A private brand is a brand owned by a retailer or supplier, but not a manufacturer or producer. The retailer or supplier gets its goods made by a manufacturer on contract under its own label and not under the manufacturers’ one. The products are designed to compete against branded products offering customers a cheaper price than the nationally known branded products.
Pros of Private
1. Branding Control
Private branding offers retailers or suppliers control of factors relating to their products, for example, size, package design, pricing, production, and distribution. Retailers can make quick changes to products based on consumer’s preferences and the prevailing market conditions.
Private branded products are usually readily available, since they do not depend on the idiosyncrasies of manufacturers from other brands.
They have higher profit margins, which are usually offered by Private Labels because they are readily available to a large customer base.
4. Easy control
There is easy control on all aspects of private labels because the brand popularity increases the market share.
5. Customer Loyalty
Private brands are associated with customer’s loyalty, since a loyal customer base is dependent on the retail outlets for that label. The use of logos and taglines personalize the customer experience, hence, increasing their loyalty.
6. Increase in sales
Due to the exclusiveness and differentiation of the products, this translates to increase in their sales.
7. Increase bargaining power
Product labels increase the bargaining power because they have better control in deliveries and freedom in their pricing strategy.
8. Enhancing the retailers’ image
Through private branding, retailers and suppliers enhance their reputation as viable individuals in their businesses.
9. Ability to offer quality service to customers in a short time
Due to low logistics and production measures, retailers and suppliers are in a position to offer the best products to the market within a short period of time and with minimal resources.
10. Custom products
The branding can be tailored to meet customer requirements and specifications including product name, description, company’s logo and contact information for the customer.
Private branded products are only available at the retailers’ outlets. A customer will not go to big shopping malls or megastores to get them at lower prices as they can get them in retail stores.
Cons of Private Branding
1. Inventory risk
Private branding has an inventory risk which is the initial capital used to brand the product.
2. High marketing cost
Since advertising a brand is expensive, the marketing cost is high. If the product expensive, it creates a negative image.
3. Lower perceived quality
Since retailers and suppliers only brand their products due to changes in the market conditions, they may give customers what they want, and not what they need.
4. Complex production
A problem of complex production and importation issues associated with trade barriers in the form of tariffs is also encountered.
5. No return allowance
Private branding lacks return allowance from branded suppliers.
6. Purchasing in large quantities
Retailers and suppliers have to purchase the private branded products in large quantities. This can be too expensive, taking into consideration other costs that will have to be incurred, for instance, transportation costs and other related costs.
This involves the presentation of multiple brands to the public under a single marketer. It is the combination of brand names to enhance the perceived value of the product. For example, Sony-Ericsson involves two brands, which are Sony and Ericsson.
Pros of Cobranding
Cobranding improves the image of the company. This is because when two strong companies merge their names and form the one brand, it is perceived that they have merged their expertise in the production of goods and services. This gives them a good public image, hence, they have an advantage in their marketing strategies.
Risk-sharing is evident in co-branding, since companies pull resources together and spread them to ensure efficiency. One company will not have to bear all the cost, in case a risk occurs. The two companies share the risks between them; hence, the cost of risks is reduced.
3. Sharing of costs
Costs, for instance, marketing, operational, rent, and utilities will be shared between the two companies; hence, one company will not bear the costs alone.
4. Royalty income
Cobranding also enables owners of a brand earn royalty income. This income will be earned forever to the descendants of the brand-owners because the household name has a good reputation and large customer base.
5. Increased sales
Cobranding leads to increased sales income, resulting from the large market. This is brought about by the perceived quality of the products by consumers.
6. Facilitating expansion
Cobranding facilitates expansion into international markets. The companies tap into an international image, which enables them to venture into different countries. This, in turn, increases their distribution networks.
7. Technological benefits
Technological benefits will also be evident in cobranding. A good product image is usually achieved through association with another renowned brand.
8. Improves access to new sources of finance
Cobranding leads to a greater access to the new sources of finance because investors will invest in shares, so that one is associated with the company’s profit-sharing through dividends.
9. Wider scope
Cobranding leads to a wider scope because of joint advertising, hence, minimizing costs incurred by the company.
Cobranding increases the value of a company. This is because by combining multiple products under a single brand, the company will take advantage of its previous investment.
For products that are not well-known in the market, cobranding may create confusion in customers. Consumer may know products from one company and not the other one. They might, therefore, incline to buy, since they might think it is the product from a different company altogether.
Cons of Cobranding
1. High advertising and public relations costs
The main drawback of co-branding is high advertising and public relations costs. Establishing a brand, either local or an international one, requires years of consistent advertising, exceptional customer service, and high levels of quality.
2. Difficulty of creating the brand image
Creating a brand image and maintaining its reputation cannot be established in a day, so companies must continue with promotions, even during hard economic times.
Cobranding may terribly fail when, for example, two products have different markets and are completely differentiated. Therefore, if there is a huge difference in the vision and mission statements between the two companies, composite branding may fail.
4. It may affect partner brands in an adverse manner
Cobranding may affect partner brands in a negative way. For instance, if customers had initially associated any adverse experience with a constituent brand, it damages the total brand equity, hence, affecting its sales.
Cobranding poses a significant disadvantage to small businesses, which try to establish themselves in an industry.
6. Loss of control
Cobranding may lead to lose of control in the two companies which have co-branded. This is because they can venture into activities which can be too overwhelming for them.
The success of cobranding depends on the compatibility of the two companies or products.