Your own brand name will ensure profitable margins, differentiate you from other suppliers and reduce your dependence on the big brands. Brick-and mortar retailers have been using such brand names successfully for many decades. E-commerce vendors have also been experimenting with them for a number of years.
In particular, large online retailers are testing which strategic orientation promises success with brand names. It is clear: There is no such thing as a showcase solution. While Zalando is already strategically separating itself from its own fashion brands launched in 2010, Amazon is penetrating more and more product segments with new brands. The US online retailer now offers more than 400 own brands, including fashion, furniture, technology, baby products and food, and has recently entered the B2B market. In today’s article, we will introduce you to strategy options that can help you introduce new brands.
Brand names: how customer confidence in e-commerce is changing
Why should e-commerce vendors focus on brands? The most important reason for introducing brand names is probably the change in your customers’ values. The long-term loyalty of a customer to their favourite brands has been declining for decades. The advertising agency Serviceplan even draws a parallel between the change in values towards brands and commitment behaviour in relationships. The only difference is that, for a number of years now, commitment behaviour in society has been increasing again, while brand loyalty continues to decline. Instead of classic brand trust, other factors are becoming increasingly important in e-commerce:
“Brands were the barometer of trust in the past, today they are being replaced by algorithms and product valuations,” says Klaus Forsthofer of Marktplatz1.
While established brands have to cope with a dwindling brand loyalty, the change in values is a great opportunity for new brands. By strategically positioning your own brands, you too can benefit from this shift in values.
Using strategic brand architecture to create successful brands
When establishing brands, it is first of all crucial to think about the concrete brand architecture. How visible should your own company be in relation to your own brands? How do you want to position the brands price-wise compared to the competition?
Using the name of the company shows how the brand is aligned with it
The first factor in strategic brand building is how close you want the new brand to be to your company. Your company is most visible when the new brand is marketed under the company name as a corporate brand. REWE‘s branding is an example of this in the retail sector. The company name is still strongly recognizable in an aligned brand such as REWE Feine Welt. The concept of the endorsed brand, on the other hand, uses a clearly recognisable branding that is perceived as an independent brand. The company’s branding is merely added as support. One example is Balea, an endorsed brand of the dm drugstore. According to a brand image study conducted by FOM University in 2013, Balea is perceived positively by consumers and barely differs from the recognition of well-known manufacturer brands. Strong brand names that have a direct relation to your company can also have a direct impact on your company. Unlike any other brand architecture, independent brands are not recognizable as own brands at first glance. The well-known, REWE-owned discount brand ja! is an example of this.
Which price segment do you assign the new brand to?
Once you have determined how to position the new brand in relation to your own company, the next strategic decision is to position it in the market. Depending on the competitive situation, you can decide which price range is the most lucrative. Different price strategies are recommended with regard to the selected price segment for your brand.
#A2: Do you want to position your new brand in the entry-level price segment? If so, it makes sense to offer the same value (for example, the same quality) as the manufacturer’s brand A1 at a lower price.
#B2: You want to target the mid-price segment? Deliver a higher value (for example, more quality) at a lower price than the competition B1.
#C2: In the high-price segment, position a brand so that it promises more value than the manufacturer’s brand C1 for the same price.
The REWE example illustrates how price positioning and branding are mutually dependent. When positioning the company as a quality retailer, REWE makes sure that the company name is located close to the product brands only from the medium-price segment onwards. Obviously, the strategic goal is for strong brands in the medium and upper price ranges to directly support the REWE corporate brand, while own brands such as ja! within the low-price segment are distanced from the corporate brand so that the overall image of quality is not jeopardised.
Amazon does the same with its own brands. Some express a clear proximity to the company, such as the most popular “private label” AmazonBasics. The aligned brand currently generates 85 percent of own brand sales and directly promotes awareness of the internet giant. Other own brands, on the other hand, are more remote from the parent company. The fashion brand find., for example, is labelled “by Amazon” as an endorsed brand, while the hygiene brand Presto, as an independent brand, has no direct connection to the group.
How to correctly implement strategic brand alignment
To find the best price for your new brand, you must have a comprehensive overview of the market. The example of Amazon with over 400 own brands shows, however, that it is almost impossible in e-commerce to achieve this overview manually; more and more new vendors are entering the online market in a wide variety of industries. In addition, more and more e-commerce vendors are making dynamic price adjustments. The market intelligence software blackbee Insights can present these huge amounts of data to you in a clear and concise way and will support you in your search for the ideal price for your product with highly up-to-date data.
Our market analysis experts will gladly advise you on the tailor-made blackbee Insights solutions without any obligation to buy. We look forward to hearing from you!