The Rise and Shine of Private Labels: Edges

We all seen and read about the rise of private labels. In UK and US, companies as Walmart, Tesco or Mark’s and Spencer delight us with true valuable products at the level of any brand we have seen before. Retailers are beginning mastering brand management and realized how to manage their portfolio of products covering today categories within low, medium and high end offerings, sometimes stated by consumers as better than well established brands.

In the past years the world revolved around advertising and distribution: more ads would probably create more demand, therefore more distribution, therefore more sales. This as changed today with massive competition from many players and information accessibility brought by the Internet. No longer advertising works so well as in the past did. At the same time retailers realized they have the power in their hands, at the end of the day, they are the core location where people physically shop and choose their products, if even not online whereas they’re also doing a great job at delivering a great service.

Some experiments lead to implementing products of their own, copying what was already done. With a bit more effort retailers realized they could actually build brands and improve their margins by settling wider offerings throughout different categories and different choices throughout different quality layers. Again, they own the aisles and the shelves. Hiring talent to manage their portfolio doesn’t seem like a problem as well.

Some changes on the packaging, an incremental investment in improving product quality and bingo, people question themselves why not? Why not I don’t buy a product with the same quality as the other brand but at a lower price? After all this is value for me. People’s questions became imperative, and the rise of private labels seems to be here to shine. When thinking about what causes this shift, besides of what was mentioned above, the following key points lead to the situation:

1.  Branding is more vulnerable in FMCG. People use Armani to make a statement, but they don’t use TIDE or eat Danone Yogurt to make such a statement.

2.  The value proposition of private labels is huge. The inexistent costs in advertising, economies of scale, and distribution capabilities along with an alignment in product quality makes it very hard to compete with.

3.  The economic downturn as deeply changed consumer behavior. Smaller family budgets and a new mindset of value within shopping as helped private labels rise. People experiment more lower priced items and eventually get loyal fast if happy with overall experience. The incremental quality in private labels is buzzing already and spreading fast.

4.  The insights retailers can work on on their own shops is gold mine for developing strategies, products, brands and experiences which make the cut.

Given this what brands are doing? Well buying some supermarkets.. focusing on power brands and selling out others. Yet, we see brands as “Innocent” rising. The edges are where brands will win. Middle market is hard to cope with as people wonder around the cheap or the expensive, the big or the small, the fast or the slow. Focusing on a single positioning within the edges seems to be the best strategy.

Why advertising fails? One of many reasons

I am reading a fine book on advertising, and what makes this book quite good is the approach on common sense key points that we usually tend to forget. Beyond several insights that caught my attention so far, there is one to highlight that is simple when building a communication strategy but ignored often, it says:

Clearly list and brainstorm the features, advantages and benefits of your offering, but start by the benefits, advantages and features when communicating with your market.

The attention your consumers dedicate to your brand is scarce within today’s landscape of ad clutter, if you don’t show fast the benefits consumers have with your offering, how do you think you’re going to get their buy-in in a tremendous competitive landscape? Below is a easy simple framework which should be always kept in mind. Consumers think on the benefits first, though several advertising messages think on the features first.

According with the authors, the thinking on true value propositions for the consumer is being easily filled by blank “buy me” propositions. As advertising seems to be dying nowadays, if you keep thinking on the traditional monologue, it will die faster. Why does this book have to highlight simple common sense and the community repeatedly be reminded of these time and time again? Here are a couple of reasons why I think it happens:

- Lack of proper research

- Research is not converted into valuable insights

- Consumers fail to provide true behavioral answers

- A few people in a focus group is not enough to get valuable conclusions

- Advertisers, marketers are busy enough they ignore insights from stakeholders

- Advertisers try to please marketers, marketers CEO’s: all fail on customers

If your advertising copy says, “we pride ourselves on the exceptional service we provide to all of our clients”, or “the best place on earth”, erase, rethink today.

