By providing product to private label retailers, national brand owners may be concerned about competition and losing revenue. However, if the national brand chooses not to provide their product to private label retailers, another brand likely will. It may seem like a no-win situation for national brands working to achieve maximum profits. An online study consisting of 1,600 consumers, found that brand imitation by private labels increase a consumers’ preference relative to the imitated brand. The study also found that if the private label retailer uses its own name on the imitated national brand, it does not hurt the sales or reputation of the national brand, but may negatively affect the private labels’ brand image and reputation.
In addition to national brands, the international marketplace is also being affected by private label brands. Private label products account for more than 30% of global grocery sales. Although there are individuals who are cautious about their purchasing decisions, there are also many shoppers who shop based on name recognition and perceived value. Within the United Kingdom, for example, private label production rose from 21.5% in 1980 to 39.3% in 2003. The success of private labels throughout the globe has presented challenges to international brands concerning budgets, advertising, and sales.
An example of national and private label products are over-the-counter medicines. While the national brand may present a televised commercial or a print advertisement, the private brand offers little or no promotional efforts. In this regards, the national brand should do fairly well based on their marketing efforts. In regards to the private brand, individuals who purchase private brands, likely do so because they are not affected by marketing efforts. Consequently, if the national brand can earn revenue by providing to the private labels, the national brand does not necessarily lose a customer or profits. Whether the national brand loses money is determined by the real value of the product. In regards to private labels, retailers are responsible for product sourcing, advertising, warehousing, and promotional efforts. If the national brand is making profits from private labels with no marketing or promotions, the results are good results.
The main difference between private labels and national brands awareness is the brands marketing and advertising efforts. Marketing generates familiarity to consumers, and the assumption is that the perceptual response patterns are different toward private labels than national brands. The factors include the private labels lack outside advertising, which affects product knowledge and sales. Consumers are likely to purchase a national brand if they believe the private labels are of lower quality. National brands often sell more product than private labels considering consumers perceive that national brands have a better quality than private labels. However, there is often very little difference between the two if any difference at all. For example, Wonder bread may not use the same quality materials for private labels as it does for its national brand. Additionally, the company may use a different formula, or may use material that is not as fresh.
Large National brands seek consumers with a higher level of knowledge than private labels. By promoting their brand, national brands enjoy consumers that are loyal and who are likely to promote their brand. In addition, national brand consumers often purchase based on cues from their memory of the brand. For instance, if a consumer were to arrive to a retail shelf to purchase a box of cereal, they are likely to purchase the box that reminds them of something they have seen or have a positive perception of. In this instance, the national brand is the likely choice of the consumer considering the national brand generally has a larger marketing budget and will be more familiar to the shopper. The important difference between understanding the private label and national brand consumers is with the consumers’ perception of the product and brand.
Dr. Elijah Clark (September 22, 2015). Private Label Brands [Web log post]. Retrieved from http://elijahclark.com/private-label-brands/