January 21, 2009
Consumers Stick with Brands They Know/Trust
There has been a lot written
about consumers trading down to private label and value-priced brands during
the current period of economic tumult, but a new study also points to large
numbers of shoppers sticking to tried and true brands.
Research by the YouGovPolimetrix
research company for
BrandIndex found that consumers were sticking to brands such as Sears’
Craftsman tools, Clorox, M&M’s, Rubbermaid, Sony televisions and Whirlpool.
The BrandIndex poll asks
consumers to rate brands based on six criteria: image, quality,
reputation, satisfaction, value and willingness to recommend.
Michael
Margolis, president of Thirsty-Fish, told Brandweek, that Craftsman’s
high marks are a reflection of consumer confidence in the brand. "People
are wondering, ‘What brands can I really trust,’" he said.
Ted
Marzilli, general manager of the BrandIndex, said Craftsman connects with
consumers not because it is "showy or flashy. But it is well-known,
reasonably priced and good quality."
Among
the brands making the biggest jumps in approval from the first to second
half of 2008 were Craigslist, Southwest Airlines and Wal-Mart Stores. All
three are known to appeal to the frugal nature of consumers.
"In
a challenging economy, value is something consumers focus on," Mr.
Marzilli told Brandweek. "In a down economy, people are more
concerned about price than whether or not all Wal-Mart employees receive
health care benefits."
Companies
that saw the biggest drop, not surprisingly, included AIG, Goldman Sachs,
Merrill Lynch, Morgan Stanley, Wachovia and Washington Mutual.
Discussion Questions:
What does it take for a brand to be successful at a time like this? How
does a brand without the history of those mentioned in the BrandIndex
poll establish itself during periods of economic uncertainty?
BrainTrust
Recent Discussions
Discussion Questions
Poll
After the initial “hit” in September, when everyone ran scared in the direction of price, it makes sense that there would be a minor “return” to brand–but, BEWARE, it’s not over. Discounters are in an incredibly dominant position for at least the next year.
Other than price considerations, brands should always focus on their core and remain consistent, especially in terms of expression–that remains unchanged.
I don’t see a clear movement toward (or away from) national brands. The brand names offering credibility, value and performance are thriving while plenty of other brands are suffering. At the same time there is a sharp rise in store brands, especially as generic substitutes for higher-priced national brands. (Food and drug retailers have commented on the growth in this side of their business.) So the search for value is very real, but it’s too early to validate whether this will benefit national brands in the long run.
Michael Margolis says it right that value and trust are the key elements people will look for. I believe that no matter what the economy is like, people want products they can count on. And while they may be more inclined to try the private labels, they will quickly migrate back to the name brands of those private brands don’t deliver.
To those brands that have been resting on their reputation, I say get with the program. People are no longer drawn to elite names for the sake of vanity. Keep it real by providing value, service and quality.
The answer to the question of what makes a brand successful in these times gets pretty much the same response as during great times. At the core, ‘trust’ is essential. With so many shaky dealings in the economy, bailouts and ‘scams’ being reported, we all want to turn to something (in this case brands) we can trust. It’s not surprising to read above that the brands suffering are those financial institutions.
Craigslist, Southwest Airlines and Wal-Mart Stores are more than just ‘discount’ brands. We trust them.
That’s the challenge for private store brands, too. They might be cheaper but can you trust the quality is the question. “President’s Choice,” the private label brand of Loblaws, is the model for all private brands. Great value and great, consistent quality.
To be successful in the current economic climate or at any time, a brand must connect emotionally with consumers. The essence of the brand must have meaning beyond utilitarian values. Consumers’ needs do change and different messages resonate at different stages in their lives, but a brand that has been true to its core story, that touches consumers with more than utilitarian values, can succeed in any economic circumstances.
Brands can offer comfort and security–especially when consumers want to make sure they’re spending their money wisely on products and services that will still be around in the future. Whether a brand is stronger or weaker is going to depend a lot on the state of that particular brand (GM, for example vs. Whirlpool). Brands who want to keep that consumer trust need to continue to innovate and provide value added products and services meeting consumers needs and bringing them comfort in both traditional and unexpected ways.
No single ‘better’ or “worse’ answer exists here. It’s an ‘it depends’ based on the brand name and the willingness of the company behind that brand name to invest to keep it relevant.
There is not, nor is it likely will there be a mass exit form National Brands to Private Label, but there are varying degrees of switching, depending on the category.
Some years ago there was a study on why Hispanic shoppers mostly purchased National Bands and not much Private Label. The results showed it had more to do with limiting risk when spending disposable income. Not having excess funds, these consumers simply would not take the risk of buying something they did not know.