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Acquisitions and Branding, simple lesson from Cathay

When acquiring Dragonair in 2006, Cathay Pacific did not merge the two brands nor co-branded both companies. With this decision, Cathay cleverly identified the different positioning between the two airlines and took aim to build both brands instead of merging them. Both brands have a clear market range and identity. Cathay with international routes from Hong Kong, has a more demanding customer that is willing to pay for quality and service within long flights. Dragonair on the other hand, supports a more regional focus, flying within Asia and more specifically to China where lower cost flights are appreciated in a high price sensitive market.

With both brands already well implemented in their markets and successfully positioned, a brand merge could have had generated a great loss of brand equity for Cathay or Dragonair, where a sudden inconsistency could have been surrounded by questions about which service to expect, which pricing to build in, which routes to take on, which identity, etc, especially when there is a large gap differences on respective target markets traits and expectations.
Strategically, it was a very smart move to complement Cathay portfolio to China, where the routes to Shanghai and Beijing are highly important. The deal placed Cathay to exploit the rapid growth in the passenger market in China, almost the second biggest global aviation market after the US, complementing its short routes to China with several Dragonair routes including the great Hong Kong – Shanghai, and also a joint venture with Air China. Cathay better coordinates connections through Hong Kong into China and offers more competitive prices for flights to Chinese cities from overseas destinations.

The combination of Cathay’s international reach and Dragonair’s well established branding on the mainland will mean a greater reach for the company, and a stiffer competition for other airlines. Cathay’s decision to retain the Dragonair brand name is not intended to create a “sub-brand”, as other airlines have done, to try and establish a presence in the “no frills” carrier market, but yes to cleverly manage both brands and build upon their equity developed before. Cathay offers a simple lesson on how extensions, re-branding, or co-branding can be wrong moves especially in the services industry, and how maintaining brand names after acquisitions could be a strategic move to develop long term growth as both are currently doing very well today.

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Brand Elements, a look at Adidas

Throughout all communication points where the consumer can experience the Adidas brand, we can see that a well-implemented integrated strategy is undertaken. Below, are the main brand elements that contribute to the perceptions consumers today have on Adidas.

1.  Leveraging brand image through athletes
Adidas initiated its path representing winning teams, equipping several athletes in the 1928 Olympics and later the German national football team. Since then, endorsements on athletes represent the best way to leverage the brand. Adidas smartly identified individuals with high potential of winning and which could represent the brand core values, partnering with famous football players, Olympic winners, tennis athletes, cycling champions, swimming competitors, and many others who could also score high in celebrity quotient, such as David Beckham (Football), Kobe Bryant (Basketball) or Anna Kournikova (Tennis).

2.  Actively sponsor major teams and sporting events
Later on, Adidas became solidly present on numerous national, club and local sports teams, providing all kinds of sports equipment to these teams and creating high levels of awareness together with powerful connections with winning teams – endorsement of successful teams. Active sponsorship of major global sporting events is another key brand sway. The Olympics, World Cup, and recently the Super Bowl, are major events where Adidas is involved, making the integrated strategy of event endorsement together with teams and athletes endorsement, raise awareness on its key brand values of authenticity, inspiration and achievement.

3. Channels: Retail partners, Adidas stores, and Adidas innovative superstores

Retail partners – Specialized sports stores
Since early Adidas is strong at the POS, incorporating its own merchandising into retail stores and partnering with retailers to effectively develop a consistent marketing next to the consumer. An effective strategy in leveraging the brand at the POS is made, creating a strong position at the most important consumer experience point – when ‘feeling’ the product, and fighting directly against its competitors. In determined retailers, Adidas involves its products not only with inside merchandising, but also with powerful outside banners.

Adidas stores
In its own stores, Adidas pulls out its best in the branding experience consumer can go through at the POS. A close look at some evident store brand elements tell us the use of colours, employee clothes, lightning, images, labels and other elements, make a special combination of its core brand elements displayed intelligently into a single store.

