Caution: Private Label Traps Ahead

Avoid these common strategic mistakes
JGunderson1

 

It’s important to know where you stand in your private label process, but it’s almost as important to avoid key strategic mistakes that can cripple your program. You’ve put all the work into the inventory and marketing plan. Here are three of the most common B2B private label traps to avoid:

1. Forgetting you are the manufacturer for your brand – Today your branches and sales teams have manufacturer representatives who call on them and provide training. Your manufacturer partners drive demand by advertising and marketing their brands to end users.

Your partners make face-to-face calls at your locations, and they have built crucial relationships with your teams. It’s not in their best interest to do anything but to sell against your private brand if it competes with their branded products.

As you launch your private label lines, you have to create demand, market and advertise the brand to your end customers. The crucial step – often overlooked – is to build a robust internal communication, advertising and marketing plan for your branch associates.

You aren’t going to invest in hiring an internal sales force to sell a private label brand to your team. That’s why you need to aggressively advertise and market your brand internally to compensate for not having salespeople who call on your branches. This can’t be a one-time event where you launch the line and then quit prompting it internally. You have to make it an ongoing process.

If you don’t have a strong marketing and advertising plan, you will have trouble avoiding the second trap.

2. Letting your brand be just “Good” enough – It will be tougher to create traction if your private label program only has products in the Good position.

A Good-Better-Best product positioning plan gives you price points — low to high — that allows your customers to choose which price works best for them. Often manufacturer branded products occupy the Better and Best positions, and your private label brand sits in the Good enough position. The key sales driver for Good products is having the lowest price.

You can make a profit, but only occupying the good position puts you in danger of having to be low on every order. As a wise counter rep once said to me about our brand: “It’s good enough and it’s cheap, so I use it to win with low-price buyers.”

The challenge: as prices erode in the market the Good product position is where the margin compresses first. To move some of your Private Label products into the Better category, you need to build the brand and mimic the role of a top manufacturer. This takes a strategic plan by product category and a talented team to execute it.

3. Achieving victory, and then trading your best players – Many B2B distributors build a great strategy, source the product and execute the plan masterfully. They price and position their private label products expertly to drive profits to the bottom line.

The leaders that drive these results are often rewarded with promotions to the “A Team” and become leaders in the regular business. What is interesting is the skills to be successful in private label are manufacturer-like; they don’t always translate to becoming a strong distributor leader. It’s often a case of trying to fit a square peg into the round hole.

To compound the problem, the loss of these star performers from the private label team often undermines the growth of many private label efforts. The leading private label distributors have team leaders who are removed from the day-to-day pick, pack and ship-it business.

If you see private label as a key part of your growth plan, I recommend investing in your A Team, build your brands and determine if broadening your product set to cover more than just the Good product position is in your future.

As always, we value your feedback. Feel free to comment below or contact me at john@mdm.com.

 

 

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