Competing against distributor's brands

We are frequently asked, how is it best to compete with distributor’s brands, which are– as their market share attests – the number one competitor of the big brands? Procter &Gamble Europe has long believed that it was competing against Unleveled, Shekel or Colgate, old friends which share the same business model, the same cultural references, and even the same HEC MBA’s.

The consumer sees things differently. Moreover, it has been shown that an excess of price-based promotions created sensitivity to price and led consumers to try distributor’s brand products, itself a preliminary step to trying low-cost products. There are different levels of response to the question above, some tactical, others involving a revision, not of the brand, but of the business model.

A precondition: do not tolerate brand imitations

In developed countries, brands fall victim to unfair competition on the part of distributor’sbrand products, in the form of imitations of their distinctive symbols. This imitation is anything but accidental, as the design and packaging agencies recruited for the purpose well know. The national brand product is used as brief, not for what to avoid – according to good brand principles – but what the rival should most resemble.

This is where competitors increase their ‘me-too’ product’s chances of success, by closely imitating – albeit with a few differences – the characteristics of the targeted brand product, as well as its distinctive marks. To be considered as an unfair threat, the imitation must be likely to cause confusion in consumer of average attentiveness.

Imitations can come either from competing producers, or from the product’s own distributors– and the response must vary depending on the individual case. Most big companies would in fact be reluctant to take action against their distributor if they believed that one of its distributor’s brand products, placed alongside one of their own branded products, was imitating it too closely and constituting an act of unfair competition.

It is true that the second phase in the implementation of a distributor’s brand policy is generally to imitate the targeted market leader on a shelf by shelf, reference by reference basis. It can even be the case that distributor’sbrands within a given group copy one another. Bicycles sold by Au chan superstore shave borne an extremely close resemblance toga best-seller at Decathlon (the ‘be-twin’): the two stores form part of the same group.

Actual legal proceedings against the distributor are rarer still. Big companies, many of whose products are stocked by the distributor, fear a Pyrrhic victory and prefer to build up a dossier with the aim of avoiding legal action and resolving disputes amicably. The dossier consists of a form of proof that could be produced as legal evidence if required, for it is in fact possible to devise scientific approach to prove illegal imitation. Two methods exist.

The first works on the legal definition: the imitation is illegal if it is likely to create confusion in a consumer of average attentiveness. here are two techniques capable of demonstrating such a risk of confusion, without actually asking customers directly whether they would be confused by the copycat (an invalid method). The first is the use of a archaists, which ‘flashe’s picture of the copy at consumers, first at high speed, then at slower speeds.

They are then simply asked to describe or name what they have seen (Caperers, 1995b), and the number of times the copy is mistaken for the originals measured. The second method is to start with a computer-degraded image of the copy, and to build it up, step by step, using computer software. Consumers indicate what they think they can see on the computer screen (Caperers, 1995a). These two techniques produce a working imitation of consumers of average attentiveness, either by limiting the length of their exposure to the product, and then increasing it (the archaists)or by presenting low-resolution pictures (computer method) and steadily increasing the resolution. Using the first method, we have found confusion scores of40 per cent.

The second approach ignores the legal concept of confusion. Indeed, although they pay lip service to it in their rulings, judges do not truly use the concept of confusion. Rather, they concentrate on excessive manifest resemblance. They pay more attention to resemblances and less to differences(as advanced by the imitator’s lawyer).

Objective proof of an excessive resemblance can be obtained by asking one group of consumers to describe the original, and then asking an identical group of consumers to describe the copy. An analysis is made of which aspects were mentioned first, second, third and so on, for each of the two products, and the level of agreement between the aspects stated first by each group.

Once these results on the reality of the prejudice have been obtained, contact with the distributor must be made at a high managerial level in order to emphasis the seriousness of the matter. Furthermore, this is the level at which long-term interests are best appreciated. The distributor needs big brands, dynamic aspect to its store shelves, the value innovations the brands bring to the category and the margins they give the distributor.

The manufacturer needs the distributor to gain access to the customer. At lower managerial levels, the producer–distributor relationship is more antagonistic. The outcome of such contact is the modification of the trade dress or packaging of the distributor’s disputed products.