At the time of the study, the majority of Private Label products were National Brand copies. Today, we have an entire economy of conservative shopping consumers not willing to take risk. The difference is, Private Label quality, selection and packaging have been greatly improved. Consumers are not just trading down on basics but now have a better acceptance of Store Brands. They are buying and switching to these trusted Store Brands.
For Store Brands to be accepted, they first must be created with the marketing methodology and merchandised accordingly. Like I always say, if you are not prepared to put your Private Label on the front page of your advertising, why are you selling it?
The ultimate in this environment is to have low price as a core element of a well-known brand. That’s Walmart, Costco, Southwest, Geico, McDonald’s, etc. These are companies that have spent years developing and delivering on a low-price brand promise, while delivering enough other elements of range/experience/etc, that consumers believe in them. It isn’t the only brand message that works, but it might be the only one that works right now (and better yet, it does work in any economic environment).
Also, there is no substitute for “low-price.” I get antsy when I hear words like “value,” that sound good on consulting slides but often are meant to mean “not quite low price, but moderate price and higher [quality/service/etc].” Sorry, low price means low price.
Nationally branded products traditionally rank high on the quality/value scale and in times of tightening spending, represent known quality and value to consumers. Many of these brands represent consumer staples. But staples are not enough. The consumer has cut back, not stopped. They are still willing to spend on non-essentials, but they must be engaged and captivated by both the item and the experience. This is a realm where smaller, niche players have a decided advantage, and this is the segment that we’re likely to see retailing innovation coming from for the next few years.
From all of our observational work with consumers in retail environments, it is clear that people are making price-sensitive purchase decisions. Some thoughts on what makes these national brands at the top of the list (apart from the value brands like Wal-Mart) untouchable:
1) they don’t have a close (perceived) private label competitor (e.g. M&Ms)
2) they are heavily promoted/discounted against private label (and therefore often cheaper than private label)
3) many are performance-driven (Whirlpool, Rubbermaid)
4) most are necessary (not impulse) purchases.
National brands will continue to be challenged at every turn, but those who continue to get it right at retail will retain loyal shoppers. Key for the retail brand is to continue the focus that keeps products that core shoppers want at the price they are willing to pay. Depending who shops at the store, different solutions will maintain the business. For many people in today’s economy, private label is comparable value at a lower price–depending on the category.
For many primary shoppers, if they don’t give up convenience or taste, they may be interested in trying a store brand. But if the zipper feature on the shredded cheese doesn’t work, it will become an obstacle to repurchase. They may trade down to block cheese and make major savings–or not. If the private label brand spaghetti sauce will deliver a dinner that everyone enjoys, a switch might be made. But if tastes different, or the package is too difficult to empty, the brand wins.
In some categories like self care, many shoppers want to make sure that products will deliver. Buying a shampoo or toothpaste that doesn’t meet family expectations is seen as too much risk. And things like coffee, household wraps and many others–good experience with name brands ensures returns. There are enough choices on the shelves for all shoppers in this economy. Brand owners that understand how their products deliver against lower priced Private Label have the best opportunity to keep shoppers coming back.
The key brand ingredients mentioned above both in the article are all drivers of loyalty but it’s critical to recognize that not all brand attributes are equally meaningful to all customers.
Brands, like people, have a range of relationships, some more meaningful and lasting than others. This is why it is so important to have (and use) customer data to enable insights and allow for the brand to be invested in and maximized where appropriate.
The most successful brands in this economy are the ones with the most evolved customer relationships.
This is a critical time for Branded products because consumers are looking for value. The recent growth in Store Brands confirms the trial of these items by consumers who did not previously go to Store Brands. Many good retailers, Wegmans for example, will argue that they have branded their stores to the point that consumers have full confidence in the items that carry their name.
National Brand companies have to remain true to their products during this time. Reformulations, size reductions, etc, all should be put on hold and the quality message must come through loud and clear to consumers. It will be worth a small profit reduction to maintain quality, continue to promote and look for creative ways to market in order to weather the economic storm.
I feel the need to say again part of what I wrote yesterday…Retailers for the most part are fighting the recession with a “ready, fire, aim” mentality. It’s painful to watch. They are hurting themselves and the supplier community more than they are helping the consumer.
Private label and value brands are part of some of the solution, but not the entire solution. Consumers still want to buy their own brands, and they still want to buy specialty items, niche products, and yes, even premium items that often replace a more expensive solution to a certain need once answered outside of the retail store environment. Retailers that are slashing the numbers of SKUs carried just for the sake of slashing, well, they are drinking the slow acting poison without giving more thought to what they are actually doing.
