skip to main content
Business Journal
Private Labels Are Brands, Too
Business Journal

Private Labels Are Brands, Too

by William J. McEwen

Marketers have long derided "store" brands and "private label" offerings, viewing them as clearly distinct from -- and markedly inferior to -- traditional "name" brands. As marketers see them, private label goods aren't really brands at all. They simply trade on the category-building efforts of branded products, providing lower cost, lower quality alternatives to the more esteemed name brands.

Unlike "true" brands, store brands are often established through minimal expenditures in product R&D, provided with imitative packaging, and supported with little or no marketing and advertising. They're simply shoved onto store shelves, their design and construction mimicking the brands beside which they appear. And their appeal is determined only by lower prices. To marketers, private labels are the country cousins riding the coattails of brands that have earned their right to shelf space.

QUOTE: Store brands cry out just as loudly --- and persuasively -- as the name brands that appear alongside them.

This image persists, reinforced recently in a column by Jim Jubak on The author, senior markets editor for MS Money, contends that "the traditional brand is dead, dead, dead" because Wal-Mart, Target, and Costco have "killed it." According to Jubak, store brands account for about 15% of U.S. retail sales and up to 40% of retail sales in various European countries. That's because a store's private label brand is typically about 25% cheaper than its name brand counterparts while it delivers comparable product quality. So brand marketers are now confronted by what Jubak calls a "post-brand" world, where minimal differences in product quality no longer justify the price premium that name brand marketers desire or demand. The only alternative, Jubak suggests, is brand differentiation through constant product innovation, which keeps name brands one quick step ahead of a store's private label offerings.

But this discussion and debate looks at brands through the wrong lens. Product marketers and retail chains don't decide what's a "real" brand -- consumers do. If the hallmark of a brand is a differentiated promise that a company makes to consumers, then the consumer's perception of meaningful differentiation is the only criterion that can be used to determine what is, in fact, a brand.

If it looks like a duck, and it walks like a duck . . .

Looking at the world from a consumer's viewpoint -- because consumers, after all, make the buying decisions that determine a company's long-term health and viability -- Wal-Mart is every bit as much of a brand as Crest or Jif or Pampers. Is a traditional brand like Oldsmobile somehow more legitimate than a store brand like Kenmore or Craftsman? Craftsman enjoys a level of consumer trust and esteem that many traditional brands would envy. Is Gap not a real brand because it's only carried in Gap stores? Starbucks is no less a brand than Folgers just because Starbucks wasn't built through advertising. Martha Stewart still qualifies as a name brand even though the company has made exclusive merchandise distribution agreements with Kmart. If "cheaper" is what defines a private label brand, then Celeron and Suave must be categorized as private label brands.

By any measure, Safeway, Costco, and Sears are brands. And whatever products they carry and feature that bear their proprietary names must be recognized, acknowledged, and managed as brands, because that's exactly how consumers think of and react to them.

When a consumer encounters an array of products on a Wegmans grocery store shelf, she does not think, "Ah, these are private label brands, and these are not." Rather, she considers that some are worth her time and money, and perhaps her patronage, while others are not, regardless of who owns the brand name, designs its package, or controls its placement in the store. Store brands cry out just as loudly -- and often, every bit as persuasively -- as the name brands that appear alongside them.

Competing for customer engagement

Are traditional brands "dead, dead, dead"? The answer is no, although they're not all equally alive. And this very same point can be made for store brands. Some private label brands are vibrant, while others are dormant -- and for the same reasons that some traditional name brands are growing, while others are languishing. Given that store brands are priced 25% below their name brand counterparts, and yet command only about 15% of the U.S. market, something besides price must be motivating consumer choice. After all, the great majority of consumers are paying a significant price premium for products that allegedly are no better at meeting their needs.

Whatever their parentage, strong brands are those that have managed to create and consistently deliver on a credible, compelling promise -- one that's powerful enough to connect with consumers personally and emotionally. Low prices alone can't forge this sort of connection, and a low price won't ensure success for a store brand or a name brand. If "cheaper" were a sufficient source of brand power, Yugo would still be going strong, and Kmart would be every bit as vibrant as Target.

GRAPHIC: How Engaged Are Your Customers?

To consumers, the aisles of their favorite stores aren't battlefields where traditional and private label brands fight for dominance. As they stroll those aisles, consumers see brands they care about and brands they don't. The brands they care about are the ones that have forged and sustained emotional connections with them that transcend a price-based buyer/user relationship. (See graphic "How Engaged Are Your Customers?" and "The Engagement Imperative" in the "See Also" area on this page.)

What company executives should be aiming for, and what investors should really prize, are the brands that have proven they can craft and nurture fully engaged customer relationships. Whether those brands are "traditional" or "private label" is irrelevant. All brands must innovate, not just traditional brands. All brands must offer value, not just store brands. All brands must establish Confidence and Integrity, generate Pride, and inspire Passion. (See "The Constant Customer" and "Getting Emotional About Brands" in the "See Also" area on this page.)

Every brand -- whether it's a name brand or a store brand -- must offer a meaningfully differentiated brand experience that bonds the customer to the company. In the Darwinian world of marketing, a brand's survival depends on its engaged customer relationships, not on whether marketers or analysts classify it as a "name brand" or "private label" offering.


William J. McEwen, Ph.D., is the author of Married to the Brand.

Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A
+1 202.715.3030