Who dares wins loyalty for brands

It’s the retailer that has the upper hand in brand control – so how can manufacturers control a brand’s movements? There are ways of ensuring your brand’s freedom of manoeuvre, especially if the manufacturer resists the gravitational pull of f

When is a brand not a brand? No, this isn’t an excuse for some esoteric semantic debate, but a question about fmcg companies’ marketing strategies.

The question was raised in its starkest form at the beginning of the recession when a senior Tesco executive told an IPA conference to stop talking in terms of “brands versus own-label”. One of his points is now widely accepted: retail brands are increasingly brands in their own right. The other was received in the hushed and shocked silence of denial. Many so-called brands, he argued, are nothing less than “manufacturer label”, names that manufacturers slap onto me-too products that have no particular excuse for existing.

Some manufacturer labels have died since then. But many haven’t. They survived because they have become retailer satellite brands. Formally speaking these brands are controlled by the brand manufacturer, free to go in whatever direction they choose. In reality, they’re free to move – as long as it’s within the retailer’s orbit. As the World Class Branding Network’s Chris Macrae says, they have been “captured by somebody else’s added-value chain”.

Take Virgin Cola, for example. OK, there’s no doubt that Branson has ambitious global plans for the brand. He’s also working hard to develop its distribution through UK impulse outlets. But the brand is currently little more than an extension of Tesco’s marketing strategy.

Or how about Unilever’s Red Mountain coffee? Probably its greatest role in life is to be used by retailers to play the two coffee giants, Nestlé and Kraft Jacobs Suchard, off against each other. That’s how it gets its shelf space.

The emergence of satellite brands presents new opportunities for retailers, and requires branded manufacturers to think afresh. For retailers, they are a particularly valuable marketing tool because someone else bears all the risks, yet they are still under the retailer’s control.

One way of looking at it can be shown by the diagram above. This depicts at the centre those areas where retailers risk most, and which they find most difficult to change. The concentric rings radiate out to those activities where investment and risk is lowest.

The bull’s eye is the infrastructure centre of the retail chain: its site locations, its stores, centralised warehousing, logistics and the like. The next circle is how those central assets are used: store ambience, corporate branding, pricing, ranging and own- label strategy. The third ring is specific own-label developments, where most of the risk is carried by the own-label supplier. The outer ring represents the limit of the retailer’s effective gravitational field, the almost imperceptible difference between “real” and satellite brand.

Being a satellite brand may not be all bad. The danger, however, is that having crossed the gravitational threshold, the brand’s formal owners continue to act on the assumption that their brand is still its own master. Such pretensions are a recipe for wasting time and money.

The million dollar question, of course, is how to avoid being sucked into orbit in the first place. Here are three suggestions.

First, don’t put your faith in category management. True, it sometimes helps build manufacturers’ and retailers’ businesses. Often, however, it’s used by wily retailers to suck brands into their orbit. Canadian own-label zealot Dave Nichol predicts a time, for example, when Samurai retailers (as he calls them) “control the mix of every category” so that national brands continue to play their traditional role of being “traffic builders”, and retailers “use the superior profits of the brands they control to reduce national brand pricing even further”.

Second – a related point – seeking “partnerships” with retailers isn’t the answer either. True, more and more retailers are seeking help from brand manufacturers to solve particular problems.

But as Gordon Bromley, general manager of Tropicana, suggested at Nielsen’s recent Retail Forum, brand manufacturers are wrongly putting their faith in the win-win benefits that partnerships supposedly imply. Partnership, he argued, is a “myth created by vulnerable suppliers who have still failed to grasp the realities of retailer power”.

The minority of “realistic suppliers”, as he called them, accept that for consumers the cost of switching brands is usually far lower than the cost of switching stores – “a brand’s success relies ultimately on building retailers’ businesses”.

Which leads on to the third, more positive suggestion. As Bromley noted in his Retail Forum presentation, retailers’ top obsession nowadays is store loyalty. Guerrilla marketing by brands can exploit this obsession. Recent research suggests, for example, that 18 per cent of consumers peruse stores for special offers. That, he commented, “represents massive potential for brands”.

Instead of running national promotions which benefit no particular retailer, why not play stores off against each other through retailer-specific promotions which are expressly designed to help one chain steal customers from another? That way the brand helps itself by helping its customer.

Playing one planetary system off against another is dangerous. But if you feel yourself coming under the gravitational pull of a larger body, the idea of recasting your marketing skills to increase your freedom of manoeuvre is more sensible than kidding yourself that the gravitational pull you feel is the warm embrace of a new-found “partner”.

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