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Marques, S. & Brochado, A. (2014). Private label: opportunity or threat?. 9th Global Brand Conference.

S. M. Marques and A. M. Brochado,  "Private label: opportunity or threat?", in 9th Global Brand Conf., Londres, 2014

@misc{marques2014_1734881101701,
	author = "Marques, S. and Brochado, A.",
	title = "Private label: opportunity or threat?",
	year = "2014",
	howpublished = "Outro",
	url = ""
}

TY  - CPAPER
TI  - Private label: opportunity or threat?
T2  - 9th Global Brand Conference
AU  - Marques, S.
AU  - Brochado, A.
PY  - 2014
CY  - Londres
AB  - For brands, the times we live in are dynamic, highly competitive and full of challenges related to the economic environment.   
More than ever, the consumer is informed and participatory in the process of purchase decision, more demanding and increasingly less "faithful".
The "business as usual" is no longer enough for a brand to evolve in a sustainable way in the market as we know it, adding to the fact that the "pressure" of private labels is growing. 
Responses from the national brands are required for various strategic and tactic issues, such as: "How to build and communicate an offer distinct and unique?", "How to build a brand in the medium and long term in a sustainable and efficient way?", "How to face the private labels strategic plan and anticipate their movements?", among others.
One thing we know, the private labels are here to stay in the Fast Moving Consumer Goods market and the national brands need to react now.
The goal of this research is to analyse the current challenges of supplier brands, result of the strengthening of the private label in FMCG market, as well as contributing to the construction of what will be a strategic plan taking into account this reality.
According to Kotler (2000), "a brand is essentially a promise of the company to provide a set of attributes, benefits and services to buyers. The best brands bring a guarantee of quality. We can thus say that a brand is far beyond their physical attributes, because the real challenge is to develop positive associations. This concept is used to define the relationship between the consumer and the brand, although this concept may have different definitions, an accounting perspective / financial or from a marketing perspective (Wood, 2000).
According to Wood (2000) there are three possible meanings for brand equity:
- The total value of the brand as an asset that can be separated from the product itself (brand value);
- The level of consumer connection with the brand (brand loyalty);
- The description of the associations and beliefs the consumer has regarding a brand (brand image).
The original concept of private labels existed since the 19th, however, this has changed over time. In its simplest definition, a private label is a product that is the brand name of the retailer or a product whose brand is controlled by it and whose name is created exclusively for him. 
Private labels are offered exclusively by retailers that own them, which mean they can differentiate the owner from other retailers. Corstjens and Lal (2000) suggest that private labels can generate store differentiation if consumers accept that the private label offers sufficient quality. In contrast, some private labels emphasize price discounts in comparison with national labels, which could cause them to attract price-conscious customers who shop across stores to find the best price option (Gonzalez-Benito and Martos-Partal, 2012).
According to Baltas et al. (2010), consumers’ private label proneness increases the size of their patronage set; Hansen and Singh (2008) also find that high private label patronage across multiple categories is associated with lower store loyalty.
Previous literature has noted that private labels’ success varies across categories (e.g., Batra and Sinha, 2000; Hansen et al., 2006; Hoch and Banerji, 1993; Quelch and Harding, 1996; Raju, Sethuraman, and Dhar, 1995), for several possible reasons. Narasimhan and Wilcox (1998) take a consumer perspective and argue that consumers prefer national brands to private labels if the relative risk of purchasing within the category seems high. Therefore, the risky nature of products categories should relate to private label success.
There seems to be a correlation between the economic situation of a country and the strength of distribution brands (Quelch, J. and Harding, D., 1996),  the private labels share of market  tends to grow when the economy falls and vice versa. See an example of the USA, where the great recession of 1981-82 private labels peaked at 17% and in 1994 represented "only" 14.8. However, many consumers started buying private label in times of recession, continue with this option in time of economic growth, the result of experience with the product is in fact positive.
Currently it is possible to identify four trends in private label: products "premium", low cost products, products concern with health and sustainability. In fact, the trends that are found in national brands r, worldwide, who are also being applied in the management of private labels.
Since 2005, the Food Marketing Institute encourages its members to adopt a program of private label with 3 different approaches: economic proposition, proposed standard and a premium (equal or better quality than the other brands, but at a more competitive price).
