Welcome back to Forrester’s blog series “50/50,” where we showcase two sides of a B2C marketing issue. This month we explore how consumers feel about buying “branded” and “private-label” products:
- “Branded” products are produced, marketed, and sold under a recognized brand name owned by a specific company. An example is Colgate’s “Total Whitening Toothpaste.”
- “Private-label” products are manufactured by one company but sold under a retailer’s brand name. An example is “Up & Up Whitening Toothpaste” (Target’s private label).
We asked 668 online adults in Forrester’s ConsumerVoices Market Research Online Community (MROC) in the US, UK, and Canada about their buying behavior. About half said they buy branded and private-label products equally frequently, with the remainder generally favoring branded products. Shoppers tend to go with branded personal care products and electronics, since they consider branded products in those categories to be higher quality. They are split in most other categories, including food and beverage, household, medication, and apparel.
Price Increases Force Shoppers To Choose Private-Label Products
Prevailing winds are blowing towards private-label products, however — while almost a quarter of respondents said that they had increased their purchases of private-label products in the last year, nearly a third said they expected to buy more private-label products in the following year.
The same reasons came up over and over again: prices are increasing too quickly, forcing shoppers to choose private-label products, which are generally less expensive. To quote various community members:
- “The price of everything has skyrocketed and we’re trying to spend our money more wisely by looking for better-value products.”
- “The cost of living means the weekly shop is getting more and more expensive. We have to try and keep the cost down.”
- “The rising cost of groceries and cost of living is having a very detrimental effect on my life, so I need to cut back in areas that I’m able to.”
- “Name brands deceptively shrink the amount in their containers and raise the prices.”
The private-label trap can be a dangerous one for brands to fall into, because once consumers venture to the dark side they may not look back — only a quarter of consumers who have recently switched from branded to private label for some products said they were likely to switch back if the price difference narrowed. For brands like Costco’s Kirkland and Target’s Up and Up, consumers don’t simply don’t private label as settling for less.
Brands Can Mitigate Private Label Switching With A “Value Barrier”
So how does a brand get it right and fend off private label? Create a value barrier to switching. This value can be economic (not likely for branded versus private label), functional, experiential, or symbolic, and a brand must find the right value positioning that resonates with customers. When done right, even mass markets high energy brands, like many of P&G’s brands, have been able to sustain price premiums and ward off churn. But brands that fail to deliver value commensurate to their price premium run the risk of abandonment, and it’s difficult to claw your way back when your customers have had a taste of something very similar for a lot less.
Thoughts on private label vs. branded or what we should cover next? Email mkearney@forrester.com.
