Retailer issues in branding

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					Retailer issues in
         Learning Objectives
After this session you should be aware of
the following:
   What is meant by the term ‘own label’
   What is meant by the term ‘generics’
   The growth of own label brands
   The different reactions of brand
    manufacturers to the growth of own label
    brands and retailer power
Brands as a sign of ownership
1964 (U.K) resale price maintenance
(RPM) abolished, ‘own label’ began
Own labels positioned as cheap
alternative to manufacturers’ brands
Up until 1970s own labels seen as cheap
Now retailers’ own brands offer high
    The changing nature of brands and
               own labels
                               High quality

                                            •Own label 2003
                                            •Manufacturers’ brands 2003
                                            * Manufacturers’ brands 1970
Low price                                                           High price

            * Own label 1970

Generics: lowest priced retailer brands,
Tesco ‘value range’ for example
Generics appeal to very price conscious
Generics often perceived as very low
Leading US retailers own labels
1.   Wal-Mart
2.   Best Buy
3.   Home Depot
4.   Target
5.   CVS
6.   Dell
7.   Walgreens
8.   Lowe’s
        Own label brands
Brands designed by retailers to compete
with brands’ manufacturers

Also known as retailer’s brands

Retailers have stringent standards of own
label pack designs
Strong retail brands
Publix’s Own Label brands
Wal-Mart's Own label brands
Carrefour’s Own label brands
Tesco’s Own label brands
          Brand Positioning
 Brand positioning is a process of position
or place the brand in the minds of
consumers based on:

   Cost
   Differentiation
   Combination of both
Let’s have a look
The growing power of retailers
                                            Large discounts
              Growing                       from
              strength of                   manufacturers
              major retailers

 Small retailers                                     Discounts
 withdraw                                            attracts more

         market share
                                Store                   High profits
     The weakening manufacturer’s
                                Manufacturer gives in to
                                retailer demands for extra

                                                     Manufacturer brand support cut
  Less investment in existing                        while own label investment
  brands and NPD                                     grows

 Manufacturers see falling profits                  Consumers perceive less
                                                    difference between brands and
                                                    own labels

Brand sales fall and own labels rise                 Choice based on prices,
                                                     availability and display
Own label brands potential
 There is excess manufacturing capacity
 Products are perceived as commodities:
 Inexpensive and low risk purchases
 Products can be easily compared by
 Low level of manufacturer investment are
 common and the production process
 employ low technology
 High price gaps and resources to invest in
 high technology
Own label brands potential contd:
 Variability in quality is low and distribution
 is well developed

 Branded products are offered in few
 varieties and with rare innovations
How retailers choose its suppliers
 Can they produce the quality standards
 Are they financially sound?
 Do they have adequate capacity?
 Do they have good labor relations?
 Will they be committed to retailers?
 Do they have the flexibility to respond to
 short term market fluctuations?
 Will they be able to hold adequate stock?
How retailers choose suppliers
 Will the supplier maintain adequate
 communication with retailers?
 Will the supplier agree to payment terms
 of the retailer?
 Would the retailer be happy to be
 associated with the supplier?
     Strong brand manufacturer’s
   response (Unilever, P&G, Nestle,
                     Investment in
                     current brands
    Manufacturer                         communicatio
                     and NPD
    profit                               n, ‘pull’

Brand sales                               recognises
grow                                      brand values

                                       influenced by
      Wide                             quality and
                      Retailers want
      distribution                     brand
                      strong brands
Classification of Retail outlets
 Convenience Retail outlets

 Non convenience outlets
Convenience Outlets
 Have a geographical coverage, which
 makes easier for consumers to access or
 reach them

 Products sold are not specialized and do
 not involve extensive information search

 Manufacturers’ brands do not rule until
 strongly differentiated and too much
 information should be avoided
Inconvenience Outlets
 Outlets that are not easier to access

 Consumer involvement is higher as
 compared to convenient retail outlets

 Sales assistants and staff need to be fully
 aware about the products’ functionality
 and capabilities

 For example jewelers, electrical and cell
 phone retailers
Understanding the balance of power

 Coercion Power

 Legitimate Power

 Referent Power

 Expert Power

 Reward Power
Coercion Power

 It is the expectation of one party that the
 second will be able to punish them if they
 fail to fulfill other’s wishes

 For example, Wal-mart can de-list Procter
 & Gamble, if P&G does not fulfill any
 demand of Wal-mart
Legitimate Power

 When one party accepts to act in a certain
 way required by another party.

 For example, Franchisor can use its
 legitimate power on franchisee like KFC,
 Mc Donald's and subway
Referent Power

o Referent power occurs when members of
  the distribution channel are willing to defer
  to a highly-regarded channel member

o For example, suppliers want to be
  associated with a reputed retailer and
  follow strict rules to be well recognized
  among the market to win more business
Expert Power

 This power exists when the retailer
 recognizes that a supplier has a certain

 For example, Wal-mart recognized that
 P&G can supply stocks and other services
 quickly and efficiently, so at first Wal-mart
 was ready to defer to the manufacturer or
 supplier and agree to their requests
Reward Power

 When a manufacturer has the ability to
 financially reward a retailer to follow its
 directions and policies

 For example, Convenient stores or gas
 stations in the U.S. receives financial
 rewards to display Coca-Cola in the front
 or before Pepsi

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