Private label branding: Recession or no, it’s a trend that’s here to stay.

During the Great Recession of 2008-10, it was no surprise to see an increase in private label product sales – not just in food products but also in apparel, cosmetics and other consumer categories.

That was then …

It was much like a similar recessionary time in the United States history — back in the 1970s — when some supermarkets began selling “generic” packaged and canned goods. Those offerings celebrated their generic status by emphasizing their lack of branding – ostensibly to demonstrate that by cutting back on marketing and advertising costs, product pricing to the consumer could be kept lower.

The generic movement didn’t last. When the economic go-go times returned in the mid-1980s, consumers were more than happy to forego the cheaper offerings and go back to their favorite brands.

But the situation is different today. The Great Recession may now be a decade in the rearview mirror, but the private label brands they spawned are going strong.  In fact, they’re thriving as never before – and in some ways are eating the legacy brands’ lunch.

… This is now.

Several factors are fundamentally different from before. For one, products that compete on price are no longer being marketed as “generics” but rather as brands in their own right.  Brand names like Kirkland, Archer Farms and Essential Everyday look and feel like Kraft, Kellogg’s and other longstanding brands – and for the most part their quality is indistinguishable as well.

Equally important is that fact that there’s no longer any particular stigma associated with shopping “cheap” private label brands. It turns out that consumers in every income category appreciate a bargain; no one wants to feel like they’re being ripped off when there are good quality “best-value” alternatives available.

The usually prescient Warren Buffet appears to have been caught a little off-guard by the changing landscape, recently expressing surprise (and alarm) about this development. His Berkshire Hathaway enterprise took a $3 billion hit in the face of disappointing earnings as Kraft-Heinz share prices dropped more than 25%, thanks to strong competition from the private label alternatives.

Consider these eyebrow-raising statistics: Costco’s Kirkland house brand notched sales of $39 billion in 2018, which is substantially higher than Kraft-Heinz’s total brand sales of $26 billion.

Indeed, the consumer foods industry is witnessing this happening all over the place. Amazon may not be developing its own private brands like Costco or Target have done, but it is working diligently with food and beverage manufacturers to develop private label offerings to sell exclusively on Amazon’s own website.

Looking at the macro environment, the United States is running at historically low unemployment rates today, but that hasn’t stunted the phenomenal growth of discount grocery chains like Aldi and Lidl. Aldi has come from practically nowhere several years ago to threaten becoming America’s 3rd place grocery retailer, behind only Walmart and Kroger.  Aldi has done so by pursuing an über-aggressive private label strategy that’s targeting younger, middle-income shoppers in particular.

Note that Aldi is training their sights on more than just budget-conscious consumers, which have traditionally been the narrower audience for private label brands. It turns out that the “stigma” some might have attributed to the “cheap” image of private label foods isn’t there any longer.

For younger consumers especially, such “status” concerns are of no pertinence at all. Whereas the typical grocery cart today contains ~25% private label products, among millennials the proportion is more like one-third.

Based on these trends, it’s little wonder that a recently released Thomas Index Report reports that sourcing activity for private label foods is up more than 150% year over year.

And while the growth of private label products is most pronounced in the food, paper goods and household supplies sectors — and has had the most disruptive consequences there — other sectors like apparel and cosmetics are seeing similar developments.

[Let’s not forget private label pharmaceuticals, too, where price differences are often dramatically lower than just the 15-20% differential we see in the food sector.]

The bottom line is this: Recession or no, cheap has become chic.  It’s a trend that’s here to stay.  The legacy brands won’t be able to wait this one out and expect better days to come along again.

Which brands are “meaningful” to consumers? Not very many.

What makes a brand “meaningful”? Multinational advertising, PR and research firm Havas SA has studied this topic for the past decade, conducting a survey every other year in which it attempts to rate the world’s most important brands based on consumer responses to questions about select key brand attributes.

According to Maarten Albarda, the methodology behind the Havas surveys is solid:

“It looks at three brand pillars: personal benefits; collective benefits, and functional benefits — and then adds in 13 dimensions like environment, emotional, social, ethics, etc. plus 52 attributes such as ‘saves time,’ ‘makes me happier,’ ‘delivers on its promises,’ etc.”

The Havas research is both global and quantitative — including more than 350,000 respondents in over 30 countries.

The 2019 Havas research shows that ~77% of the 1,800 brands studied don’t cut it with consumers. This finding came in response to the question of whether consumers would care if the brands disappeared tomorrow.

That’s the biggest disparity ever seen in the Havas surveys. Two years ago, the percentage was 74%.

Which brands perform best with consumers? The top five ranked for 2019 are the following:

  • #1 Google
  • #2 PayPal
  • #3 Mercedes-Benz
  • #4 WhatsApp
  • #5 YouTube

Four of these five are brands that are all about “utility” — helping consumers deal with actions (watching, searching and sharing). The odd one out here is Mercedes-Benz — suggesting that there is something enduring about the time-tested reputation for “German engineering.”

