The Checkout report: brands can compete with private label

Brands have an arsenal of tactics to remain competitive in a challenging shopping environment, according to the latest Checkout report, a nationally representative survey of 1,200 US adults conducted monthly by M/A/R/C Research.

Strategies include properly communicating value, preparing to win back shoppers when the economy improves, actively issuing coupons, offering a breadth of product variants and special editions, focusing on on-shelf messaging and in-store promotions, running competitions with a higher chance of winning and being ready to make a deal.

Shoppers are still torn between convenience and saving money as primary shopping goals, says the report.

Tightening budgets, lowered consumer sentiment, and an unsure economic future has resulted in a shift in shopping behaviors from performance (quality and shopping experience) to conservation of resources (time and money) accompanied by changing expectations.

Communicating value

Retailers (dollar stores, discount mass) and brands (private label and value players) that focus on lower prices will be better positioned to face this challenging selling environment, it says.

But strongly entrenched manufacturer brands can still compete by properly communicating value to their shoppers.

There has been an increase in quick fill-in trips during the course of the year. Researchers says this suggests shoppers are taking a spend-only-when-necessary position.

This attitude is most prevalent among female shoppers, while men place a higher value on spending as little time as possible.

But practicality has escaped younger shoppers (18-24 year olds) who are in store more often and have a higher tendency to make fill-in trips and seek entertainment compared to older people.

Coupons gain ground

Coupons have become even more important in the second half of 2009, underscoring the effect of the recession on shopping behaviour, say researchers.

Use of mobile phones has increased over the course of the year too due to the growing usage of smart-phone shopping and information-seeking applications. This is especially true with younger shoppers.

Consumer behaviour continues to skew toward lower spending, with men more apt to make credit purchases and seek out American-made products, says the report. Single shoppers are more willing to spend money to save time. Higher-income households ($100k+) are more likely to purchase brands, while 28% of younger shoppers (18-24) report they are more loyal to their usual brands and less apt to switch.

Own label switch plateaus

According to the study, the number of shoppers switching to store brands has reached a plateau with no significant changes after steadily increasing until the second quarter 2009. It will be interesting to see if those people who have been prompted to switch to store brands due to the recession switch back when the economy improves, say researchers.

There were significant drops in shoppers reporting they always consider trust in their name brand, sale prices, and coupons as reasons they do not buy store brands, alluding to the growing strength of private label products.

The ranking for the top five reasons shoppers gave for not buying store brands remained largely the same, with brand often being on sale, trust in the brand, and satisfaction with the regular price making up the top three.

However, shoppers are also less doubtful of the quality of store brands but they are less likely to switch from their brands due to the different varieties of product available.

As the sophistication of store brands catch up, brands will have to justify their higher prices with continuing innovation and engaging product offerings, say researchers.

Shoppers warm to private labels

While most consumers continue to perceive brands as more expensive (80%) while offering greater variety and innovation (57%) than store brands, this number has significantly decreased since last quarter.

Shoppers also perceive less difference in product quality and their families are becoming more used to having store brands in the shopping basket.

High income shoppers ($75,000+) and younger (18-24 year olds) shoppers have a greater affinity for brands and are more apt to feel they are more reliable, offer greater breadth of products, and have more attractive packaging.

Decisions made at point-of-sale

While most shoppers say they are price sensitive, this month saw significant changes in shopping behavior with fewer shoppers going straight to the sales items, to their usual brand, or even store brands – indicating they are making more of their decisions at shelf.

More than half (56%) of shoppers find a modest prize with a reasonable chance of winning to be more appealing than a larger prize with worse odds or a greater chance of winning a small prize.

However, when suppliers are considering how to structure a promotion and the value of the prize, they are advised to target the shopper — male shoppers have a higher affinity for contests with modest prizes and reasonable chances, while female shoppers prefer having a higher chance of winning a small prize.

Deal or no deal

Consumers appear to want to take advantage of any deal they can find; however, buy-one-get-one-free offers or clearly marked reduced prices are the ones most popular, says the report.

Women are more likely than men to take advantage of promotional offers, whereas older consumers are more willing to invest time in money-saving activities with a larger use of rebates, mail, and newspaper coupons.

But not all shoppers respond with the same fervor to all types of deals — younger shoppers do not readily change their behavior based on coupon offers but were significantly more likely to shop clearance items.

For further information visit: www.MARCresearch.com/thecheckout