In general terms, brand management must plan for these phenomena and put the branding a position to be able to defend itself strongly. Thus, in order for a brand co lour to be defensible, the brand itself must also defend it internally. For example, the brand’product lines are very often segmented: this leads to the use of different colors to identify each segment.

In this way, the ability to claim that the brand is characterized by a particular is reduced. Thus, if a Coke label is red, and a Diet Coke label is silver, red is no longer the co lour of the Coca-Cola brand: after all, when producing their own colas, distributors always start by producing red packaging.

In general terms, the brand must become moving target through innovation and regular modifications to its packaging and its characteristic components. However, it must always be remembered that the aim of these modifications is to bring more value to the consumer. The difficulty that this permanent movement creates for copies is a secondary effect.

On the design front, the brand must accentuate and radicalize the signs of its own individuality, in order to be able to defend them better, and at the same time make them recognizable to consumers of average attentiveness. It is significant that the often-imitated Bailey’goes as far as to print the word ‘Original’ twice on its front label: ‘Original Irish Cream’ and‘Bailey’s the original’.

Re-communicating the risks

Asian imports, DOB's and discount products enter first into the categories with low perceived risk. A first reaction is to remind people of the risks, to regenerate involvement in the category. For example, in 2005 one book became the talk of France, despite its size and its forbidding cover, which showed two nutritionists (Cohen and Serge, 2006).

The whole press talked about it, and television devoted time to it. In fact, this revealed at ruth that big distribution would much prefer to keep hidden: the lowest-price products are not good for your health. The drastic reduction in price is made by forcing through awkward compromises, where client health and pleasure hardly enter into the equation. All that matters is the price. This is where we learnt that low-cost gingerbread contains no honey, and so on.

The decision was made to recreate the perceived risk. Chinese lighters are in fact dangerous: for example, they can explode if left on the rear shelf of a car. This does not happen with Bc lighters, which are products of remarkable quality. The problem is that in marketing, perception is reality. By not communicating the advantages of the product, Bc had admittedly made savings, but it had weakened the brand and paved the way for Chinese imports, chosen by the trade, which was unconscious of the considerably higher safety of a Bc and the danger of Chinese lighters.

Bc created a magazine for its distributors in order to put the word out, and remind them of their legal responsibility if Chinese lighter sold by one of them were to cause physical harm to a client. At the same time, it took action to raise the level of the criteria for approval for sale on European territory.

Price reductions

Faced with a decrease in their market share, producers are conscious that their brand no longer justifies the price differential that it offers on the shelf. It is tempting to reduce the price in order to restore the lost balance of perceived value and price.

This approach is logical, but carries several drawbacks. There is nothing easier than lowering prices. What will they do when an even cheaper Asian competitor appears?Lower them again – taking the money from which budget? Should it not be a question of recreating value by increasing quality and price? Also in many stores, the consumers do not even walk past the big brands: for them, the brand is too expensive by definition! They would not even notice the reduced price. The anticipated effect on sales would misfire. The price, and therefore the margins, would be decreased without benefiting from superior volumes.

An interesting study showed that the premium brands should not fear DOB's, since the market is segmented. On the contrary: statistical analysis showed that, after the introduction dodos, their sales became less price-dependent, and their turnover increased. The intermediate brands, on the other hand, saw their price sensitivity increase and their sales fall.

Several conclusions emerge at this stage. irst, the era of systematic price increases upon the launch of new products is over. It is necessary to place price at the heart of the innovation, and move on to a value analysis.

The non-premium big brands should take care to create a ladder enabling them to increase penetration through a product at an accessible price, and then practice trading up, once the client is aware of the quality of the brand’s products. The difficulty, it must be admitted, is the reaction of distributors, since these mini or economy-priced products compete directly with their DOB's

Thus, having bought all Colgate Palmolive’s washing powders, Procter &Gamble decided to use Gamma as a ‘fighting brand’. In the second quarter of 2006, the price of Gamma was reduced by 25 per cent, from s6. 65 to s4. 95 per 27-measure tub (Ariel is priced at s10). Gamma became an ‘everyday low price’ brand, at a price lower than Somme. The goal was to bring hard-discount purchasers back into the superstores, since studies showed that they were particularly attracted by the cheapest washing powders. ales increased by 54 per cent in four months, increasing market share from 3 per cent to 5. 4per cent.

