Four shelf strategies to help fend off encroaching store brands.
Over the past several years, we’ve seen a revolution in the packaging strategies of store brands, which are increasingly breaking from their “copycat” approaches and, instead, are developing design directions that match the quality and sophistication of their national competitors.
These changes are a big reason why retailers’ own brands are experiencing significant growth and why they are cutting into national brands’ market share and price margins across virtually all categories.
For brand marketers, the implication is clear: Packaging must work harder than ever to convey superiority and justify price premiums. So with this challenge in mind, I offer you several guiding principles for winning against retailers’ own brands:
Use shelving to minimize comparisons
You should start by attempting to visually “pre-empt” the store brand at the shelf, reducing the likelihood that shoppers will actively compare products (i.e. national brand in one hand, store brand in the other). For larger brands, such as Colgate or Tide, this is best done by creating “mini” sections that are four to six feet wide and are dominated by your brand.
Subsections like these work to simplify the shopping process by taking a potentially overwhelming category (sometimes spanning 20 to 30 feet) and reducing its scope and complexity. More importantly, they focus and lead shoppers to compare and select products within the brand franchise, rather than against the store brand.
Of course, most brands don’t have the luxury of establishing such mini-sections. For these brands I recommend a strategy that focuses on optimizing shelving within a display—with a horizontal brand block. Our research tells us that when shoppers first view product categories, their dominant scan patterns are horizontal: They typically begin at the point of greatest visual contrast and then scan to the right, in a reading pattern. This visual pattern typically leads shoppers to compare products that are positioned on the same shelf.
That is why horizontal “brand blocks” typically lead shoppers to compare products within a brand (Which Tylenol is right for me?), while vertical shelving makes it more difficult to shop within a brand family and is more likely to promote cross-brand comparisons (Should I spend more for Tylenol or buy the store brand?).
It’s important to note, though, that retailers are aware of this insight; many are already positioning their products immediately to the right of leading national brands, to break up “brand blocks” and encourage direct comparisons.
Use structure to differentiate
When direct comparisons do take place, and they inevitably do, national brands must simply “look better” than store brands at first glance, ideally from several feet away. Across categories, we’ve consistently seen that the most effective way to create this “visceral” differentiation is through unique structures and/or delivery systems. More importantly, a unique shape can have a powerful impact on brand imagery by embodying a key dimension (such as “fun”, “innovative” or “premium”). For example, within the children’s shampoo category, L’Oreal’s “aquarium” design system effectively differentiates from a distance and embodies the concept of fun.
In a recent study, we found several cases in which innovative packaging systems contributed directly to brand preference and/or an increase in a brand’s anticipated price premium.
Structural innovation is also critical because it is inherently more “ownable” than graphic design, which is far harder to protect legally. Store brands can easily develop product visuals of comparable quality, but they will always be more reluctant to invest significantly in structural changes, which often involve capital expenditures.
Simplify your message
In the instance when a shopper is holding your package in one hand and a store brand in another, you want to be sure that your brand “owns” a message and establishes a clear point of difference. A shopper in this scenario is frequently just looking for a reason to justify spending a bit more for a national brand.
When it comes to messaging, our research has consistently found that less is more: It is more effective to highlight one very clear message or claim than to try and cover the bases by throwing four or five claims on a label. Interestingly, we’ve found that the point of difference doesn’t even have to be grounded in a tangible and unique product benefit (a special ingredient, an efficacy claim, etc.) to be effective, nor does it need to emphasize value. Instead, it can be linked to a usage occasion (The brand for … ) or simply reinforce brand equity (America’s #1 choice for … ). Overall, it is most important to have a single clear message and highlight it so that it is prominent in the few seconds the shopper spends with your package.
One way to do that is to position your claim properly on the package. Our eye-tracking studies of label viewing patterns have shown us that messages placed in top corners (as “violators”) are often missed by a majority of shoppers. However, when a key claim is integrated within a label’s primary viewing flow (which is often between the branding and the main product visual), it is typically seen and read by about 75 percent of shoppers.
Focus on price points
Even if you’ve mastered the above three points and really worked your brand’s packaging, you must remember that pricing also matters. Specifically, price points matter—and it’s important to keep in mind that certain price points and price gaps have more psychological power than others.
For example, when cereal prices climbed above the $5 mark, it triggered shoppers to give store brands a second look. Similarly, we’ve seen that increasing a national brand price premium from 50 cents up to 60 cents may not impact sales, but that the same 10-cent increase can be more powerful if it brings the premium above the $1 mark.
One consistent finding across categories and studies has been that shoppers’ value perceptions are driven primarily by price points, more so than by full value propositions/equations (i.e. price and quantity). For national brand marketers, one implication is that it’s often better to offer slightly smaller sizes in order to keep the price point or price gap (versus store brand) below a certain figure. Conversely, the strategy of offering bigger sizes (at higher price points) tends to be less effective.
In addition, we’ve found that new packaging shapes/systems can be valuable in resetting price expectations and helping to justify new price points. For example, if someone has purchased orange juice in a carton for many years, she will typically have a fixed perception of what orange juice “should” cost. However, if that orange juice suddenly comes in a carafe, she may give the marketer more latitude, particularly if the new structure provides a benefit (such as easier handling, better product protection, portability, etc.).
One final point to consider about pricing: this is the area that you are least likely to get clear, accurate feedback from shoppers. If you ask shoppers directly about pricing (How much more would you pay for the national brand? How much would this extra feature be worth?), they are very likely to provide misleading answers. To get the most accurate direction from shoppers, it’s best to avoid direct questions about pricing and, instead, test a new packaging system at different price points to see if incremental production costs can be passed along.
Big picture implications
Clearly, the days of Coke vs. Pepsi—or Bayer vs. Bufferin—are over. In more and more categories, the primary challenge for national brands now comes from lower-priced store brands with increasingly more attractive and higher quality packaging. This change in the competitive landscape requires that you re-calibrate your mindset as you develop and test new packaging systems.
In packaging development, the focus should be on creating more “ownable” innovations that differentiate, deliver added value and, ultimately, help justify price premiums. They key here is developing more structural innovations and proprietary delivery systems, as opposed to settling for “graphic refreshes.”
In packaging research, the focus should be on incorporating an assessment of new packaging systems against private label. Specifically, this means measuring potential confusion at the shelf and questioning to uncover the anticipated and acceptable “price gap” between national brands and store brand competitors.
In facing the store brand challenge, national marketers have a choice. You can treat packaging as a cost center, and attempt to combat declining margins by further squeezing production costs. Or, you can recognize the importance of packaging as a marketing vehicle and invest in further differentiation against store brands to justify price premiums. Marketers who take the latter course—and invest to achieve packaging superiority—are sure to be well-rewarded. BP
Scott Young is president of Perception Research Services (PRS), a company that annually conducts more than 500 studies to help companies guide, assess and improve their performance at retail. Contact Scott at firstname.lastname@example.org or 201.346.1600.
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