WHO SHOULD DO THE BRANDING?
Manufacturer brands versus dealer brands
Who’s winning the battle of the brands?
A consumer who needs a new showerhead is likely to pick the brand and style by comparing alternatives at a retail store. Waterpik’s package makes it easy for the consumer to see and evaluate the product and the curved design helps to focus attention on the flexible hose. The package for Grillero beef looks different from the way most beef is packaged and also provides a way to tell French consumers that the product is organic.
Manufacturer brands are brands created by producers. These are sometimes called national brands because the brand is promoted all across the country or in large re- gions. Note, however, that many manufacturer brands are now distributed globally. Such brands include Nabisco, Campbell’s, Whirlpool, Ford, and IBM. Many creators of service-oriented firms—like McDonald’s, Orkin Pest Control, and Bank of America—promote their brands this way too.
Dealer brands, also called private brands, are brands created by middlemen. Examples of dealer brands include the brands of Kroger, Ace Hardware, Radio Shack, Wal-Mart, and Sears. Some of these are advertised and distributed more widely than many national brands. For example, national TV ads helped Original Arizona Jeans (by JCPenney) and Canyon River Blues (by Sears) compete with Levi’s and Wrangler.
From the middleman’s perspective, the major advantage of selling a popular manu- facturer brand is that the product is already presold to some target customers. The major disadvantage is that manufacturers normally offer lower gross margins than the middleman might be able to earn with a dealer brand. In addition, the manufacturer maintains control of the brand and may withdraw it from a middleman at any time. Customers, loyal to the brand rather than to the retailer or wholesaler, may go else- where if the brand is not available.
Dealer branders take on more responsibility and must promote their own product. They must be able to arrange a dependable source of supply and usually have to buy in fairly large quantities. This increases their risk and cost of carrying inventory. How- ever, these problems are easier to overcome if the middleman deals in a large sales volume, as is the case with many large retail chains.
The battle of the brands, the competition between dealer brands and manufac- turer brands, is just a question of whose brands will be more popular and who will be in control.