Private Brand: Leadership Through Innovation

This is the final post in a three part series of  guest posts from Rob Wallace the Managing Partner, Strategy at Wallace Church, a Manhattan and San Francisco based brand strategy and design firm working with both private and national brands such as Target, P&G, Whole Foods, Nestle, Coca-Cola, Bacardi and Dell.

What’s Different, What’s the Same, What’s Next?
Private Brand: Leadership Through Innovation

Rob Wallace

In the past, game-changing innovations have been, for the most part, the province of big CPGs. They have the experience and the money to invest in trend forecasting, consumer research and product development. To a great extent, large CPGs have been forced to innovate in order to maintain margins and slow the ongoing erosion of sales to Private Brands. Now Private Brands are creating new brand experiences and building new-to- the-world product innovation. The Private Brand-focused retailer has several essential advantages over CPGs that will continue to fuel this transition.

What’s the Same: Perceived Differentiation Drives Market Share
The most successful brand innovations so effectively identify and tap into an unmet consumer desire that their brand experience is perceived as being proprietary to that brand, making it much harder for others to copy. Iconic brands like Ipod and Swiffer own more than 70% of their respective market share because they somehow “own” their unique experiences, even though their competitors’ products do much the same things.

No longer the fast followers, Private Brands are now taking the lead in innovation. OfficeMax , for example, has adopted a truly fashion-forward innovation strategy for DiVoga,  their file organization suite brand.  Rather than change the design once a year, like competitive CPG’s, they update this brand offering every season.  Mike Kitz, OfficeMax’s Vice President of Brands and Product Development , states:
“The decision to change DiVoga’s design three times a year  was driven by a consumer insight.  Many women want to refresh their office environment, and we listened.  CPG brands are not achieving this pace. “

What’s Different:  Research vs. Real World
When it comes to the new product innovation process, Private Brands have a distinct advantage. CPG’s have higher success hurtles, tougher barriers to entry. Because CPG’s often manufacture their own products, a large capital investment and a long-term commitment to growing the brand is required at the onset. CPG’s almost always do exhaustive, time consuming and expensive BASES testing and both qualitative and quantitative consumer research. They spend this time and money seeking assurance that their brand premise is relevant and their large and long-term investment is warranted.  Unfortunately, the results of these tests often do not accurately reflect how the new brand will fare in the real world.

Brand-driven retailers, on the other hand, are much more nimble. They are often closer to their consumer, can more quickly develop a product, find a partner to produce it (often without a long term commitment) and get it in their stores– the ultimate research scenario where consumers vote with their dollars. The Private Branding process can be significantly faster and more efficient.  Because its relevance is tested in store, a Private Brand’s initial success results are more accurate, unequivocal and projectable.

The smartest retailers are using this real world proving ground to launch both incremental innovations (significant improvements over existing brands), and in a growing number of cases, new-to-world innovations.  Retailers are also more fully supporting their innovations with an integrated marketing communications platform including national advertising, in store communications and viral marketing.

What’s Next: Private Brand Leadership
The next generation of billion dollar brands will not come from traditional CPGs but from their brand-focused retail counterparts.  Value-seeking consumers may have fueled the recent growth in Private Brands, but as the economy rebounds, the most progressive Private Brands will develop innovation and own leadership at every value tier. I foresee the Marks & Spencer model invading our shores where innovative, fast moving Private Brands will represent close to 100% of a specific retailers’ product offering.  But this leadership requires an investment in true radical innovation not simply incremental product improvements. The future belongs to those retailers who take the fullest advantage of their immediate access to their customers, their fast response to emerging needs and their continued commitment to Private Branding.

What’s Your POV?
You are invited to participate in this on-going dialog by adding your comments.  Only with shared insights will processes advance. Your insights are critical to its success, so please contribute.

Other posts in the series:
Private Brand: Hierarchies & Architectures

Private Brands: What’s Different, What’s the Same, What’s Next?

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Christopher Durham
Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.