The effect of price reductions on leader brands cannot be guaranteed: thus, in order to combat the products of the horticultural, Always (Procter & Gamble’feminine hygiene brand) lowered its price sin Germany, moving from an index of 240to 197, with Ali’s index at 100. Ali’market share remained stable at around 45per cent.

Alway’s market share moved from21. 7 per cent to only 24. 7 per cent. It was failure. The same tactic was successful, however, for Pampers: by moving from index 131 to 116, the market share jumped from 31. 1 per cent to 42. 2 per cent, sandaled’s product fell from 53. 9 per cent to 45. 9per cent. A significant difference between these two cases is the far smaller difference in price for Pampers than for Always. Is it really worthwhile for premium brands to lower their prices?

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
Brand Equity In Question What Is A Brand? Differentiating Between Brandassets, Strength And Value Tracking Brand Equity Goodwill: The Convergence Of Finance And Marketing How Brands Create Value For The Customer How Brands Create Value For The Company Corporate Reputation And The Corporate Brand Strategic Implications Of Branding What Does Branding Really Mean? Permanently Nurturing The Difference Brands Act As A Genetic Programme Respect The Brand ‘contract’ The Product And The Brand Each Brand Needs A Flagship Product Advertising Products Through The Brand Prism Brands And Other Signs Of Quality Obstacles To The Implications Of Branding Brand And Business Building Are Brands For All Companies? Building A Market Leader Without Advertising Brand Building: From Product To Values, And Vice Versa Are Leading Brands The Best Products Or The Best Value? Understanding The Value Curve Of The Target Breaking The Rule And Acting Fast Comparing Brand And Business Models: Cola Drinks From Private Labels To Store Brands Evolution Of The Distributor’s Brand Are They Brands Like The Others? Why Have Distributor's Brands? The Financial Equation Of The Distributor’s Brand The Three Stages Of The Distributor’s Brand The Case Of Decathlon Factors In The Success Of Distributor's Brands Optimising The Dob Marketing Mix The Real Brand Issue For Distributors Competing against distributor's brands Facing The Low-cost Revolution Should Manufacturers Produce Goods For Dob's? Brand Diversity: The Types Of Brands Luxury, Brand And Griffe Service Brands Brand And Nature: Fresh Produce Pharmaceutical Brands The Business-to-business Brand The Internet Brand Country Brands Thinking Of Towns As Brands Universities And Business Schools Are Brands Thinking Of Celebrities As Brands The New Rules Of Brand Management The Limits Of A Certain Type Of Marketing About Brand Equity The New Brand Realities We Have Entered The B To B To C Phase Brand Or Business Model Power? Building The Brand In Reverse? The Power Of Passions Beginning With The Strong 360° Experience Beginning With The Shop The Company Must Be More Human, More Open Experimenting For More Efficiency The Enlarged Scope Of Brand Management Licensing: A Strategic Lever How Co-branding Grows The Business Brand Identity And Positioning Brand Identity: A Necessary Concept Identity And Positioning Why Brands Need Identity And Positioning The Six Facets Of Brand Identity Sources Of Identity: Brand Dna Brand Essence Launching The Brand Launching A Brand And Launching A Product Are Not The Same Defining The Brand’s Platform The Process Of Brand Positioning Determining The Flagship Product Brand Campaign Or Product Campaign? Brand Language And Territory Of Communication Choosing A Name For A Strong Brand Making Creative 360° Communications Work For The Brand Building Brand Foundations Through Opinion Leaders And Communities The Challenge Of Growth In Mature Markets Growth Through Existing Customers Line Extensions: Necessity And Limits Growth Through Innovation Disrupting Markets Through Value Innovation Managing Fragmented Markets Growth Through Cross-selling Between Brands Growth Through Internationalisation Sustaining A Brand Long Term Is There A Brand Life Cycle? Nurturing