What’s equally interesting is which high-profile brands don’t crack the Top 30. I’m somewhat surprised that we don’t see the likes of Apple and Coca-Cola in the group.  On the other hand, Johnson & Johnson comes in at #6, which seems surprising to me because I doubt that J&J has the same kind of consumer awareness as many other brands.

The Havas research reveals that the highest ranked brands are ones that score well on purchase intent and the justification of carrying a premium price. Repurchase scores are also higher, making it clear that a meaningful brand translates into meaningful business benefits.

In addition to reporting on international results, Havas also releases a U.S. analysis. Historically, U.S. consumers have been even more parsimonious in choosing to bestow a “meaningful” attribution on brands.  In fact, the percentage of American consumers earmarking specific brands as indispensable hovers around 10%, compared to the mid-20s across the rest of the world.

The reason why is quite logical: American consumers tend to have more brand choices — and the more choices there are, the less any one brand would cause consternation if it disappeared tomorrow.

Click here for more reporting and conclusions from the Havas research.

Marketing AI and Machine Learning Come Into Better Focus

Artificial intelligence and machine learning are two phrases that have become regular currency in the marketing world over the past several years. It isn’t hard to figure out why, as both AI and machine learning have the potential to help marketers make sense of the ever-increasing volume (and complexity) of raw data that’s become available in increasing amounts, thanks to the digitization of “everything.”

Some people use the two terms interchangeably, but that isn’t exactly right. According to Thorin McGee, director of content at Fast Capital 360, the distinction is subtle yet significant:

  • AI is when you develop an algorithm that allows a computer to “think” for you towards achieving a goal.
  • Machine learning is when you let a computer create an algorithm to find ways to meet the goals you give it, based on large pools of data.

Put the two together, and you have the ability to gain some really deep insights into what your data is actually telling you, thereby improving decision-making success.

On the data front, this great potential is tempered by some significant challenges. Christopher Penn, chief innovation officer of marketing data and analytics consulting firm Trust Insights, characterizes them as the “5 V’s” of data:

  1. Volume — There’s so darned much of it.
  2. Variety — More kinds of data are being churned out.
  3. Velocity — Data is coming at us faster than ever.
  4. Veracity — If data isn’t verified, it can do more harm than good.
  5. Value — In raw form, data isn’t particularly useful. Like oil, data needs to be refined to be of value.

If getting your arms around data seems like trying to hug a stream of water, you aren’t alone in thinking that. Many companies are pretty adept at using data to identify what happened — and maybe even to diagnose problems and why they happened.  But it’s less easy to predict what will happen based on data … and even harder to use data to determine with confidence what should happen.

The biggest challenge — but also the one with the biggest potential payoff — is tapping machine learning to process and use data in forging future business as you wish it to be.

To date, very few companies have come all that close to becoming AI-powered enterprises. But it’s where we’re headed in the coming decade.  It represents one of the biggest opportunities for differentiating one company from another.  But it will require a disciplined and concerted effort:  talent acquisition (developers and data scientists), tapping outside vendors, along with taking available open-source code and building upon that to implement the appropriate marketing technologies.

Oh, and committing to a multi-year initiative and budget even after all of those other pieces are in place.

Surveying the current landscape, are there particular entities that you see as on the leading edge in applying AI and machine learning to their marketing endeavors? Please share your observations with other readers.

Any way you slice it, Google continues to dominate the search ecosystem.

Just how big is Google in the world of search? I’ve seen percentages that are all over the map, but one thing is undeniable:  Google remains the overwhelming leader in search.

And it isn’t even close. Runners-up in the search engine derby include Bing/Yahoo and DuckDuckGo, but they’re so small so as to be mere asterisks at the bottom of the page.

… Which might be surprising to some. After all, as late as 2015 comScore was reporting that Google’s market share of desktop search was running around 64%, whereas the Bing family of search products (including Yahoo and AOL) was tracking in the low 30s.

But it’s all in how you make the calculations. At the very same time, Statista was reporting that Google’s worldwide share of desktop search was approximately 89%.

Moreover, Statista’s trend line for Google between 2010 and the end of 2018 is remarkably consistent, with Google’s share of desktop search charting in a narrow range between 86% and 90%:

But I think it’s the data from marketing intelligence and analytics firm Jumpshot that gets us closest to what’s actually happening in the world of search. Jumpshot licenses anonymized ClickStream data from hundreds of millions of users.  It finds that ~63% of all online searches are through Google’s “core” function.

But then one needs to factor in additional Google-related search activity that occurs on Google Maps, Google image search and YouTube, which is owned by Google. When those figures are added to the mix, Google’s market share of search is indeed in excess of 90%, with all other players way, way behind.

This graph shows the makeup of Google’s dominant position as compared to its search competitors:

Source: Jumpshot (based on ClickStream data), 2018.

These dynamics explain why Google remains so entrenched – and why advertisers continue to devote so much of their search engineering advertising dollars to Google properties.

A “constant” in Google’s market strategy over the years has been to make it easy and effortless for users to perform a Google search wherever they are.  In years past, that meant making Google the Home Page on as many Internet browsers a possible. In more recent times it’s taken the form of building activity on Google-centric browsers (Google Chrome), mobile market share (Android), acquiring the dominant video platform (YouTube), and making a major push into voice search with Google Home.

