Archive for February, 2015

SHAMPOO BRANDS BANK ON MARKETING

Private-label “store brands” are well past the time when they only appealed to bargain-hunting shoppers. A new report from Nielsen says, though, that private-label sales and shares are strongest in commodity-driven, high-purchase categories and those where consumers recognize little differentiation, such as paper products and medications such as headache pain relievers.

Where there is strong marketing support for name brands, though, the store brands do not do as well. Marketing spend is incredibly high, for example, in the hair care category, Nielsen noted. In 2012, Advertising Age estimates that name brand manufacturers spent approximately $6.8 billion globally on personal care products. Although it’s a tough proposition to overcome, investing in marketing activities for store brands will likely result in increased equity, even if slightly.

Hair care just keeps coming up in the examples. Name-brand manufacturers’ investments in innovation and marketing have created strong brand loyalty among consumers. In the U.S., more than one-third (34%) of respondents in Nielsen’s recent survey about private-label products say they’re willing to spend more than the average price on shampoo because it’s worth paying extra. Shampoo is among the top three products for which consumers are willing to pay a premium. Nielsen also noted that launches in categories like hair care require significant investment, making it more difficult for private label to compete.

High product differentiation also makes it more difficult for the store brands to compete with the name brands. Manufacturers in the hair care category—once again the example cited—have developed products to serve a wide array of consumer needs, including anti-dandruff, color protection and damage repair. Therefore, the degree of real and perceived differentiation is extremely high.

A longer purchase cycle and heavy promotional activity is also advantageous for name brands. Consumers purchase hair-care items less frequently than some other categories. Since hair-product purchasing is more sporadic, a higher price tag for brands is less of a barrier, making more price-competitive private-label brands less of a contender.

Conversely, name brands have a tougher time competing with store brands in categories where there is minimal differentiation and low brand equity. Perceived differences among milk products, for example, are low. There are many suppliers, and it’s easier for private-label to create similar products at lower cost in this category. Interestingly, the “Got Milk?” advertising campaign—the most successful in the category—was not branded. We’ll see if that changes now that Coca-Cola is getting into selling “premium” milk products.

IMPROVING ECONOMY BOOSTS YOUNG DEMO

It’s been widely reported that for many Millennials, “30 is the new 20,” with many delaying major life milestones, like full-time employment, marriage and having children. However, new data from the American Express Spending & Savings Tracker suggests that as the economy continues to recover, Millennials will make 2015 a year of major purchases and life experiences.

With the generation becoming a little older and perhaps wiser, the American Express survey finds that Millennials, defined as young adults age 18-34, say they’re more likely than older generations to experience major life milestones in 2015 (56% vs. 33% Gen X, 20% Baby Boomers) and make a big ticket purchase, like a new home or car (59% vs. 43% Gen X, 34% Baby Boomers).

This could be the year that Millennials start shedding the image of living too long in their parents’ home, being delayed in finding a real career path and becoming truly independent. “Now, with an improving economy, the country’s 80 million Millennials say they will be wielding their wallets, a trend that will create an interesting new dynamic for retailers,” said David Rabkin, Senior Vice President of Consumer Lending Products, AmEx.

75% of Millennials say they expect to take a leisure trip in 2015, which is even more than Gen X (68%) and Baby Boomers (59%). Importantly, 33% of Millennials say they plan to buy a car this year, 27% will start a new job and 25% will buy a house or condo, while 23% expect to move to a new residence. Also in the major retail purchase area—22% expect to purchase a major household appliance in 2015.

How many will make their mothers happy by getting married? The survey found that 5% of Millennials expect to hear wedding bells this year. Still, that’s more than the 2% for both Gen Xers and Baby Boomers.

For Americans of all generations, the AmEx research says 2015 may be a good year, with more consumers feeling optimistic about their future finances (43% vs. 40% in 2014, 35% in 2012). Saving money still remains the top New Year’s resolution (58% vs. 33% in 2013), but the average amount Americans plan to save is slightly down from last year ($11,292 vs. $12,464 in 2014). Most (52%) plan to save from their primary income, while 23% plan to pare back on little luxuries (like morning lattes and manicures) and 20% plan to sell some unwanted items online.

Here’s a strange factoid from the survey: A majority of consumers say they’ll keep their savings at a local bank (57% vs. 55% in 2014) but more than half of those who keep their savings in cash plan to hide bills in a secret location at home (53%).