For some unexplained reason retailers simply do not promote Private Label properly.  Many seem to think the retail price difference to National Brand is all that is needed.  Others indicate the promotional calendar is overflowing with deals from National Brands leaving no room for Private Label promotions.

Private Label manufacturers want retailers to promote their products.  Many paid rebate money to encourage promotions.  Then along came Wal-Mart with their dead net costing.  Dead net costing simplifies processing for Ever Day Low Price retailers.  Now many retailers are demand dead net costing even though they are Hi-Lo retailers.  This makes the gross margin look larger without having to adjust for rebates.  Larger gross margin seems to be the reason many retailers have expanded their Private Label selection, when being different than the competition and satisfying consumer demand have long term importance too

Food retailers must learn what non-food retailers have known for years, you must actively manage gross margin.  In non-foods retailing there is the season start, promotion and mark down (close out) gross margins.  Merchants manage to a target dollar amount.  They create an estimate of the quantity they expect to sell during the season start, promotion and markdown to gross margins.  Then throughout the season they adjust the gross margin based on actual sales.  For too long, food retailers have allowed suppliers to drive the process.  They suggest the normal and promotional retail prices. 

There are many reasons Private Label products fail or don’t achieve their objectives.  Poor quality ranks high, meaning, the product does not perform up to the consumers expectation.   Product tastemays not please the consumer or consumers find the packaging uninviting.  Also high on the list is that the consumer does not know the product even exists.

Promoting Private Label is at its most importance during launch time.  The key to success is to create excitement and awareness.  Retailers have worked hard and should be excited about bringing a new product to market, if not they should not be launching the product.  They need to communicate this excitement to their customers.  The goal is to create awareness and trial.  Price reduction is not the best promotional tool for new Private Label items, as the product already has a price gap with National Brands. 

Here are some ideas to promote new Private Label items.  In store sampling is a good method to get the consumer to try the product.  Studies show many consumers purchase products they sample.  This is a good method for getting trial and product into the household.  Pair the Private Label item with another logical product.  When two products are frequently purchased at the same time (detergent and dryer sheets), this is a good opportunity to make one of them Private Label.  Giving the Private Label product away will create trial.  A What’s New end cap coupled with normal consumer communication can create awareness of a new Private Label item.  Target sampling by giving every customer who spends over $100 at checkout a free retail unit or store coupon. 

There are many ways to create trial and price reduction does not have to be one of them.  Not promoting Private Label should never be an option.  Just as National Brands are promoted so should Private Label.  Yes, this means spending some gross margin dollars, but the end results should be greater profits and customer satisfaction.