A brand by any other name: Five steps to woo back new private-label shoppers
By Warren Storey, [email protected]
It is hard to put a label on consumer purchase behavior these days, what with Americans pulling out of the recession. But one thing is clear: The store brand is gaining ground as a core brand in an increasing number of households.
Despite improving employment figures and a stabilizing economy, American consumers continue to switch to lower-cost, private-label goods across every supermarket category. From cheese to shampoo to laundry detergent, shoppers are trading to store brands in the double digits — roughly 74% of almost 1,500 consumers recently surveyed by Epsilon Targeting said they shifted to private label in both food and household products. A surprising 61% switched in personal care.
This move could indicate not only the fading perception that purchasing store brands means sacrificing quality, but also that consumers are becoming satisfied with the value of these alternatives. (Wow, the store brand painkiller worked!) Yet at the same time, our research shows national brands still wield influence: In almost all segments, more than 65% of consumers said would return to their national brands, with a coupon.
For manufacturers of the nation’s most enduring brands, this is sobering shift, but they can rise to the challenge. The formula for winning back the best customers is well within reach — packaged goods makers just require the key ingredients of scale, consumer data and new-and-improved communication channels.
Winning back store-brand shoppers in five steps
To recapture this shifting segment and, importantly, to prevent additional brand-switches, we offer these state-of-the-industry findings:
- Target the former faithful: While more than 65% of those surveyed said they would return to their national brand if given the right offer, that means roughly 35% are not likely to switch. Marketers should first identify those consumers who would return to their national brand and then target them with coupons, samples and similar incentives. It is important to avoid directing resources to those consumers who are not willing to trade back, but focus instead on those who will deliver a meaningful return.
- Reward the savvy shopper: These days there is less of a stigma associated with store brands, coupons and other efforts to save money –this includes “image” categories such as hair and facial care. In addition to using coupons and samples, manufacturers can increase their consumer connections with “Savvy Shopper” clubs and similar loyalty programs tailored to the shopper’s lifestyle. Such rewards will increase the shopper’s emotional investment in the brand, and potentially result in powerful word-of-mouth marketing.
- Track the high-risk categories: Our research shows more consumers are switching to private label in high-quality categories such laundry detergent and diapers. Consumers make these decisions based on two factors: price and quality. Manufacturers must use their data to identify these price-conscious consumers and then target them with tailored promotions that emphasize the quality and value of the product. This equation should attract the shopper not just once, but for the long term.
- Use food for thought: The Wall Street Journal recently reported that food prices continue to rise, meaning that the trend toward store-brand foods will likely escalate. Using this pricing knowledge, manufacturers can cross-reference those categories with vulnerable pricing against the spending patterns of their best shoppers, and then promote accordingly. This trend also presents an opportunity for non-food marketers to develop cross-category promotions — “buy two cans of soup, get $1 off cold remedy.”
- Channel surf for success: Access to robust, actionable consumer data and shopper insight enables national brands to identify what their best shoppers buy, where they buy it and when. Then, they can use this intelligence to reach these shoppers where they are — applying the “what, where, when” knowledge across all channels, from direct mail to mobile phone. National brands have the advantage of scale and can create a deeper emotional link with consumers through the web, social media and other channels where private labels might not venture.
No generic answers
Indeed, there is no prepackaged solution to winning back consumers who have switched to store brands. But manufacturers certainly do have a recipe for altering the shift — it exists through the use of shopper data and tailored marketing.
The first step is segmenting out those consumers who have traditionally been faithful to national brands, since private-label loyalists are much more difficult to win back. Then, using robust, actionable data, manufacturers can win best shoppers with samples and money-saving promotions that emphasize the better quality of their product and innovative features. (New and improved! Works longer while reducing drowsiness.)
Lastly — and importantly — manufacturers must deploy their data based not only on what shoppers buy, but where they are likely to be reached, from the mailbox to the smart phone.
By combining these top-shelf ingredients, manufacturers should be able to recapture their most desired consumers while preventing others from switching to store brands. Most importantly, they’ll understand their shoppers better in the long run, which is the trademark of advanced, cross-channel marketing.
Warren Storey is VP Epsilon Targeting, a marketing services firm with a broad array of data-driven, multichannel marketing solutions that leverage consumer insight to help brands deepen their relationships with customers. He can be reached at [email protected].
