Friday, August 29, 2008

Manufacturers Can Help Build Retail Brands

This week’s AdAge CMO Strategy article boldly announced the coming of retail branding, suggesting that retailers have been mere distribution points for their branded goods manufacturers’ wares up till now. Hogwash.

Sam Walton knew about branding. Every day low pricing, store greeters, tough vendor negotiations, early morning employee Rah Rah sessions, and the company travel policy are all examples of a clear and powerful Wal-Mart brand. Howard Schultz knows about branding, too. And like it or not, Starbucks delivers a powerful brand experience – who hasn’t met up with friends or held an entire meeting at a Starbucks while sipping overpriced but consistently prepared hot and cold drinks? Cheers, the bar where “everyone knows your name,” was a brand, too.

The balance of power in the retail value chain shifted a long time ago to the retailer. Sam Walton knew it, and so do other shrewd retailers: "He who controls the customer experience also controls the customer relationship."

Now, the customer experience occurs at multiple touchpoints, not the least of which is the use or consumption of the product. It just so happens that many (though not all) of the touchpoints leading up to and following product use are controlled by the retailer.

Part of the “news” the AdAge story covers seems to be the increasing number of retailers developing and offering the own branded assortment. But this isn’t news, at all. Gap started out selling Levi jeans. Safeway and Whole Foods have had store brands for years.

Another part of the story is about retailers recognizing the importance of customer loyalty and creating innovative loyalty programs. No news here, either. Heck, when I was a cashier at AlRose in Century City, our store layaway program served as a powerful loyalty program - credit for people who didn't have access to credit cards. That was in the ‘70s!

So, what is the real point here? Branded manufacturers have a role to play in partnering to innovate across the value chain. An example of a brand that recently did this is Coca Cola. Last week’s Business Week article attributed much of the design team’s success to their prioritizing innovations that worked within the constraints of Coca-Cola's complex partner relationships.

No doubt, manufacturers can help retailers build stronger, more differentiated brands. Doing so will help them secure their own brands, too.

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