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.