The brand has to be dependable. Consumers are risk averse right now–more so than in normal economic times. Sure, they may take a shot at a cheaper brand of peas when money is tight. But when it comes to significant purchases they will go to trusted sources for value.
Frank got the most salient point–there has been a clear shift in shopper attitude toward store brands during the past 10-15 years. The quality and packaging improvements in store brands have resulted in more and more categories being viewed as commodities. Sugar, canned and frozen veggies, vinegar, napkins and dozens of other categories have moved or are moving into this mode.
BTW, isn’t Craftsman a store brand?
Lots of shoppers don’t stick with brands. Any brand will do, as long as it’s on sale. Not many brands can get away with consistently higher prices. As often as Pepsi runs a supermarket promo, Coke does, too. Same with every supermarket brand category: salty snacks, condiments, ice cream, pasta, etc.
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After the initial “hit” in September, when everyone ran scared in the direction of price, it makes sense that there would be a minor “return” to brand–but, BEWARE, it’s not over. Discounters are in an incredibly dominant position for at least the next year.
Other than price considerations, brands should always focus on their core and remain consistent, especially in terms of expression–that remains unchanged.
I don’t see a clear movement toward (or away from) national brands. The brand names offering credibility, value and performance are thriving while plenty of other brands are suffering. At the same time there is a sharp rise in store brands, especially as generic substitutes for higher-priced national brands. (Food and drug retailers have commented on the growth in this side of their business.) So the search for value is very real, but it’s too early to validate whether this will benefit national brands in the long run.
Michael Margolis says it right that value and trust are the key elements people will look for. I believe that no matter what the economy is like, people want products they can count on. And while they may be more inclined to try the private labels, they will quickly migrate back to the name brands of those private brands don’t deliver.
To those brands that have been resting on their reputation, I say get with the program. People are no longer drawn to elite names for the sake of vanity. Keep it real by providing value, service and quality.
The answer to the question of what makes a brand successful in these times gets pretty much the same response as during great times. At the core, ‘trust’ is essential. With so many shaky dealings in the economy, bailouts and ‘scams’ being reported, we all want to turn to something (in this case brands) we can trust. It’s not surprising to read above that the brands suffering are those financial institutions.
Craigslist, Southwest Airlines and Wal-Mart Stores are more than just ‘discount’ brands. We trust them.
That’s the challenge for private store brands, too. They might be cheaper but can you trust the quality is the question. “President’s Choice,” the private label brand of Loblaws, is the model for all private brands. Great value and great, consistent quality.
To be successful in the current economic climate or at any time, a brand must connect emotionally with consumers. The essence of the brand must have meaning beyond utilitarian values. Consumers’ needs do change and different messages resonate at different stages in their lives, but a brand that has been true to its core story, that touches consumers with more than utilitarian values, can succeed in any economic circumstances.
Brands can offer comfort and security–especially when consumers want to make sure they’re spending their money wisely on products and services that will still be around in the future. Whether a brand is stronger or weaker is going to depend a lot on the state of that particular brand (GM, for example vs. Whirlpool). Brands who want to keep that consumer trust need to continue to innovate and provide value added products and services meeting consumers needs and bringing them comfort in both traditional and unexpected ways.
No single ‘better’ or “worse’ answer exists here. It’s an ‘it depends’ based on the brand name and the willingness of the company behind that brand name to invest to keep it relevant.
There is not, nor is it likely will there be a mass exit form National Brands to Private Label, but there are varying degrees of switching, depending on the category.
Some years ago there was a study on why Hispanic shoppers mostly purchased National Bands and not much Private Label. The results showed it had more to do with limiting risk when spending disposable income. Not having excess funds, these consumers simply would not take the risk of buying something they did not know.
At the time of the study, the majority of Private Label products were National Brand copies. Today, we have an entire economy of conservative shopping consumers not willing to take risk. The difference is, Private Label quality, selection and packaging have been greatly improved. Consumers are not just trading down on basics but now have a better acceptance of Store Brands. They are buying and switching to these trusted Store Brands.
For Store Brands to be accepted, they first must be created with the marketing methodology and merchandised accordingly. Like I always say, if you are not prepared to put your Private Label on the front page of your advertising, why are you selling it?
The ultimate in this environment is to have low price as a core element of a well-known brand. That’s Walmart, Costco, Southwest, Geico, McDonald’s, etc. These are companies that have spent years developing and delivering on a low-price brand promise, while delivering enough other elements of range/experience/etc, that consumers believe in them. It isn’t the only brand message that works, but it might be the only one that works right now (and better yet, it does work in any economic environment).
