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The Psychology of Private Label

As consumers' budgets are stretched further, offering price differentiated alternatives is critical in service of budget-constrained families. However, the consumer is also keenly aware of quality. Private label has evolved to meet these demands beyond the era of ‘No Frills’ and ‘Value’ stripped-back offerings. It is critical that private label offerings continually evolve and follow some principles.

Ian Gray - Head of Technical Sales

3 Minutes

/ 7th September 2022
  • Manufacturing

The consumer must be enabled to easily navigate each category, shelf, and segment. Cues are critical to the purchase decision – the proposition must minimize confusion vs the alternative purchase decision – a private label Cola must respect these cues e.g. a red label, dark brown liquid. The purchase decision is made within moments, and signposting the purchase decision via product cues is the first hurdle.

The experience of the product is not to be overlooked. The second hurdle is therefore providing the value and quality which will ensure repeat purchases. The expertise in this area is deciding what the critical success factors are and then how best to execute within a variety of constraints. Therefore selecting a partner who understands this is critical to avoid a negative consumer experience undermining months of hard work. 

Private label owners should succeed in striking a balance of aspiration to be different (customization) versus respecting customer perception and cues of the product. This requires an understanding of the private label brand equity, and the demographic willingness to invest in ‘newness’ and customization. Missteps here can result in great products failing to sell via overcomplexity. As always, a strategic imperative is key – understand which propositions are the ones to focus on out of all the alternatives. A dash of humility and realistic expectations within this decision-making process is needed.

The process of developing and offering a private label proposition is highly involved, places great demands on a variety of cross-functional stakeholders and therefore strategically can be disastrous if not well conceived and understood. It must be value-additive to all stakeholders, and if done correctly can tremendously boost brand equity for the private label owner. A well-thought-out approach with a correct understanding of consumer psychology is therefore imperative to realizing value for all stakeholders.