Crisis and store brands made lose market shares and customers to the national brands. Moreover, customers today have new expectations about what they buy: the novelty is not the first criterion anymore but it is now the utility and the life expectancy. The brands have to improve their value for money to be able to answer the new expectations and the competition.
This is a survey conducted by Ipsos in the USA.
We can see with this survey that the value for money is the first thing to change for the national brands.
Indeed, 89% of the customers in the USA say that the value for money provided by store brands is the same or is better than the value provided by national brands.
To change their quality-price, national brands have three solutions.
First solution: Reduce costs to be able to get closer to the store brands’ sale price.
National firms have to reduce:
- Production cost. National brands have to take the best from store brands: benchmarking. Example with Cristaline and Evian: the quality of the bottle is an occasion for Cristaline to reduce production cost while Evian bottle is expensive.
But the production cost reduction must not be reflected on the quality; otherwise the national brands will not differ anymore.
- The communication cost can be reduced too. The national brands have to communicate more on the place of sale than on global advertising like TV or newspapers. For example, in 2004, Evian dedicated € 8.7 millions in communication whereas Cristaline spent € 1.2 million.
- Finally, national brands have to reduce research and innovation costs.
Second solution: Create new brands
The second solution of the national brands is to create a new brand.
This solution is chosen by many brands like Renault with the Dacia, Belvédère with William Peel …
William Peel is the perfect example of this strategy. This whisky is sold € 15.0 /L; this is the less expensive whisky in French markets, even less expensive than Carrefour brand whisky. This