According to Trout and Rivkin (2000), the question that arises is between firms differentiate or die, which means that brands need to be able to offer at least a strong and interesting reason for the consumer to choose a brand versus a competitor. The fact is that today there are more and more alternatives on the market, which is good for the consumer, but that makes it more challenging the role of companies, who have no margin for error.
Verhoef , Nijssen and Sloot (2002) concluded that competition with private labels are most often subtle and indirect, and national brands usually do not respond through temporary price reductions, but through a greater focus on increasing the distance between the two brands. At this level, we identified two different types of responses from national brands to private labels: one focuses on technological innovation and strengthening the "brand value" and another at only the strengthening of "brand value". The results showed that the second type of response, in which there is only one focus on strengthening of the brand value does not have the same results as when combined with an innovation strategy. This is linked to the fact that traditional marketing efforts, be easily copied (Verhoef , Nijssen and Sloot 2000). This finding reinforces the importance of innovation in categories with strong presence of private labels.
In terms of methodology were conducted two studies: one exploratory and one empirical.
In the exploratory research, interviews were conducted with professionals, to obtain the justifications for certain behaviors observed, interpreting trends, as well as a vision for the future. Thus, we selected some experts in marketing and sales of FMCG companies (Central Beers, L' Oreal , Delta , Danone, Iglo, Reckitt Benckinser and Mars).
At the same time, in a research conclusive causal, a survey was conducted with the following characteristics:
- Sample of 231 respondents, a confidence interval of 90% and a sampling error of 5.42%.
- We conducted a pretest with 15 people in order to make the necessary adjustments, depending on feedback given (issues not clear possibility of double interpretation, among others).
- Survey conducted by non-probability sample of convenience.
The hypotheses to be studied are:
H1 - There is no loyalty in the purchase of private label - just "one shot thing".
H2 - What drives consumers to opt for private label is only price.
H3 - Who buys private label does so only by "need" rather than a free choice, since a habitual consumer of private label or a habitual consumer of national brands has the same opinion on the private label.
H4 - The belief that a consumer has on private label is based on the comparison that makes with national brands in that category.
H5 - Who buys their favorite brands, makes the decision before the visit to the store. 
H6 - The private label are never considered as being the favorite brands of consumers.
H7 - The reasons that a consumer would switch private label to national brand are related to your demographic profile.
H8 - There is a consumer profile of private label.
H9 - Who buys private label usually makes their purchase decisions in store. The purchase of private label is not planned.
The results show that: 
H1-There is no loyalty in the purchase of private label - just "one shot thing"	Not supported
H2 - What drives consumers to opt for private label is only price	Supported
H3 - Who buys private label does so only by "need" rather than a free choice, since a habitual consumer of private label or a habitual consumer of national brands has the same opinion on the private label	Not supported
H4 - The belief that a consumer has on private label is based on the comparison that makes with national brands in that category	Not supported
H5 - Who buys their favorite brands, makes the decision before the visit to the store	Not supported
H6 - The private label are never considered as being the favorite brands of consumers	Supported
H7 - The reasons that a consumer would switch private label to national brand are related to your demographic profile	Supported
H8 - There is a consumer profile of private label	Not supported
H9 - Who buys private label usually makes their purchase decisions in store. The purchase of private label is not planned	Not supported

The private labels should not be seen as just another competitor in the market, but not because we should consider not meeting the needs of our target or because they are only a low cost target. Should rather be seen in a different way because they are held by customers of national brands, business partners and by someone who does have privileged knowledge about the consumer.
The fact is that national brands should fail to categorize private labels as only store brands, so come to see how your competitors. It is essential that national brand guarantees as the basis of his proposal, product quality, add value and differentiation with new attributes or services and at the same time being efficient in terms of management, so can guarantee a fair price and competitive and quick response to the challenges posed by retailers and consumers.

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