Private Label Buyer

Deal or No Deal

September 16, 2011


Here’s how to sell more private label by offering store brand coupons.
 
Shoppers at all income levels are looking for deals And in food shopping today, that increasingly means that shoppers expect coupons. Yet overall, couponing activity for store brands is underdeveloped, experts say.

Retailers may feel their private label products already offer value to consumers; however, coupon users like the thrill-of-the-hunt experience that coupon savings offer. Given the explosion of coupons being offered electronically, on mobile devices and via other means, store brands should be represented in the mix. By offering store brand coupons, retailers have the opportunity to influence purchase decisions and drive brand affinity to their private label products.
 
WHY PL COUPONS?

Offering coupons is an easy way to increase sales and interest in private label products, especially in today’s economic environment. Consumers saved $2 billion with coupons in the first half of 2011, says Jeff Weidauer, vice president of marketing and strategy for Little Rock, Ark.-based Vestcom, a marketing consulting firm. “Interest is high in coupons, and having a coupon for a private label product will help to make it part of the consideration set for the shopper.”

“Generally store-branded promotions offer higher margins and, in areas such as perishable departments, store coupons may offer a real catalyst for growth,” agrees John Thompson, vice president of digital strategy for Winston-Salem, N.C.-based logistics management company Inmar.

Another benefit to providing private label coupons is to give retailers a point of difference compared with other retailers who are not embracing private label coupons.
 
WHEN TO OFFER PL COUPONS?

 “Effectiveness will be determined by the perceived value versus other offers, so tracking the coupon market in general, especially national brands, is a critical element in the decision process,” says Weidauer.

New PL product introductions also present a good opportunity for retailers to offer coupons, as do traditional seasonal opportunities such as back-to-school, spring cleaning, etc., adds Thompson.
On the other hand, breaking out of the typical timing cycles of competitors or seasonal promotion also can be considered as a way to generate purchases successfully with a coupon, says Charlie Brown, vice president, marketing, with Deerfield, Ill.-based NCH Marketing Services, a Valassis Company.
 
WHICH PRODUCTS?

Some categories, such as salad dressings, peanut butter and even laundry detergent, are dominated by national brands and already have a lot of national brand coupon activity. “It would be best to avoid these categories in favor of those where there is real growth potential for private label market share, such as perishables, meat, dairy, paper products and household cleaners,” says Thompson.

However, developing a strategy that offers complimentary store brand coupons to the existing slate of national brand offers also can prove beneficial for both retailers and national brand CPG companies, states Thompson.

Additionally, retailers should be sensitive to the SKUs and categories that have the best inherent margins, to include perishable departments, and add to that those categories that have high household penetration and relatively high acceptance of private label usage.
 
MEASURING SUCCESS

The best way for retailers to monitor the success of a store brand coupon program is via a loyalty program, says Weidauer. “Otherwise the retailer is just giving away margin with no hope of changing behavior.”

Coupon redemption also can easily be tracked in retail POS and analytic systems. “There is also an opportunity to understand the value of the consumer and the effect on basket size when store brand coupons are in the mix,” says Thompson. “At the category and department level, understanding the effect on sales, traffic and repeat customers versus store brand coupon use are great metrics that retailers should embrace.”

Store brand coupons can help retailers level the playing field with national brand CPG companies by encouraging consumer trial. “Highly developed store brand programs are already competing nicely in key categories of cold cereal, paper products, canned vegetables, coffee, juice and others,” says Thompson.
 
“The deal-driven consumer that understands the value of store brands will certainly embrace deals for strong private label programs.”

More coupons are not always better though. Retailers should think about how to add value (bundles, cross-promos, etc.) to create a relevant value for the shopper.
 
Five Keys to Effective Couponing:
 
1. Use coupons to add value: Try buy two, get one, rather than just a cents-off promo.
2. Cross-merchandise with complementary categories.
3. Tie coupons to a loyalty program.
4. Understand product affinities: Knowing which branded coupon offers consumers prefer will help retailers offer complimentary store brand coupons.
5. Be consistent: Offering store brand coupons in the mix will let consumers know they can rely on having a store brand alternative to national brands in key high-penetration categories on a regular basis.