Unifying Private Labels for Greater Impact [Brand Strategy]

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Can recategorizing one brand into another brand boost the performance of the first brand? Organizations and retailers commonly use private labeling (PL), in which they group similar products under one category. The recent intake in this idea relies on a more generalized categorization of products/brands in one group. By rebranding several category-specific private label brands into one larger group with a particular name, retailers attempt to influence buyers’ purchasing decisions. This strategic technique is known as umbrella branding or family branding, and it affects individuals’ mental categorization in evaluating the products. The positive effect of this strategy is a noticeable decrease in costs and risks of presenting new products. But how can retailers assure brand strength and marketing effectiveness of their products when repositioning their marketing strategy to umbrella branding? Kristopher O. Keller, Inge Geyskens, and Marnik G. Dekimpe’s recent Journal of Marketing Research article addresses this research question by evaluating the strategic decision made by the retailers SPAR, Attent, and Colruyt to rebrand specific PL brands to one umbrella brand.

“That’s extremely interesting. We have just rebranded one of our private label tiers and would love to know more about that.”

SPAR Group to Prof. Keller

The Idea

The concept of this study emerged from the previous paper by the authors (“Let Your Banner Wave? Antecedents and Performance Implications of Retailers’ Private-Label Branding Strategies”).   This study revealed that retailers’ branding decisions differed on another dimension: whether one brand is used across all product categories or whether individual brands are developed. The result triggered the authors’ interest in studying the change in private labels over time, including umbrella-branding decisions.

Even though PLs maintain their growth, many retailers still offer these products in small categories that may, individually, not be strong enough to perform in the market. To create a more substantial impact, retailers are now more open to using an umbrella branding strategy, which allows them to put differently labeled products under a group name. Although prior studies have focused on the creation and utilization of rebranding strategies, little is known about whether changes from multiple brands to a single brand would materialize. The disadvantage of applying an umbrella strategy refers to the risk that customers could hold favorable associations with particular brands and are not willing to accept a category aggregation with other brands. Can such rebranding attempts be successful?

Methodology

Through intense collaborations with the SPAR Group (which owns SPAR and Attent) and GfK Belgium (delivering insights and data for Colruyt), the authors had the opportunity to observe and evaluate the PL umbrella branding from different angles. During the rebranding phase, the three retailers granted in-depth company views about the steps they performed as well as why and when. These insights advanced the understanding of the rebranding efforts and augmented the valuable data sets that were already available, especially with regard to real-life cases.

“This is a great scenario: we were actually able to observe the exact same brands, just sold through other retailers.”

Keller, Geyskens, and Dekimpe

SPAR, Attent, and Colruyt have rebranded all of their category-specific private labels to one umbrella brand across 50+ product categories. Some product examples of SPAR unifying different PL brands under the umbrella brand name “OK€” are presented below. As the three selected retailers SPAR, Attent, and Colruyt differ in terms of store format, service type, size, value sales, selling space, the rebranded PL tier, and its prior market share, the authors were able to generalize their findings from one case to other cases.

With the available data, the research objective was to determine whether the strategic decision of rebranding was effective with respect to the businesses goals to gain brand strength and marketing-mix effectiveness. When choosing a suitable method for data gathering and analysis, the authors faced the challenge of lacking knowledge about how the brands would have performed without the strategy change. For this reason, they decided to utilize a difference in differences (DiD) analysis and a quasiexperimental procedure to analyze the obtained data. By observing control cases by means of outcomes for very similar brands that did not engage in the strategy change, they were able to understand how the treated brands would have performed the change not taken place. The authors utilized weekly sales data for five years, including at least one year before and after the rebranding, and rich marketing mix information to understand the effects of the rebranding.

When performing DiD analysis, a good setting with a clean set of control cases is essential. Fortunately, the DiD approach was suitable in case of the SPAR Group. The SPAR Group is part of a group of several retailers, which collectively source some of their private labels. As some of the group’s members decided not to rebrand the category-specific private labels, the authors were able to observe how these brands performed, while also observing the move to umbrella branding performed by SPAR and Attent. Hence, they were able to observe the exact same brands sold through different retailers.

Findings

When the authors started the research project, they discovered an empirical literature stream on umbrella branding, but these studies focused exclusively on national brands. Another research trend led them to examine game-theoretical papers, which further contributed to their understanding of the effects of umbrella branding. The authors were fascinated to find that no single lens would provide a comprehensive answer but that a combination would advance their understanding of the relationship between private labels and umbrella branding.

The study’s findings indicated that rebranding to an umbrella brand makes the PLs more reliable brands, less price-elastic and reliant on low prices, and less reluctant and sensitive to price promotions. In contrast, the famous brand name across a large and diverse set of categories throughout the store seems to lead to a reduced variety perception and decreases the effectiveness of further SKU additions under the PL brand. Consequently, the authors recommend that managers should avoid siloed thinking in setting the umbrella brand’s promotional intensity.

According to the authors, the results of this study provide retailers that still offer category-specific private-label brands with insights into the various implications of a shift to umbrella branding. Although private-label umbrella branding is common, looking at the market leader in the largest five countries in each of six continents, close to 30% of the banners still use category-specific branding.

Avenues for Future Research

Since the results obtained were successfully applied to three European retailers, the authors suggest that their key results can be applied to American retailers or other European retailers. As all examined retailers operate in more developed countries, it may also be interesting for future studies to compare the results obtained in less developed retail landscapes.

Furthermore, in the article’s limitations and future research section, the authors raised the thought of an inverse positioning by splitting one umbrella brand name to multiple PL brands. Would the flipside of the setting be an effective marketing strategy and worth studying in future research streams? The authors suggest that if moving from an umbrella brand to category-specific PLs would produce symmetric effects to the reverse move, a steep drop in brand strength could be expected, making the new private labels less appealing. Also, the price elasticity would increase, bringing rock-bottom prices back to the fore—quite the opposite of retailers’ efforts to create private labels that are brands in their own right. Another idea could be to combine the best of both worlds: A hybrid strategy with selected product categories getting independent brands from an umbrella brand that covers most other product categories. Research could examine if this approach would be fruitful or too complicated for retailers to manage and for customers to understand.

Referenced article:

Kristopher O. Keller, Inge Geyskens, and Marnik G. Dekimpe (2020), “Opening the Umbrella: The Effects of Rebranding Multiple Category-Specific Private-Label Brands to One Umbrella Brand,” Journal of Marketing Research, 57 (4), 677–94.