It’s no secret that you’re operating in a Target and Starbucks world where retailers wield the power. Not only are they tinkering with your brands, they’re also pumping up their own brands to increasing levels of caché.

Without a doubt, today’s store brands are no longer considered cheap and inferior. For consumers, they offer value without yesteryear’s steep sacrifice of quality; for retailers, they couple higher margins with increased customer loyalty. In fact, for the savviest of retailers, like Longs Drugs (see sidebar on p. 8), store brands are an integral component of their market position.

It’s a situation that is troubling for national brands, especially since retailers—and even consumers—are beginning to ask, “What can you offer that a store brand can’t?”

How can you compete in an environment like this?

The answer can only come as a result of “architecting” your brand—a process that starts with an understanding of your core strengths, moves to a smart strategy and culminates in flawless execution, particularly at the point of sale.

To begin, reflect on your strong points. For major national brands, long-term success is built around three strengths:

1 Innovation: Successful brands spend money and manpower to continually develop new and improved products and packaging that enhance differentiation, improve functionality and satisfy unmet consumer needs. Sony and Nike, for instance, are market leaders that continually create better (often patented) mousetraps that store brands simply can not.

2 Communication: Retailer marketing dollars support their stores and all of the brands within, private label and national. In contrast, a national marketer’s budget is more focused, pinpointing users of a single brand or brand family. Used effectively, these resources can forge a consumer bond that a retailer will never match.

3 Assortment: Store brands are generally limited to SKUs that represent a significant portion of sales. But niche items, which only a national manufacturer can make economically, will always have a place on the shelf. Certain specialty cosmetic items, for example, may serve consumers’ needs but many not be profitable enough for a retailer to develop.

After assessing your core strengths, you have four strategic directions to consider. Notice that competing solely on price is not among them; this will always be a losing proposition for national brands. If we do our job right, we will always offer “value,” even if the shelf price exceeds the private label competition. Ultimately, these are the strategies available to you:

1 Do Nothing: This may be appropriate if your product line is a cash cow at the end of its life cycle. Maintain status quo, leverage your existing brand equity, and hope you don’t lose too much share. (Hope hard. Store brand sales are growing 5 percent per year; likely at the expense of your brand.) Unfortunately, many marketers choose this path without making a cold calculation, but like ostriches, they bury their heads in the sand rather than face the fact that by doing the same thing, they’ll get the same result.

Packaging implications: Keep the current package. If you intend to let the product run its course, there is no need to redesign the package. But expect the shelf landscape to change around you, potentially accelerating the brand’s decline as branded and private label competitors invest in packaging updates that will leave your brand looking out of touch.

2 Flank the Store Brand: Some manufacturers choose to create their own low-cost brand, going head to head with the store brand. Such offerings can benefit from the “halo” effect of the umbrella brand name. This also protects the flagship brand’s position and its margins and makes use of excess plant capacity, if available. On the flip side, it’s difficult to muscle in on an already crowded shelf, particularly when you’re trying to take back lucrative space from a retailer’s own brand. Even if you are successful, your result is likely to be lower margins along with increased slotting allowances and co-op costs.

Packaging implications: Differentiate the low-cost product clearly both from the master brand, the retail brand and other competitors. Finding the right combination of features and benefits can be a challenge, though. While you want to “de-feature” the product in comparison to the flagship brand, you also need to highlight strong selling points. When you do this, you may end up cannibalizing your own product as well as the competition.

3 Make the Private Label: If you can’t beat ’em, join ’em. Some companies opt to manufacture the store brand as well as their own. While this creates a “partnership” with the retailer, it also turns the marketer into a supplier. There’s certainly no guarantee the retailer will keep the national brand on shelf. And when the retailer knows the cost structure, pricing strategies are at risk.  Eventually, the retailer is likely to look for a lower cost producer.

Packaging implications: Package design decisions will be made by the retailer, who is likely to push for more and more “upscale” touches (embossing, special colors, unusual die cuts) while still holding the line on costs. Manufacturing margins are likely to be squeezed.

4 Manage the Brand and Connect with the Audience: As a director of branding, I, naturally, think this is the strategy a true marketer should take. But there’s work involved. Brand marketers need to improve consumer insights to compete with retailers who can do consumer testing far easier and who have reward programs that result in a goldmine of data. You should also focus your marketing budgets and your package designs to fill consumers’ emotional needs in ways that store brands just can’t.

Packaging implications: Packaging does not exist in a vacuum. A new picture on a box cannot solve a marketing problem unless it is connected to a coherent and dynamic brand vision. Let’s take a look at that process now.

In managing your brand to compete against the retailers’ own brand, you’d be smart to focus on developing better research and creating stronger emotional ties with consumers, primarily through your packaging. But you must take the retailer into account as well.

Take Intermatic’s Malibu line of outdoor, low voltage and solar lighting. The company was besieged with competitors and was facing a jumbled point of sale. Even the brand’s own packaging was inconsistent, with eight different logos used across the line.

When they came to us, our first step was to research what the consumer knew about the brand, why they bought the product category and what their expectations were for quality and price. Among our discoveries: since consumers purchase outdoor lighting to improve the appearance of their property, the aesthetics of both the product and the packaging were important.

We also learned that Malibu was perceived as having a wide assortment of well-designed products—a plus for the brand. (Remember the importance of innovation and assortment? Here’s where it pays off.)

We took the findings of our research and worked to develop a positioning, key message points, a brand personality and a tag line that would create a stronger emotional connection with the consumer. Packaging also served that objective with a clean design that portrayed the product in a warm, inviting outdoor living space. In addition, we played to the brand’s core strength of assortment, as determined by our research, and infused the line with new, modern products featuring an up-to-date appeal.

But let’s not forget the focus of our discussion: what about the retailer? To compete against private label, you must also take the customer into account.

For Malibu, the retailer was top of mind throughout the development process. As we were creating different packaging iterations, alternate logos and designs, we were also developing a good/better/best brand hierarchy, rationalizing SKUs and developing segmentation that would allow for retailer exclusive product. The strategy was meant to discourage store brand encroachment by offering the brand’s customers a point of differentiation with exclusive product.

National marketers’ strengths lie in targeting consumers of their product better than the retailer ever can, and turning that knowledge into effective branding that emotionally connects with those consumers, champions their causes and offers them value at any price. BP