Are Your Customers Brand or Category Loyal?

How your brand can start to combat private-label pressure by connecting with consumers on a deeper level.

The Store-Brand Elephant In The Room

It’s not news that many brand managers are seeing their share erode in favor of private-label brands. The following trends are enough to give any brand manager indigestion:

  • Unit sales of private labels have been on a slow but steady climb for the past five years. Currently, private labels account for roughly 23% of unit sales.
  • It isn’t just the price that makes private labels more attractive. Sure, they cost roughly 29% less, but most consumers today believe that private label products are just as good, and in some cases better, than national brands.
  • Retailers are actively recruiting veteran brand marketers to help grow their private label-brands even more. In 2009, Safeway recruited Diane Dietz from Procter & Gamble and named her chief marketing officer. In 2007, Kroger nabbed Linda Severin from ConAgra.
  • In 2011, private-label brands accounted for 31.4% of the 14,400 new food and beverage items introduced in the U.S. That is double what is was in 2010 and up from just 8.7% in 2009.
  • Since 2008, the number of premium-positioned private-label brands has outpaced new premium-positioned products introduced by national brands.

What is news is how some national brands are addressing these issues and addressing the problem. These are the national brands that have managed to keep private labels in check. Among the biggest winners have been brands in the categories of diapers, shelf-stable dinners and cat/dog litter. Not only were brands in these categories able to maintain their share, but private label shares in the categories also declined.

What’s their secret? The answer is a holistic approach to customer retention. At the center of this strategy is the idea of consumer loyalty. Success with consumer loyalty in the CPG space hinges on a three-pronged strategy outlined later.

Meeting the Challenges

Why are national brands in some categories winning and others losing? The hypothesis is that these national brands have managed to connect with consumers on multiple levels.

That is not an easy thing to do. Consumers are complex beings. They will drive across town to save a few pennies on gas yet they will pay four times as much for a tube of mascara with no discernable product feature superiority. They insist on their own individuality yet they crave community and inclusion. They will sing the praises of a brand in a review yet they will blithely purchase a competing product at the first sign of a coupon.

So how are these brands winning in categories with just as many private-label challengers, given private-label brands have eliminated national brands’ once held advantages of technology, design and quality?

Firstly, there are no low-involvement categories—just low-involvement brand managers. All categories require a decision and purchase commitment; each purchase asks for a renewed commitment to the brand—or represents the opportunity to switch. Social media monitoring shows that categories considered low involvement are relatively active and able to ignite (and hold) conversations with people.

We’ve identified three ways national brands can break people’s private-label habits and encourage new rituals through surprise and delight, recognition of brand affinity, and looking well beyond advertising.

1. Surpirse & Delight

To start with, don’t just appeal to people’s emotional side by wrapping innovative products in strong branding and aligning squarely with the core values and needs people seek to fulfill with your products. But also consider using those shared values to provide an element of unexpected acts of kindness and goodwill—useful content, opportunity to trial other brands in the portfolio, reward just for being a customer on that day.

Marie Callender’s and a collection of other ConAgra brands have teamed up to offer consumers a way to fight childhood hunger together, enjoy some music and feel good about what they have been able to accomplish together.

2. Recognize Brand Affinity

It’s important to leverage the “give and take” dynamic that has been core to customer loyalty efforts for over three decades. Successful brands make no qualms about the fact that their brand is a higher-priced product but they also acknowledge their customers’ repeat purchases by offering them rewards and recognition for that loyalty. This recognition is only possible through transactional data and insight—a party to which CPG has been historically late. By creating this direct correlation between product purchase and reward, these national brands not only ensure equitable reciprocity for brand loyalty, but they also ensure they receive a continuous, low-to no-cost feed of consumer transaction data. That data is 100% owned and controlled by these brands—the power of that data cannot be overstated. One reason to switch—loyalty will be recognized and rewarded.

Stouffer’s Dinner Club rewards people for every single-serve product they purchase. Participants feel recognized for their loyalty and Stouffer’s is able to better serve their consumers because they now more clearly understand the buying and consumption patterns of their consumers.

3. Well Beyond Advertising

Marketing, over and above advertising, is more than a tactic; it’s a strategic imperative to develop a brand community that enhances the value of a brand, and to create a movement of people to grow and defend the brand. Brand communities consist of loyalists who share stories, ideas, concerns, and dare we say, feelings with each other about the worlds they live in—parenthood, nutrition and pet parenthood. This sense of community is vital to establishing a greater sense of loyalty—and commitment.

As one of P&G’s most successful brands, Pampers knows how to engage moms well beyond print and television advertising. Pampers has successfully recognized that moms want—even need—to engage with one another for advice, reassurance, humor and more. Pampers regularly works with the Mommy Blogger community to stay connected and offer content. In addition, Pampers was quick to master what a successful brand Facebook page

Three Legged Platform for CPG Loyalty

When brought together, these three marketing strategies and their associated tactics form a very stable three-legged platform for consumer loyalty in CPG (Figure 1). The word loyalty when used in the context of marketing no longer means just points and prizes. It means to create fidelity or a lasting bond. In order to achieve the consumer loyalty in CPG, marketers must connect with whole consumer—their brain, their psyche and their conscience.

What It Means For Your Brand

All three of these categories are weathering this sea change in packaged goods better than any. All three have recognized the importance of connecting directly with their consumer and establishing bonds on multiple levels—both emotional and transactional.

They have attracted consumers to their products by creating brands that stand for superiority and meaning. They know who their best consumers are by name and which products they are buying. And finally, they have created brand advocates simply by giving their consumers a platform on which to interact with each other. They have successfully created brand loyalists and are not as susceptible to the next competitive coupon that rolls through the market.

This article was originally published on September 4, 2012 by Loyalty 360.