This is the last of our three-part installment on improving Private Label Strategy.
The success of private label products is rooted in the ability of a retailer’s category management team to stay focused on the big picture. But your category management team is continuously challenged to take a holistic approach to priorities that are inherently in conflict.
Category management teams need to tackle P&L responsibilities based on the performance of their national brands, while having to meet private label penetration goals. Are you addressing your private label’s category management challenge effectively?
Collaboration With A Focus
As you build the brand strategy, it is imperative that your private label and category management team work together to both understand the category and be made aware of changes as they happen. Often, category managers have the advantage of knowing what is happening with national brands before consumers, so use this information to your advantage.
Effective category management comes in three parts:
- A continuous review of the planogram and merchandising standards to optimize product visibility.
- Balancing promotional activity with overall category profitability and brand loyalty.
- Ongoing category analysis and inventory management to ensure that non-performers are being removed and innovative new items have a place.
1. Build The Planogram Based On The Brand Vision and Strategy
The planogram must be rooted in the brand vision and strategy in order to achieve consistency. Do you want to build a private label section or should your private label be adjacent to the equivalent national brand? Regardless of the outcome, your brand vision for each tier will determine the answer.
While the planogram and position of the products can help support the brand vision, the fixturing and on-shelf POP are important considerations for enhancing visibility. For example, you may choose to merchandise a premium line of products on a standalone high-end fixture, as well as in section, where products can stand out with shelf danglers.
2. Over Promoting Can Cheapen The Brand
Traditionally, category managers and their national brand suppliers plan ongoing promotional activity throughout the year to drive volume. Now that private brands are not just the cheaper equivalent to national brands, retailers are feeling the pressure to stay competitive by using promotions on private brands.
This promotional strategy is a slippery slope: as consumers become more price sensitive, retailers risk diluting brand loyalty and brand health, because consumers will wait for private brands to be on promotion. Meanwhile, overall category profitability will erode which will affect other volume incentives.
3. Get Rid Of Excess Inventory
Do not let access to shelf space put blinders on good category management. If a product is not performing, you must evaluate the long term potential as every product will not be a winner. Working with your manufacturer partners and your merchandising team, you need to determine the quickest and least expensive way to get rid of excess inventory. While practicing careful inventory management during the life cycle of a product will help to minimize write offs, there are times when the write offs are inevitable. Make the tough decisions and move on.
Good category management can help retailers discover opportunities within the category. With digital media, the speed of information is faster than before, and your customers can now quickly tell you what they want, like and dislike. However, make sure you validate consumer input with solid category management data.
For example, customers told us they wanted an eco-friendly line of cleaning products. However, purchasing data showed that they were not currently buying national brands that were marketed as eco-friendly. Further research explained this disconnect: consumers did not feel that eco-friendly products were actually effective. This insight led us to research and develop a line of cleaning products that were environmentally friendly but cleaned as well as leading national brands.
The collaboration between category management, product management and manufacturers is integral to the health of your private label and national brands. Big-picture thinking, and not silos, will help retailers become efficient masters of private label category management.