By Jill Rivkin
Through a special arrangement, what follows is an excerpt of a current article from Private Label Buyer, presented here for discussion.
Partly because television and radio ads are losing their effectiveness in reaching consumers, CPG companies are reallocating their ad budgets toward point-of-sale marketing efforts. For retailers already creating an in-store marketing presence for store brands, CPGs are encroaching their domain and enticing even the most steadfast retailers with funding. And for retailers not yet building store brand marketing plans, the competition for space and consumer attention will only become more challenging.
"The battleground for brand position is shifting from traditional media outlets, such as television and radio, to the store aisles," writes Mike Waite, president and chief executive officer of the Retail Integration Institute, in the 2006 Trends Report from P-O-P Times. "Consequently, new challenges are on the horizon. The influx of brand messages in the store will put a greater burden on brand marketers to differentiate their product on and off the shelf."
According to the report, 47 percent of CPG suppliers surveyed said point-of-purchase (POP) displays/signs would be receiving greater emphasis this year. Only 15.2 percent reported an increase in TV advertising, and just 12.5 percent reported an increase in radio ads.
"Savvy consumer goods marketers and retailers alike are beginning to realize that the point of brand-decision is coming closer and closer to the point of sale," the report stated, pointing to Procter & Gamble's naming a director of FMOT (first moment of truth) responsible for producing better and more sophisticated in-store displays.
Brian Harris, chairman of The Partnering Group, said retailers need to be looking ahead to where in-store media trends are headed to factor into marketing programs for store brands.
"There are some pretty dramatic trends happening as consumer-packaged-goods companies reallocate their media mix to put more in the store," said Mr. Harris. "Retailers have to think about how to capitalize on newer tools and media to support store brands. It's critical because the trend will only accelerate."
However, Brian Mitchell, vice president of marketing with Thomas Nelson Publishers, believes national brands will be challenged because retail chains are increasingly limiting their selection of products and campaigns for which they will provide promotional space.
"Limited allocations for merchandising equates to less POP and higher costs per unit to the manufacturer," said Mr. Mitchell. "Additionally, more retailers are taking control of POP and creating their own signage, shelf inserts and even floor dumps. While this approach makes sense for the retailer, allowing them to avoid clutter and create a cohesive, appealing look throughout the store, it dilutes the marketing message and its impact by homogenizing all products. Nobody wins in this situation."
Finding the right balance between national brand and store brand marketing space within the store is a challenge set forth on many levels, from assortment and SKU counts at the shelf to signage, promotional pieces and big events.
"Retailers can do more in private label, but again it comes down to the value of the real estate and who's going to pay the highest price," said Tom Dowdy, chief executive officer of National In-Store, a division of Omnicom Group. "It comes back to an economic decision based upon sales per square-foot and additional funding."
And clutter is always a concern because no one wins if the moment of truth is confusing.
"Retailers have to draw the line between distracting overload and appropriate," observed Mr. Harris. "If you overload customers, they will switch because they don't want clutter. You have to implant messages within the shopping experience so that it's a comfortable experience."
Discussion Questions: What do you make of CPG companies' greater investment in in-store marketing? How do you think it will affect retailers' private label brands? How can the consumer best be served given these seeming conflicts between marketing national and store brands at the store level?