A Mind For Marketing

The potential advantages of adding a private-label line to a distributor’s inventory are fairly obvious — just ask those who are already successfully selling these products.

A mind for marketing, however, might be a distributor’s best asset when it comes to figuring out how private labeling can best benefit a distributor’s bottom line. A savvy marketing plan can mold a distributor’s private label into almost anything they want it to be.

But the question remains, “private label, national brand or both?” It depends. Many distributors have been successful at using private-label brands to supplement their national brand lines or, in some cases, to replace national brands altogether.

How do distributors decide to start a private-label program? What are the advantages? How do they market and position their private-label brand? Distribution companies deal with these questions every day and the answers vary depending on each company’s business model.

Why Private Label?
A private-label brand is a product, or line of products, that a distributor sells exclusively through its company. These product lines may or may not be manufactured by the distributor, but they are labeled and marketed as the distributor’s in-house alternatives to the national brands it also carries, or exclusively as the only product line a distributor features.

Private-label brands are not limited to chemicals or paints, as some in the industry may believe, but rather encompass entire product lines.

The reasons for companies starting private-label brands vary greatly.

One company may want to discontinue its affiliation with a national brand; another may have started as a private-label company without ever even considering a national brand line. Raymond Johns Co., is one such company.

“Everything we carry is private label. We started the changeover in 1975, and by 1983 we were exclusively stocking our own private label,” says David Ederheimer, president of the company, based in Louisville, Ky.

“We started the brand after I came to Raymond Johns from another company that had a very successful private-label brand. I found it very important that we develop our own brand as well, in order to promote customer loyalty and increase profits. It has worked in both areas,” Ederheimer explains.

The creation of a private-label brand can also be attributed to competitive reasons.

“We use our private-label brand as an alternative, cost-wise, to national brands,” says Robert Cronyn, president of Los Angeles-based Empire Cleaning Supply.

Developing customer loyalty seems to be a theme when it comes to private brands and and the relationships distributors have with their customers. Private-label brands build customer loyalty. If a customer is loyal to a particular brand, the customer is loyal to that company.

“We have been private labeling for 20 years,” says Bill Nourse, president of Brookmeade Hardware and Supply Co., Nashville, Tenn. “We started with our ‘Supreme’ brand of paint and light bulbs, and it has grown into a very diversified label, with products ranging from cleaning chemicals to electrical and plumbing supplies,”

“We started our private label to create brand identification with our company, as well as to appear larger than we really are. That gives customers confidence that we will be there for them in the long run,” says Nourse.

In-House or Outsource?
The first, and most important, issue when developing a private-label brand is the question of manufacturing. Do you want to manufacture your own brand in-house, or do you want to farm out the manufacturing process to another company? In most cases, companies outsource the manufacturing duties to an outside manufacturer.

“We manufactured our own products until 1996, when we found that all the regulations, red tape and overhead no longer made sense for our company,” says Cronyn. “Since 1996, we have had 500 percent growth in our company. Not having the manufacturing process bogging us down allowed us to concentrate on marketing and growing our business.”

Lack of red tape is not the only advantage to farming out the manufacturing process to another company.

“One advantage we have found is that the manufacturer may change, but as far as the customer is concerned, it is the same product because the packaging does not change. This makes us more competitive price-wise because we can shop our business around and find the best deal for ourselves. This savings trickles down to the customer,” says Nourse.

What’s In A Name?
In-house brands are handled differently by each individual company. In some cases the name on the can is not the name of the company. In other cases, the company’s name is all or part of the private-label brand.

“The promotion of our private-label brand is the same as if it were a national brand,” says Ederheimer. “We use the name ‘Raymond Johns’ on our products to help our customers identify us, not the national brand. It also helps that our brand is just as good as the national brands.”

“We promote and sell our private label ‘Supreme’ brand as a national brand,” says Nourse. “We decided early on that there would be no distinction between the advertising and promotion of our in-house brand and a national brand.”

“We use the name ‘Empire’ for our private label,” says Cronyn. “We promote our private brand right alongside the national brand. If the customer wants the national brand, we sell them the national brand. It’s as simple as that. Of course we would like them to buy our product, but we do not hide the fact that we make the product — we put our name right on it. Some customers are just more comfortable with the national brand.”

Private-Label Packaging
Packaging the private-label products is a diverse enterprise with many different approaches and goals. Ideas and market research are incorporated to come up with the right packaging for each individual company’s needs.

“We use very basic packaging because we want our product to look more generic. We want it to look like it is less expensive than the national brand, which it is, so it works well for us,” says Cronyn.

Raymond Johns Co. has a different approach. “We want our packaging to look every bit as good as the national brands it will be competing with on the open market,” says Ederheimer.

Graphics and logos are also involved, and there are many different approaches to developing that aspect as well. “In the beginning I did that stuff myself,” says Nourse. “Now the graphics department takes care of that and our catalog, but most manufacturers will do it for you if you desire.”

Raymond Johns Co. keeps the production close to home. “When we designed our packaging, we had a local high school/vocational school do the work. Now we have a local printer,” says Ederheimer. As diverse as the products are themselves, there seem to be just as many packaging and graphics options.

Marketing Matters
As it is with most products, marketing is a very important aspect to the success of any product line. “Side-by-side comparisons of private labels vs. national brands list the pros and cons about each product and let the customer decide what is important to them,” says Cronyn. “Literature is very important. All of the national brands have slick literature to go along with their products, so you really need literature to go along with your product.

“It doesn’t have to be slick,” he adds, “but the customers need to have information that they can use to compare products and take with them when they leave.”

Advertising is also an issue private labelers must consider.

“Spend the time and money on it to do it right. We advertise our private-label brand the same as a national brand, through flyers, telemarketing and word of mouth,” says Nourse.

Salespeople’s pitches and word-of-mouth advertising are critical in the advancement and promotion of a private label.

“Our salesmen do small seminars for our customers and prospective customers. They also do a mini-convention,” says Ederheimer. “Your sales force may be the most important tool you have.”

All agree that word of mouth is very important. “If someone in the business recommends you to someone else, that is the best form of advertising you can have — and it’s free,” says Nourse.

To Each His Own
Private-label product lines are important to distributors for different reasons. One may have its entire company based solely on its own private-label lines, as in the case of Raymond Johns Co. Another may use its private-label line to act as a generic alternative to the more expensive national brands, as is the case with Empire Cleaning Supply. Yet, another may put its private-label line up against the national brands head to head, as is the case with Brookmeade Hardware and Supply Co.

Whatever the role private labels play, they have proven to be part of solid business plans with true market staying power. However, it’s up to the companies themselves to decide how those private-label brands can help them reach their company goals.

D.M. Maas is a Milwaukee-based freelance business writer. E-mail questions or comments regarding this article.