The economic downturn continues to put stress on consumers, resulting in accelerating changes in basic purchasing patterns. An important part of the overall equation for consumers is the relationship between price and value. As consumers develop new value systems, how should manufacturers and retailers view and manage the other side of the equation-price?

If your business models and pricing strategies pre-date recent changes in the economy and consumer behavior, you could be headed for trouble. Perhaps now more than ever, pricing can serve as marketing’s most powerful lever to drive performance. We all realize we’re dealing with unprecedented circumstances, and need to act, but what are the guiding principles for successful price planning? These Six Keys for Successful Price Planning provide a roadmap for marketers to navigate through our new pricing environment.

Download the complete Price Planning whitepaper.

I recently shared some thoughts on how CPG manufacturers can protect their brands from private label expansion. Of course, it didn’t take long to hear back from retailers asking for tips on growing their own brands so here are a few private label ideas for our retailer friends.

1. Study the category consumer before going upscale. Consumer understanding is the common thread among top-selling brands. It’s not enough for a retailer to roll out a quality product in premium packaging.
2. Disguise your premium store brands. Many consumers still associate private label with cheap knockoffs. There – I said it. But what if they don’t know it’s a store brand? Look to position premium store brands as exclusive products like Choxie at Target and Canopy at Walmart.
3. Get your pricing right. The price gap between store brands and national brands varies significantly across categories. The same shopper who chooses private label bottled water for a 3% discount may require at least 20% savings for private label barbecue sauce.
4. Offer multiple brands in multiple tiers. Although Costco may be the exception, most retailers are finding growth with multiple store brands. No one brand can stand for value and gourmet and healthy eating.
5. Eliminate weak links. One bad product experience can hurt the entire store brand, not to mention the retail banner itself. Product quality needs to be consistent across each store brand. Your brand’s perceived quality is only as good as its weakest SKU.
6. Drive trial. If your store brand is really as good as the national brand (or better), let your shoppers try it. Offer a free package with a $50 purchase. Consider a trial size or in-store product demos.
7. Promote your store brands. There’s a wide range of feature ad support for private label. Using ECRM’s Marketgate data, we found that private label’s percent of feature ads ranged from 45% at Wegmans to 25% at HEB to only 10% of ads at Publix.
8. Don’t be too quick to drive out value brands. Some value brands can drive lower price and higher margins than retailers can achieve through private label. The shampoo category is an excellent example with some well-known brands at very low prices.
9. Embrace a cause. Use package labeling to show how your store brand supports local suppliers, promotes health & wellness, saves the environment, or funds local charities. You’ll find that many of these causes attract similar consumers. Regardless of sales performance, taking the high road can help to build a retailer’s image.
10. Understand the difference between strong sales vs. strong brand equity. Walmart’s Great Value brand claims to be the #1 food brand across categories, but would shoppers ever choose Great Value over a national brand at the same price point?

Bonus: (It’s one better than a top 10 list) Sell your store brand in someone else’s stores. Safeway is taking the lead by selling its “Eating Right” and “O” brand at other retailers in non-competing markets. Opportunities exist for retailers to sell their store brands not just in new markets, but in new channels (convenience, hardware, toy stores) in their own. Share your tips, stories, feedback in the comments below.

“If we just listen to these consumers, they will tell you where you need to go,” said Nick Sorvillo, Kraft Senior VP Consumer Insight & Strategy.

Kraft’s driving mission is to reconnect – emotionally and functionally – with consumers. Sorvillo stressed the path to that connection includes building an image of trust, dependability and value solutions.

“Those of you who understand the value equation for the category you are in will succeed,” he explained. “And value is not all about price.”

Kraft’s Consumer Channel research spotlights the shopping psychology of today’s consumer. The economy has changed the attitudes of consumers – 61% of Kraft’s consumer surveyed said their attitudes have been permanently changed. These consumers are cooking more at home, entertaining at home – with a mantra of ‘back to basics’ and family. They are practicing what Sorvillo termed as “brightsiding” – looking to the brighter side of a situation.

Seventy-two percent of those same consumers will continue to use the same shopping strategies they’ve begun to practice under the present economic crunch. In order to continue to service these consumers, the industry will have to change its own focus and provide solutions.

The emotional relationship with consumers translates into proving that the industry is partnering with them through not only this recession but throughout their lifetime. Retail speakers and attendees echoed the task of breaking down barriers to the customer. Customer centricity is the hub of category management.

Food Lion demonstrated the power of the customer with presentations discussing its own shifts from a decades-long, low price-oriented inventory management to customer-oriented inventory management and store design. In a partnership with Kimberly-Clark, Food Lion SVP Merchandising & Distribution Derrick Penick said they revamped the baby care aisle with a focus on the primary consumer – Mom – with input from shopping mothers, the aisle was redesigned to better suit her shopping needs. The convenience of shopping the store is now a part of the value-proposition of Food Lion’s baby care category.

According to a global survey conducted by Nielsen and the Association of the European Self-Medication Industry (AESGP), U.S. consumers place more importance on price and value when choosing over-the-counter (OTC) medications than consumers in other countries throughout Europe, Asia Pacific, North America, and the Middle East. 

Thirty percent of U.S. consumers consider price to be important when choosing OTC products, while only 17% of global consumers do, Nielsen reported. Only Japanese consumers place more importance on price (33%).

And while just 15% of global consumers consider whether the product is a good value for money, one-quarter of Americans consider this factor being purchasing an OTC medication.

“With increasing medical costs and a fragile economy, the U.S. consumer is more price and value centric than ever,” Matt Dumas, managing director, NielsenHealth, noted.  “These findings highlight the rising importance of generic drugs in the U.S. market, which is underscored by low OTC product loyalty scores versus global markets.”

Nielsen’s Global Online Consumer Survey was conducted in April and May 2008, among 28,253 Internet users in 51 markets in Europe, Asia Pacific, North America, and the Middle East.

View the full press release.