branding
Proprietary brands have evolved from private-label and store brands that are easily recognized as a retailer’s own product While proprietary brands are appearing at more retailers in an expanding number of categories, the critical importance of developing an effective strategy to compete with, or include, proprietary brand production into a business plan becomes evident.
Proprietary brands benefit retailers because they have brand equity. Brand equity is defined as the value of a brand based upon its recognition in the marketplace. A brand like Martha Stewart Everyday at Kmart has significant brand equity and successfully rivals the equity of other nationally established houseware lines. This is a significant difference from the private labels of the past that are generally considered secondary in quality. Proprietary brands also create competitive differentiation between retailers through their uniqueness in product offering. Because these brands have strong retailer associations and can only be found at a particular chain, store loyalty is facilitated. National brands cannot provide this advantage to retailers.
Along with product and brand exclusivity, proprietary brands insure that retailers no longer have to compete or get beat on pricing. Price competition for specific branded items can be fierce and vary widely. Market ADvantage continually finds significant price differences between advertised products. Retailers must continually monitor price disparities and decide whether to continually beat their competitors on price while, at the same time, not cutting excessively into potential profits. Many retailers chose to distance themselves from direct price competition through the differentiation provided by proprietary brands.
Retailers also continue to introduce and support proprietary brands to improve a store’s overall image.
Finally, retailers use proprietary brands to drive store traffic and increase profitability. To realize the potential benefits presented by proprietary brands a retailer must establish product lines with comparable quality to National Brands. To do this, a retailer is faced with the tough decision of whether to buy or build a brand name. The buy strategy allows a retailer to use a strong household brand name that is not necessarily associated with the store or even seen as a store brand. Oftentimes, the best proprietary brand names to license are the ones that have a respected name in a related industry and already have an established image. Buying or licensing a brand allows a retailer to piggyback off the existing recognition and advertising done.
While the latest trend may be to buy or license a brand, retailers can alternatively pursue a “build a brand” strategy. Built brands create strong associations with the retailer and help drive greater traffic to the store. The best examples of this strategy are evident at Sears with their Craftsman, Die-Hard and Kenmore brands. Ultimately, for a built brand to be successful a quality product must be delivered at a competitive price and [next page]