands treat private brands?
• Build brand equity
• Use fighting brands appropriately
• Build relationships with channel members
• Manage price differential
• Exploit sales promotions
• Take private labels seriously

Private Brands Slide 7
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Private Brands

• How should private brands treat national brands?
• Focus on quality
• Be watchful of national brand responses
• Decreasing NB prices
• Increased NB advertising
• Legal action
• Multiple levels of quality (with different brand
  names)
• In-store product sampling

Private Brands Slide 8