Essentially, wherever someone is … Google is there as well. It’s very much like a commodity or a utility.  (Indeed, its very name has become synonymous with the verb “to search.”)

In case anyone is counting, Google processes an eye-popping 3.5 billion searches per day.  Is it any wonder that any competitor – even a platform like Bing with resources to spend – would have a near-insurmountable challenge getting millions of people to just try a different search option (much less start using it regularly).

Could the situation change?  I suppose nothing is immutable.  The market share figures don’t yet factor in iPhone data at scale.  Some other search product might emerge that is dramatically better-performing than Google.

But none of those factors are likely to change the overall search ecosystem. The fact is, Google dominates search … it has dominated search for years … and it’s on track to continue doing so in the future.

I close with a question to readers. If any of you prefer using a different search product besides Google, please share your reasons why in the comment section below.

Chief Marketing Officer: The most thankless job in the corporate world?

Few people I know would claim that being the Chief Marketing Officer of a company is a job without risks. Indeed, numerous articles in the business press point to an average length of tenure in a CMO position that is often measured in months rather than in years – indeed, the shortest length of time among all C-level jobs.

And now, a recently completed survey of CMOs  underscores just how wide-ranging the reasons are for those employment characteristics. Branding consulting firm Brand Keys tested a number of issues to see which are the ones that keep CMOs “awake at night.”

Three-quarters or more of the respondents to the Brand Keys survey reported that every factor presented was significant enough to cause them to lose sleep.  Leading the list with near-universal high-alert concern is ROI factors. Other factors of concern to nearly every respondent in the survey are big tech and data security issues.

Listed below is how each of the factors tested by Brand Keys turned out with CMOs in terms of “losing sleep” over them.

90%+ lose sleep worrying about:

  • ROI/ROMI factors
  • Big data, big tech and big security issues
  • Establishing trust with customers
  • Innovation, AI, technology and marketing automation developments
  • Consumer expectations regarding privacy and transparency

80%-90% lose sleep worrying about:

  • Managing social networking
  • Creating relevant advertising content
  • Successfully deploying predictive consumer behavior analytics/technologies
  • Dealing with consumer advocacy and social activism
  • Developing long-term strategies that align with corporate growth goals
  • Having the ability to engage with audiences – not just find them

At the “bottom” of the pile … 75%-80% lose sleep worrying about:

  • “Democratization” of the digital world and protecting brand equity within it
  • “Political tribalism” and its effect on brand reputation
  • Being relevant when tweeted about
  • Keeping consumers engaged with the brand
  • Creating better cross-platform synergies for marketing campaigns
  • Creating an “unlearning curve” to move away from legacy marketing metrics
  • Creating marketing synergies among different generational/age cohorts
  • Being replaced by the chief revenue officer

This last worry factor – losing their job – seems almost preordained given the tenuous circumstances more than a few CMOs deal with in their positions.

… and likely made more so because CMO’s are quick to be blamed when things don’t go well, even if they aren’t in the strongest position to effect the changes that may be needed. “Responsibility without authority” is the stark reality for too many of them.

What are your thoughts about the dynamics faced by CMOs in their companies?  Whether you speak from personal experience or not, I’m sure other readers would be interested in hearing your views.

 

No End in Sight to the Challenge of Email Deliverability

When it comes to e-mail communications in the B-to-B world, yet another study is underscoring just how challenging it is to reach corporate inboxes.

A new report by cyber-security firm FireEye, Inc. reveals that fewer than one-third of e-mails sent are actually making it into corporate inboxes. The FireEye analysis was based on tracking more than a half-billion e-mails sent between January and June of 2018.

The majority of those e-mails were deemed to be spam or malicious in their intent. Nearly 60% were blocked by threat intelligence and around 10% more were halted by attack prevention tactics such as URL inspection and attachment detonation.

E-mails were deemed suspicious because they triggered one or more of the following “red-light” cautions:

  • Malware-less impersonations
  • Malware viruses
  • Phishing attacks
  • Ransomware
  • Spyware
  • Trojan horses
  • Worms

Interestingly however, it turns out that only a small fraction of the e-mails actually had malicious intent, meaning that the super-strict filters being employed by companies are capturing a huge number of perfectly legitimate e-mail messages in their dragnet and rejecting them out of hand.

On the other hand, the FireEye analysis also determined that impersonation attacks have undergone a shift from domain name spoofing to “friendly” domain name scams – ones in which an e-mail address is manipulated to impersonate a trusted source.

As the study cautions:

“This shift in tactics may be driven by how easily cyber criminals can ‘spoof’ the display name and username potion of an e-mail header. Instead of having to go through the process of buying and registering a domain similar to – or one that sounds like – the recipient’s domain, they can simply change the display/user name.”

The FireEye analysis is a reminder that because of its sheer pervasiveness, e-mail communications are also the most popular conduit for potentially significant cyberattacks. No wonder companies have their guard up.

The problem is, clearly a whole lot of wheat is being thrown out with the chaff.  And that makes e-communications hardly the slam-dunk communications tactic that many people assume it to be.