There is no denying that the past year brought about tremendous economic, political and social unrest. The Japanese earthquake and tsunami. The Arab Spring. The News of the World scandal. The Occupy Wall Street movement. Those brands and retailers that remained focused on their customers, employees, markets, demand and the environment forged ahead — and ended 2011 stronger than ever.
Each January, branding agency Interbrand looks to the year ahead and provides insights on 16 sector including: Airlines, Automotive, Business Services, Consumer Packaged Goods, Digital, Energy, Fast Developing Markets, Financial, Food & Beverage, Health, Hospitality, Luxury, Media, Retail, Technology, Telecommunications.
This is the first of a series of two posts that will feature the two sectors relevant to this site Consumer Packaged Goods & Retail. Although these are not specific to Private Brand, retail brand owners and developers can still learn from the obervations.
Redefining the value proposition for CPG brands
By Dyfed “Fred” Richards & Ted Monnin
The value proposition for consumer packaged goods (CPG) brands has shifted, and both brands and retailers must take note. Brand value is being squeezed from all sides: SKU proliferation is cannibalizing market share; online retailers are dramatically expanding the consideration set; and private label products are competing for every penny that apprehensive consumers are willing to part with in today’s sputtering economy. The race to the bottom has begun, with mid-tier and even upper-tier CPG brands vying for space on the lower shelves in an effort to connect with savvy, cost-conscious consumers. The traditional “good, better, best” brand model may be doomed, as increasingly informed consumers seek a “best, best, best” model. Shoppers strive to balance features and benefits against transparent pricing, enabling them to feel that their brand purchases are value-based choices instead of compromises.
A revolutionized consumer experience
Bolstered by shoppers’ unfettered online access to products, information, and social networks, consumerism is redefining the value proposition for CPG brands. Concurrently, inflationary pressures are eroding the power of large retailers to limit brand offerings and force pricing controls. What’s more, lifestyle changes and technology advances are transforming the entire consumer shopping experience. The days of meandering up and down the grocery aisles for weekly commodity items will likely become a thing of the past. Also, the consideration set has changed. While traditional brick-and-mortar stores— hobbled by square footage restrictions — typically offer a narrow selection of brands in any given category, online retailers can sell a virtually limitless array. Granted, the large chains are not going anywhere soon; however, a global shift is taking place in the mindset of consumers, complete with a growing intolerance for the “same old, same old.”
Today’s consumers question brand actions and value
The worldwide economic downturn, exacerbated by governmental ineffectiveness and corporate misdeeds, has shaken consumer trust in large institutions, including those companies that manufacture and sell national brands. People from all walks of life, cultures, and backgrounds are asking questions — real and valid questions — about the companies, stores, and brands they patronize: “How are my favorite brands conducting themselves in the marketplace? Where are they sourcing raw materials? How socially and environmentally responsible are they?” Brand behavior will be held accountable, and consumers will vote with their wallets.
In addition, brand value and selection are facing scrutiny like never before. Consumers are more likely to choose, and subsequently remain loyal to, brands whose packaging provides both clarity and substance at shelf. There will be no more battling claims messages, overstated facts and figures, marketing jargon, or hollow slogans. At the end of the day, the true value of a brand has to win out on-pack, in the store, and in consumers’ lives.
A new spin on brand value
CPG could learn a lesson from the automotive industry where some atypical brand names are redefining the idea of “value.” Ford is capturing market share with the value-based Fiesta and Focus models – both of which offer quality construction and high-tech features typically reserved for higher-ticket models. Relatively new brands Hyundai and Kia are attracting consumers with well-designed, smartly priced products that prove inexpensive cars can be both practical and fun.
The game has changed. Today’s consumers want brands that not only understand and meet their needs, but also validate their purchase decisions. CPG brands will have to rethink their value propositions if they hope to stay relevant in this consumer-centric marketplace. Could it be an ideal time to launch a new era in CPG branding?
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