Also, there is no substitute for “low-price.” I get antsy when I hear words like “value,” that sound good on consulting slides but often are meant to mean “not quite low price, but moderate price and higher [quality/service/etc].” Sorry, low price means low price.
Nationally branded products traditionally rank high on the quality/value scale and in times of tightening spending, represent known quality and value to consumers. Many of these brands represent consumer staples. But staples are not enough. The consumer has cut back, not stopped. They are still willing to spend on non-essentials, but they must be engaged and captivated by both the item and the experience. This is a realm where smaller, niche players have a decided advantage, and this is the segment that we’re likely to see retailing innovation coming from for the next few years.
From all of our observational work with consumers in retail environments, it is clear that people are making price-sensitive purchase decisions. Some thoughts on what makes these national brands at the top of the list (apart from the value brands like Wal-Mart) untouchable:
1) they don’t have a close (perceived) private label competitor (e.g. M&Ms)
2) they are heavily promoted/discounted against private label (and therefore often cheaper than private label)
3) many are performance-driven (Whirlpool, Rubbermaid)
4) most are necessary (not impulse) purchases.
National brands will continue to be challenged at every turn, but those who continue to get it right at retail will retain loyal shoppers. Key for the retail brand is to continue the focus that keeps products that core shoppers want at the price they are willing to pay. Depending who shops at the store, different solutions will maintain the business. For many people in today’s economy, private label is comparable value at a lower price–depending on the category.
For many primary shoppers, if they don’t give up convenience or taste, they may be interested in trying a store brand. But if the zipper feature on the shredded cheese doesn’t work, it will become an obstacle to repurchase. They may trade down to block cheese and make major savings–or not. If the private label brand spaghetti sauce will deliver a dinner that everyone enjoys, a switch might be made. But if tastes different, or the package is too difficult to empty, the brand wins.
In some categories like self care, many shoppers want to make sure that products will deliver. Buying a shampoo or toothpaste that doesn’t meet family expectations is seen as too much risk. And things like coffee, household wraps and many others–good experience with name brands ensures returns. There are enough choices on the shelves for all shoppers in this economy. Brand owners that understand how their products deliver against lower priced Private Label have the best opportunity to keep shoppers coming back.
The key brand ingredients mentioned above both in the article are all drivers of loyalty but it’s critical to recognize that not all brand attributes are equally meaningful to all customers.
Brands, like people, have a range of relationships, some more meaningful and lasting than others. This is why it is so important to have (and use) customer data to enable insights and allow for the brand to be invested in and maximized where appropriate.
The most successful brands in this economy are the ones with the most evolved customer relationships.
This is a critical time for Branded products because consumers are looking for value. The recent growth in Store Brands confirms the trial of these items by consumers who did not previously go to Store Brands. Many good retailers, Wegmans for example, will argue that they have branded their stores to the point that consumers have full confidence in the items that carry their name.
National Brand companies have to remain true to their products during this time. Reformulations, size reductions, etc, all should be put on hold and the quality message must come through loud and clear to consumers. It will be worth a small profit reduction to maintain quality, continue to promote and look for creative ways to market in order to weather the economic storm.
I feel the need to say again part of what I wrote yesterday…Retailers for the most part are fighting the recession with a “ready, fire, aim” mentality. It’s painful to watch. They are hurting themselves and the supplier community more than they are helping the consumer.
Private label and value brands are part of some of the solution, but not the entire solution. Consumers still want to buy their own brands, and they still want to buy specialty items, niche products, and yes, even premium items that often replace a more expensive solution to a certain need once answered outside of the retail store environment. Retailers that are slashing the numbers of SKUs carried just for the sake of slashing, well, they are drinking the slow acting poison without giving more thought to what they are actually doing.
The brand has to be dependable. Consumers are risk averse right now–more so than in normal economic times. Sure, they may take a shot at a cheaper brand of peas when money is tight. But when it comes to significant purchases they will go to trusted sources for value.
Frank got the most salient point–there has been a clear shift in shopper attitude toward store brands during the past 10-15 years. The quality and packaging improvements in store brands have resulted in more and more categories being viewed as commodities. Sugar, canned and frozen veggies, vinegar, napkins and dozens of other categories have moved or are moving into this mode.
BTW, isn’t Craftsman a store brand?
Lots of shoppers don’t stick with brands. Any brand will do, as long as it’s on sale. Not many brands can get away with consistently higher prices. As often as Pepsi runs a supermarket promo, Coke does, too. Same with every supermarket brand category: salty snacks, condiments, ice cream, pasta, etc.