A Perceived Difference Investing In Communication No One Is Free From Price Comparisons Branding Is An Art At Retail Creating Entry Barriers Defending Against Brand Counterfeiting Brand Equity Versus Customer Equity: One Needs The Other Sustaining Proximity With Influencers Should All Brands Follow Their Customers? Reinventing The Brand: Salomon Adapting To The Market: Identity And Change Bigger Or Better Brands? From Reassurance To Stimulation Consistency Is Not Mere Repetition Brand And Products: Integration And Differentiation Specialist Brands And Generalist Brands Building The Brand Through Coherence Defining The Core Identity Of The Brand Confirming The Presence Of Brand Core Facets In Each Product Identifying The Role Of Each Product Line In The Construction Of The Brand Graphically Representing The Overall System Of The Brand Checking The Coherence Worldwide The Three Layers Of A Brand: Kernel, Codes And Promises Respecting The Brand Dna Managing Two Levels Of Branding Growth Through Brand Extensions What Is New About Brand Extensions? Brand Or Line Extensions? The Limits Of The Classical Conception Of A Brand Why Are Brand Extensions Necessary? Building The Brand Through Systematic Extensions: Nivea Extending The Brand To Internationalize It Identifying Potential Extensions The Economics Of Brand Extension What Research Tells Us About Brand Extensions Avoiding The Risk Of Dilution Balancing Identity And Adaptation To The Extension Market Segments Assessing What Should Not Change: The Brand Kernel Preparing The Brand For Remote Extensions Keys To Successful Brand Extensions Is The Market Really Attractive? An Extension-based Business Model: Virgin How Execution Kills A Good Idea: Easycar Brand Architecture The Key Questions Of Brand Architecture Type And Role Of Brands The Main Types Of Brand Architecture The Flexible Umbrella Brand The Aligning Umbrella Brand (masterbrand) Choosing The Appropriate Branding Strategy New Trends In Branding Strategies Internationalising The Architecture Of The Brand Some Classic Dysfunctions What Name For New Products? Group And Corporate Brands Corporate Brands And Product Brands Multi-brand Portfolios Inherited Complex Portfolios From Single To Multiple Brands: Michelin The Benefits Of Multiple Entries Linking The Portfolio To Segmentation Global Portfolio Strategy The Case Of Industrial Brand Portfolios Linking The Brand Portfolio To The Corporate Strategy Key Rules To Manage A Multibrand Portfolio The Growing Role Of Design In Portfolio Management Does The Corporate Organization Match The Brand Portfolio? Auditing The Portfolio Strategically A Local And Global Portfolio – Nestlé Handling Name Changes And Brand Transfers Brand Transfers Are More Than A Name Change Reasons For Brand Transfers The Challenge Of Brand Transfers When One Should Not Switch Analysing Best Practices Transferring A Service Brand How Soon After An Acquisition Should Transfer Take Place? Managing Resistance To Change Factors Of Successful Brand Transfers Brand Turnaround And Rejuvenation The Decay Of Brand Equity The Factors Of Decline Distribution Factors When The Brand Becomes Generic Preventing The Brand From Ageing Rejuvenating A Brand Growing Older But Not Ageing Managing Global Brands The Latest On Globalisation Patterns Of Brand Globalisation Why Globalise? The Benefits Of A Global Image Conditions Favouring Global Brands The Excess Of Globalisation Barriers To Globalisation Coping With Local Diversity Building The Brand In Emerging Countries Naming Problems Achieving The Delicate Local–global Balance Being Perceived As Local: The New Ideal Of Global Brands? Local Brands Can Strike Back The Process Of Brand Globalisation Globalising Communications: Processes And Problems Making Local Brands Converge Financial Valuation And Accounting For Brands Accounting For Brands: The Debate What Is Financial Brand Equity? Evaluating Brand Valuation Methods Brand Valuation In Practice The Evaluation Of Complex Cases What About The Brand Values Published Annually In The Press? Strategic Brand Management Interview Questions