Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
END-OF-CHAPTER SUPPORT
MARKETING DEBATE—Should National-Brand Manufacturers Also Supply Private Label
Brands?
One controversial move by some marketers of major brands is to supply private label makers. For
example, Ralston-Purina, Borden, ConAgra, and Heinz have all admitted to supplying products—
sometimes lower in quality—to be used for private labels. Other marketers, however, criticize this “if
you can’t beat them, join them” strategy, maintaining that these actions, if revealed, may create
confusion or even reinforce a perception by consumers that all brands in a category are essentially the
same.
Take a position: Manufacturers should feel free to sell private labels as a source of revenue versus
national manufacturers should never get involved with private labels.
Pro: Let us begin by defining buyers: Buyers buy products or use services to meet a particular need or
want. Buyers of or for private label products do not act any differently than consumers of individual
products in their buying processes. Manufacturers negatively impacted by the surge of private label
products, actually made changes in consumer buying patterns ignored or missed by the national
brands, have the fiduciary responsibility to their firms to maximize sales wherever possible. The
opportunities to produce private label products may be and often is the salvation of the branded firm in
offset production capacity and cash flow.
The major issue here is that the national branded firm did not anticipate the changes in consumers
buying patterns in time to produce a national “flanker” brand to meet these consumer buying pattern
changes. In the production and distribution of private labeled products, there is enough differentiation
available to distinguish national brands from private label brands in quality, variety, size, packaging
costs, and others that the consumer should not be confused or perceive that all brands in a category are
essentially the same.
Con: Branded products are the lifeblood of the firm. In fact, branded products contribute to the
company’s overall financial health by commanding a premium to stock prices due to consumer loyalty
and familiarity with the brands. When a manufacturer partakes on the path of producing private
labeled products, for short-term gains, they begin the degradation of their branded products. If
manufacturers feel the pressures of lost sales—lost market shares to the private labeled products—the
solution would be to undergo the development of “superior branded products” offering the consumer
increased value, convenience, convenient packaging, and more to increase the loyalty and value of
their branded products to the consumer. The manufacturer always has the “option” of introducing
“flanker” brands to compete against private labels thereby maintaining production capacities and cash
flows.
Marketing Discussion: Retail Customer Loyalty
Think of your favorite stores. What do they do that encourages your loyalty? What do you like
about the in-store experience? What further improvements could these stores make?
Marketing Excellence: ZARA
1. Would Zara’s model work for other retailers? Why or why not?
2. What can Zara do to ensure successful growth around the world while maintaining the same
level of speed and instant fashion?
Marketing Excellence: BEST BUY
1. What are the keys to Best Buy’s success? What are the challenges it faces in today’s retail
environment?
2. How else can Best Buy compete against retail competitors like Walmart and Costco as well as
online competitors like Amazon.com?