ShopperTrak: Holiday sales up 4%
Chicago — Year-over-year retail sales rose a solid 4% for the 2010 holiday shopping season (November/December), according to ShopperTrak’s National Retail Sales Estimate.
Conversely, total U.S. foot traffic fell slightly below expectations as consumers continued the pattern retailers saw throughout 2010 of fewer mall and individual store visits with a larger spend. ShopperTrak’s revised holiday forecast called for a 1.8% traffic increase.
With very early holiday sales and promotions, November started off with a bang as retail sales for the first two weeks of the month (through Nov. 13) increased 6.1% versus last year, while total U.S. foot traffic increased a robust 6.2%. In all, November sales and traffic increased 5.8% and 4.6% respectively. By comparison, sales and traffic during November 2009 versus 2008 decreased 1.9% and 6.1%.
In December, retailers felt the wrath of Mother Nature as the crippling blizzard along the Eastern seaboard essentially wiped out shopping and delayed nearly $1 billion in sales on Dec. 26 and Dec. 27. ShopperTrak’s data shows overall monthly sales increased 2.6% compared with last year, while traffic declined 2.6%. In early December, ShopperTrak anticipated 2.2% and 0.2% sales and traffic increases for the month.
“Although early November door buster sales and promotions had been planned months in advance, the dramatic response, which quite possibly saved the season, was a very welcome surprise,” said Bill Martin, co-founder of ShopperTrak. “Then just as retailers were beginning to shake off sluggish returns from early December, the blizzard in the East and Northeast essentially wiped out traffic and sales in the days immediately following Christmas, strongly impacting overall monthly performance.”
Martin continued: “Although we’re still essentially comparing to depressed levels, the four percent sales rise this season is the first real positivity in two years and should be seen as a relatively encouraging sign for retailers heading into 2011.”
The NRSE provides a nationwide benchmark of retail sales. It is derived from the U.S. Commerce Department’s GAFO (general merchandise, apparel, furniture, sporting goods, electronics, hobby, books and other related store sales) statistic, as well as ShopperTrak proprietary industry intelligence on shopper movement and sales statistics.
The ShopperTrak Retail Traffic Index measures traffic across five separate retail segments including total U.S. retailing. Available as a database or in newsletter format, SRTI reports national and regional traffic trends in a rolling 16 month trend line.
Kmart up, Sears down in December
Hoffman Estates, Ill. — A 2.3% same-store sales gain at Kmart was not enough to offset a 6% decline at Sears resulting in an overall 1.7% decline for the combined companies domestic operations during the five week December reporting period ended Jan. 1.
The December results were released as parent company Sears Holdings updated its earning guidance for the quarter ending Jan. 29 and indicated profits per share would exceed analysts’ consensus estimate of $3.09 and fall in a range of $3.39 to $4.12 with net income between $370 million and $450 million. For the fourth quarter to date, Kmart’s same store sales are up 3.4% while Sears is down by 5.3%. Last year, fourth quarter profits were $3.74 a share or $430 million.
The quarter to date gain at Kmart is attributable to the layaway program and strength in categories such as toys, home, sporting goods, apparel and footwear, according to the company. However, those increases were partially offset by declines in the food and consumables and pharmacy categories.
The sales difficulties seen at Sears are the same as those affecting other retailers with significant exposure to the consumer electronics category and televisions in particular. Price deflation and moderating sales of existing flat panel sets coupled with a slow uptake of newer technologies has hindered sales growth at Best Buy, HH Gregg and Target. Over half of the decline at Sears occurred in consumer electronics category, but appliances and tools also experiencing declines, according to the company. Conversely, Sears said footwear, jewelry and automotive categories produced comparable store sales growth during the quarter-to-date period.
The company also updated its financial position and said it expects to end the year with approximately $1.1 billion in net cash balances and no outstanding borrowings under its $2 billion domestic credit facility. Sears Holdings plans to report its fourth quarter and full year results before the market opens on Feb. 24.
Improved profits during the fourth quarter will be offset by losses earlier in the year results in the company reporting full year net income between $130 million and $210 million, or between $1.16 and $1.88 per share. Last year, net income totaled $235 million or $1.99 per share.