Traditional NAMs and their marketing colleagues have been reared in a culture of continuity. In other words, we spent years building up relationships with consumers and customers, on the premise that a strategic approach to brand optimisation produced a predictable and acceptable return on investment, growing a level of brand equity that would carry us over the inevitable troughs in demand. This level of certainty possibly made many of us complacent and unwilling to innovate…
This all changed with the 2007 global financial crisis and the emergence of the savvy consumer, gradually morphing into the savvy buyer, each unwilling to outsource their purchase decision-making to marketers and retailers, in a continuous search for demonstrable value-for-money, for each purchase…
The results are evident in the successes of Aldi and Lidl at the expense of Tesco and the other multiple retailers that for too long took scale and continuity for granted… It is obvious that we are all now only as good as yesterday’s sales results, everywhere…
However, any supplier attempting to build up a continuous relationship with the discounters soon realises that life in this channel consists of a series of one-off initiatives, each bearing little or no relationship with previous moves made with the retailer.
In fact, thinking about it, the same now holds true for dealings with the major multiples (the over-rider agreement is now seen as ineffectual and is fast becoming increasingly discredited as the row about commercial income escalates…). And perhaps this is how it should be in business…
If this is the case, perhaps all branded manufacturers should target Aldi & Lidl with one-off experiments to help their colleagues become accustomed to discontinuity, developing skills that can then be applied, hopefully with even more effect, via their traditional customers, making each initiative ‘the best ever’, as if our livelihood depended upon it…as it probably does…
However, if a supplier’s corporate culture is firmly based in continuous trading relationships, and the increasing value of Aldi & Lidl is too appealing to miss, in a flat-line market, then the one way forward in terms of continuous relationships might be to consider supplying private label to the discounters!
Any colleagues that have a perception that products in Aldi & Lidl are somehow downmarket and inferior, should perhaps check out this misconception with the savvy consumer…
In fact, a quick trip to the nearest discount store will soon convince you that Aldi’s Lacura range deserves its growing reputation as a good quality substitute for equivalent high-end products, but selling for a fraction of the price. Meanwhile, Lidl is famous for producing good skincare and fragrance at very low prices, via its low-priced Cien range, often out-scoring well known fragrance brands in blind tests.
On balance, cheaper own brand skincare has been remarkably successful in terms of discounter’s surrogate labels. Even Tesco’s Pro Formula range has evolved to cover almost every skincare concern, from anti-ageing to combination and sensitive.
Taking an unbiased approach to evaluating the discounters’ surrogate labels in skincare and fragrance will soon convince sceptics of the speed with which Aldi & Lidl brands bypassed Generation One (Lower quality and inferior image compared to the manufacturers brands) and Generation Two (Medium quality but still perceived as lower than that of leading manufacturers’ brands) to compete directly at Generation Three (Comparable quality to the brand leaders, at a fraction of the retail price). In fact, the issue for suppliers has to be how soon the discounters move to Generation Four (Same or better quality than brand leader, and even launching innovative and different products from brand leaders, at major discounts to high-end retail prices).
At that point, those suppliers that take the plunge into private label supply will find that the discounters are demanding but manageable, are very efficient in terms of supply optimisation and ensuring high levels of on-shelf availability, and also pay on time.
In fact, their appetite for innovation is such that your marketing department may even be tempted to try new brand ideas via the discounter-brand as a test of consumer demand, before launching the best-performing options in their house-brand.
Is this a new idea in terms of optimising private label as a test-bed for national brands? Not really, in that a well-known yogurt brand pioneered this approach via Sainsbury’s and M&S own label back in the 1980’s….
