• by Susan Frech , Columnist, October 20, 2014

CPG brand marketers are all too aware that brand loyalty is on the decline. A new survey shows brand loyalty has dropped for a third year in a row. Deloitte’s annual American Pantry study shows nearly nine in ten consumers are substituting private-label, or store brands for the national brand they’ve regularly bought in the past. This shift is quite concerning for national CPG brand manufactures. 

So how big of a threat is the private-label business? According to Nielsen, in 2013 supermarket private-label brand sales set a new record, achieving $61 billion in sales, a 1.6% change from the previous year. Drug chains witnessed the largest private-label dollar volume growth, increasing 4% and reaching $8.3 billion in sales. In both cases, the growth was at a higher rate than the national store brands. The the trajectory for private-label growth continues to rise.

As retailers have shifted their strategy in developing and marketing store brands, the consumer has also become savvier. At one time, store brands were created as the cheap alternative, the “me-too” brand, and consumers noticed. The value brands lacked in quality and innovation and almost always had a price tag to reflect the poor value. The cost-conscious consumer turned to store brands when they were watching their pocket books.That’s changed: a trend report from Inc.com stated, 88% of consumers surveyed reported finding private labels are just as good as national brands.

Today, the approach to private label has changed and this paradigm shift has transformed consumers’ perception of store brands. Retailers are using their exclusive store brands to draw consumer loyalty, and this unique positioning gives them strength when the consumer so many options for places to shop. Trader Joe’s has over 2,000 private-label SKUs in their offering, and they contribute to over 85% of their sales. In 2009, Target Stores announced the revamping of their private-label business, and launched over 800 SKUs in over 40 categories, marking their stake in the CPG private-label business. 

So how can brands fight back and gain loyalty? 

Keep It Simple

A study from Harvard Business Review looked at what makes consumers “sticky”—that is, likely to follow through on an intended purchase, buy the product repeatedly, and recommend it to others. The study looked at the impact on stickiness of more than 40 variables, including price, customers’ perceptions of a brand, and how often consumers interacted with the brand. The single biggest driver of stickiness, by far, was “decision simplicity”—the ease with which consumers can gather trustworthy information about a product, and confidently and efficiently weigh their purchase options. What consumers want from marketers is, simply, simplicity. Consumers relying on their social networks, both online and off, for product recommendations can achieve this simplicity. 

Pay Attention to Your Brand Advocates

It is no surprise that as a national brand marketer, you must measure and understand your level of brand loyalty. Brand loyalty can lead to trusted brand advocates, repeat customers and more as noted in a piece from Business2Community. The article further states that one of the top reasons a consumer may switch brands is due to a word-of-mouth recommendation. 

Brands need to pay attention and harness the power of their most loyal consumers and let them do the talking for the brand. Those peer-to-peer recommendations at scale can make significantly impact your brand sales. 

Think Outside The Box 

Brands must find new ways to reinforce loyalty. The ones that are most likely to succeed are those that create a positive consumer experience around their brands during the entire length of their relationship with consumers. 

Brand marketers can harness brand advocacy from their most loyal customers to help them compete. Since consumers will trust a message from a stranger over one from a brand, (32% of online customers trust a stranger’s opinion on public forums or blogs more than they trust branded advertisements), brands should shift their focus and dollars to harness the power of consumer advocates and their combined voice to move the needle for their brand and take back their once-dominant market share.