Adidas innovative superstores
Creating a unique and stimulating Adidas experience, the Adidas Sport Performance store is designed to be more than a normal sports store. It demonstrates Adidas commitment to innovation by launching the first ‘Mi Innovation Center’, featuring a high-tech customization process that gives consumers the same treatment as elite level athletes, providing them foot scanning analysis, an “experienced personal partner” recommendation based on their feet, performance needs, and customization options which allow designing and personalizing footwear according with users’ personal style.

4. Details: Making Adidas brand experience in each detail

Examples of packaging, labels, staff members (as mentioned before) along with other details, complement the whole brand experience of Adidas. Branding is about working on each detail to deliver a 360′ experience. In the case of packaging, an after purchase example of brand experience integrates brand communications in the best way, as shown below – Adidas Originals packaging on a street marketing campaign and its website.

5. Into Digital: Websites

Adidas Performance Website
A well-integrated communication is shown in Adidas performance website, by the use of the brand color palette and remaining brand elements. An opening video ad transmits a warm welcoming to Adidas history, making a strong connection with the consumer by telling a story – the founder and foundation of Adidas involved in passion and respectfulness. The remaining layout is well designed with easy and simple menus, making the whole experience user-friendly and emotional driven.

Adidas Originals Website
Again all the classical look and logo are well characterized to excel the Adidas feeling of the classics over modern glances. The colour palette changes, and the blue and white take over giving a fresh look. Similar to the previous website, it s highly interactive and dynamic with flash inputs. Content is easy to find.

Adidas Y-3 Website
In Adidas Y-3 Website, a different approach takes place to a more modern conceptualization of the brand; a strong futuristic layout is implemented and a video makes a small presentation. Interactivity and dynamism is the key here.

6. Advertising: Creativity, Innovation and Passion in Adidas ads

Adidas is well known for the advertising campaigns it has created along with its agencies of trust. Recently, the “Impossible is nothing” campaign, featured football stars such as David Beckham, Messi or Ballack, drawing raw creative sketches along with a discourse about achievement in life, ending with the campaign slogan. This campaign is an example that fits perfectly on brand core values (achievement), being well executed in that sense. Other advertising tactics lead to an exceptional implementation effort, such as the example (on the right) of creating giant billboards, well regarded within the innovation and authenticity Adidas wants to transmit. In this case, the billboard represents a 65-meters-wide Adidas placed on a bridge scaffolding over the road to Munich airport, featuring the German goalkeeper Oliver Kahn catching the newly-designed ‘Teamgeist ball’ during Germany’s World Cup 2006.

7. Strategic partnerships: Leveraging brand positioning to premium

To conclude, partnerships with Porsche, in which special designs on footwear are created; Stella McCartney partnership with its apparel design; and the Y-3 brand implementation with Japanese designer Yohji Yamamoto – all constitute a bright strategic decision in leveraging the brand into premium categories. (but does it work?)

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Giving your competitors an advantage

A Sony executive once put, the major difference between a Sony television and others is solely the design. Certainly didn’t add the story each brand tells, as well as sales people at the buying decision moment and many other factors. True that quality is often apparently equal at the sense of a normal consumer, but when brands simply forget their marketing at the point-of-sale is something that amazes me.

In this case I mention what I realized at a electronics store other day. Some brands such as Apple, correctly invest in making product videos and carefully positioning them at key points inside the store. Other brands, correctly put their own product videos at their own television set’s making it obviously aligned, like Aquos by Sharp presenting images from ocean life (curiously not in the picture example above). Worst then becomes when a television set displays other brand product videos.

In a very quick analysis on primary perceptions, a corporate video with a Samsung logo on the top displaying quality images and wonderful scenarios makes people think it is a Samsung television – the eyes first catch the glimpse of the TV screen, not the small logo at their base. Then when consumer realizes that this same TV is a Philips one, their first impression was already recorded and the brain previously started automatically to process the brand value plus its associations, leaving this next perception to a corner where is going to be more hard to change, specially to impact. If you want to give your competitors an advantage, follow the example above, if you want to earn yourself an advantage at a key moment where purchasing decisions take place, invest in marketing at the point-of-sale rather than many mass market waste tactics.

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