Remaking the model: competing with private labels

Photographic portrait of Steven Bailey
Steven Bailey

EY Americas Commercial Excellence Leader, Consulting, Ernst & Young LLP

4 minute read 19 Dec 2024
Related topics
Consumer Products
Transforming retail

Explore how national brands can outshine private label products using AI sales strategies, personalized marketing, and loyalty programs.

In brief:

    • Navigate private label competition: National brands must evolve by implementing innovative strategies, such as future-proof operating models and AI-driven insights, to enhance cost efficiency and consumer engagement.
    • Boost personalization and loyalty: Leverage personalized marketing campaigns and flexible loyalty programs to create stronger emotional connections and improve consumer retention.
    • Dominate in commerce channels: Strengthen online and direct-to-consumer strategies with robust data and technology to capture market share and counter brand-switching trends.

    Inflation has had a profound impact on the American consumer, especially coming on the heels of the economic disruption caused by the COVID-19 pandemic. As the Federal Reserve has made inroads bringing inflation back toward target goals, consumers are searching for value and new options to help make ends meet.

    Combining this economic uncertainty with an already highly competitive retail landscape, national brands face increasing pressure from private label products. Consumers often turn to private labels to stretch budgets in tough times. This is, in fact, one of the mega trends the EY organization sees shaping the CPG landscape over the coming decade. To stay ahead, national brands must adopt innovative strategies that not only differentiate themselves from private label retail brands but also resonate with consumers on a deeper level. The right path includes a combination of cost management and growth strategies that deliver both pricing flexibility and the capabilities to find new consumers. Here are five strategies that national brands can implement to combat competition from private label products:

    1. Future-proof operating models

    National brands need to honestly review the balance between global and local strategies to reduce costs while activating more strategically in the market. This involves assessing which operations can be centralized to achieve economies of scale and which need to be localized to cater to specific market needs. Additionally, brands should not overlook the importance of rewiring agency interaction models and optimizing in-house operations as we progress in the age of artificial intelligence (AI). Leveraging AI can streamline processes, enhance decision-making, and ultimately drive efficiency, but, like any technology, AI applied to a bad operating model doesn’t deliver. Competing against private labels will require a cost and operating model that doesn’t rely as heavily on legacy brand loyalty.

    2. AI-enabled sales strategies

    Sales strategies to optimize assortment, pricing, promotions and trade require not only traditional data and insights, but now must also include AI investments, both predictive and generative. As a result, there is much talk of Sales Force Automation (SFA), but many national brands still lack the insights and internal adoption of data tools essential to progressing to SFA capabilities. SFA holds out the promise of next best actions and AI assistants to unleash the potential of sales teams as they operate in market. Showing up more reliably and with market intelligence to distributors and retailers strengthens brands and their ability to activate. Going forward, SFA will be key to helping national brands achieve their retail excellence goals to realize “perfect store/perfect shelf” initiatives fully.

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    3. Full-funnel, personalized marketing campaigns

    In the age of data analytics and generative AI (GenAI), creating highly personalized marketing campaigns is more achievable than ever. National brands still struggle to operate sophisticated consumer insights capabilities to develop campaigns that resonate with individual consumer preferences and behaviors. Personalization for many brands will require new ways of engagement in the retail environment that cannot be effective without sufficient data capabilities. It’s essential to balance full-funnel marketing to unlock mid- and lower-funnel engagement, not just upper-funnel brand building that can be easy to retreat to. A balanced, data-driven approach ensures that marketing efforts improve reach, relevancy and recognition across all stages of the consumer journey, leading to increased customer loyalty and sales.

     

    4. Loyalty and loyalty programs

    For national brands, traditional loyalty programs may not always make sense, but loyalty writ large must be built into the equation – often requiring activation through retailer loyalty programs. For those global brands that benefit from direct loyalty programs, they need to consider devising loyalty frameworks that provide flexibility for brands and markets to resonate with consumers locally. As barriers to brand switching become increasingly lower, national brands must have clear loyalty strategies in place to create the emotional connections required to keep consumers coming back for more.

     

    5. Commerce and direct-to-consumer (DTC) strategies

    Mastering commerce channels, both online marketplaces and direct-to-consumer, is essential to preserving and gaining market share. As consumers continue the march to increasing their share of purchases online, commerce activation becomes even more critical. National brands now can directly engage either through their own DTC channels or online marketplaces, requiring clear-eyed strategies, technology and data to avoid the trap of leaving these channels unnurtured. Especially in the case of retailer marketplaces, the ease of switching to private labels is even higher and requires careful strategies to mitigate.

    Summary 

    National brands can combat competition from private label products by adopting future-proof operating models, elevating data-driven sales strategies through insights and AI, creating personalized marketing campaigns, embedding loyalty throughout the consumer journey and strengthening commerce channels. By embracing these strategies, national brands can differentiate themselves, build stronger customer relationships and drive long-term profit in the face of an increasing assortment of private label competitors.

    About this article

    Photographic portrait of Steven Bailey
    Steven Bailey
    EY Americas Commercial Excellence Leader, Consulting, Ernst & Young LLP
    Passionate about the consumer agenda. Fierce advocate for my clients, teams, and DEI. Former serial expat. Grateful partner at home.
    Related topics
    Consumer Products
    Transforming retail

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