subject: What You Should Know If You Want To Be A Manufacturer [print this page] The manufacturer has relied successfully on branding to ensure distribution of his products to the market. However, economic recession, retailer integration, and market fragmentation lead to difficult conditions in which to operate branding.
In the food sector, branding wrongly became synonymous with marketing. Branding like own-label is a means to an end in itself. It is a method, which must be capable of adjustment as conditions alter. As belts tighten, manufacturers cut their investment in marketing and product development, which is the very seed of brand growth. This has led to the familiar downward spiral apparent in so many markets. An under-supported brand, unable to sustain the premium pricing which is its reason for living, cuts price to sustain volume. This, in turn, forces another paring of costs thus further eroding the brand franchise.
This process has been taking place at precisely the time when the consumer is becoming more aware of alternatives and the retailer is offering better alternatives via store brands.
How then does own-label assist the retailer? The benefits may be grouped under six headings:
Market planning. The retailer needs to develop total markets for growth and profit, not just isolated products or brands. If we think of a market as being made up of products common to a purchasing decision then our job is to present the customer with the fullest choice, offering the best value for money.
In a self-service environment, it requires considerable market planning to communicate this choice clearly to the customer. If you do not believe me, stand in front of a badly merchandised toiletries display for a few moments, then close your eyes and see if you can remember what you have been offered.
Properly handled, own-label can be used to ensure coordinated range development by filling in gaps left by brands or by covering a market in its entirety. In the final analysis the main objective of the manufacturers brand is the profitable growth of that brand and not the growth of the market. The requirement of each is not always compatible, and this can result in an imbalance of development.
Control. Own-label is the property of the retailer and therefore under his absolute control. If we see a chance to develop a market in a particular direction we can use own-label to respond quickly and in the manner we want.
Innovation. New product development which relies on branding to reach the market place often involves long lead times, heavy investment, and high launch costs. The financial commitment for a manufacturer is sometimes so large that critical decisions about the nature of the product lean toward risk aversion. As a result we see too many me too products rather than genuinely innovative products. For example, there are plenty of newsletters printing service in the net. Companies that offer these newsletters have common marketing strategies like cheap newsletters for bulk printing, gift certificates for long time customers and etc. But one thing separates each from the other is the quality of prints.
Choice. Own-label provides an alternative choice to the retailer and to the consumer. There can be little doubt that a number of important consumer product markets became stifled because of manufacturer monopoly or more typically oligopoly.
Last is the cost. It takes a lot of investment to create a brand. We have already made that investment in our stores. Own-label products seldom require additional promotional investment and are therefore cheaper to develop. The customer pays less and the retailer can make a higher margin.
