Many of today’s “generic” store-label brands, like Target’s Archer Farms or Costco’s Kirkland Signature, have gained recognition and a loyal consumer base. These brands are successful due to a mix of quality products, well-defined brand strategies, and robust investments.
To many consumers, store brands are nearly as good (if not at complete parity) as name brands, but come with a lower price tag. In fact, data shows that 34 percent of consumers say they buy generic or store brand products about half the time, and name brand products the other half.
However, there are reasons why consumers are hesitant to buy store brands and a gap between the two still exists. These reasons present brand strategy opportunities for name brand marketers to better position themselves against competitors in their verticals. Let’s take a closer look:
1. Unwanted Consequences
There are certain store brand products that consumers avoid buying based on fear. We’ve often heard the saying “buy big brand names for things you care about, and buy generic for everything else.” Take skin care products for example, consumers will generally pay a bit more, as their skin is not a place they want to take chances.
Brand strategy opportunity: Name brands should think about justifying their products’ slight uptick in cost around the fact that consumers won’t have to worry about experiencing any unwanted consequences.
2. Financial Risk
Most consumers really do their homework before making a “big” purchase, as making the wrong decision can be even more costly. Sure, they could save a decent amount of money up front by going with a store brand, but is it really worth it in the long run?
Let’s take major appliances for example. With generic or store brand appliances, consumers may be paying less up front, but may ended up paying more in the long run due to costly repairs or higher energy costs.
Brand strategy opportunity: Top brands need to make sure they convey all financial factors, not just the upfront cost, when bringing their “big ticket” items to market.
3. Time is Precious
Time is a precious commodity to many consumers. Thus, convenience is often a factor for consumers when they make a purchase, especially if that item is costly or will be highly used.
Electronics are a prime example. Americans spend, on average, more than 11 hours per day interacting with digital media. As a result, when consumers splurge a little on electronics, they are constantly being rewarded; whether it’s faster download times when using a name brand laptop or a printer that produces more pages per minute.
Brand strategy opportunity: Brands that produce expensive everyday products, like electronics, should tout the time their products will save the consumers as a prime reason they are worth the higher cost.
4. Brand Perception
Sometimes consumer perception alone is enough to influence a purchase. The products could be nearly identical in quality, but in the consumer’s mind, the brand name is just better. We commonly see this with over-the-counter drugs.
When it comes to the ingredients, the active drug in both name brand and store brand medications has to be the same. However, when people don’t feel well, they are often willing to spend a little more money for the reassurance of a brand name.
Brand strategy opportunity: Through marketing efforts that boost the brand’s reputation and highlight even the smallest details that separate it from a store brand, companies can tap into consumer perception to influence purchase decisions.
5. Fear of Inferior Quality
In some instances, consumers believe the quality of the store brand is simply inferior to brand names. For many consumers, this is true with food products in particular.
Let’s look at sodas and sports drinks for example. Even though store brand soda has been formulated based on a name brand product (like Pepsi or Coke), the taste is just not the same. This alone is enough to warrant a branded purchase.
Brand strategy opportunity: If your brand name has a distinct advantage in quality, make sure that is communicated to consumers. For example, many soda brands have had success with “blind taste-test” marketing campaigns. Especially with lower cost items like sodas or sports drinks, consumers are likely to spend a little bit extra to get what they want.
The key dimension behind consumer purchasing habits between name and store brands is how important the product benefit is to the consumer. Specifically, will the name brand product save them time or money? Is the name brand of a higher quality?
Big brands need to understand the reasons why a consumer might be tempted to choose a store-branded alternative. Then they must effectively communicate the benefits their brand offers over the competitor in order to compete for market share and win the loyalty of consumers.