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Monday, October 22, 2012

Premium Private Label Trumps Frugal Fatigue

A characteristic of past recessions has been “frugal fatigue.”  Shoppers get tired of living within their means and paying down debt and long to treat themselves to something expensive or at least frivolously indulgent.  Frugal fatigue is especially common among those who tended not to be particularly frugal prior to a recession. Long-term savers, who have made a lifestyle of frugality, have immunized themselves against the siren call of splurging.

According to a 2011 survey by the National Foundation for Credit Counseling (NFCC), 71% of respondents said they were “tired of pinching pennies."  However, simply wanting to take a vacation from a frugal lifestyle does not mean that shoppers will act on that impulse--particularly given the severity of the recent recession, where not simply creature comforts but jobs, homes, educational degrees, and retirement prospects have been on the line. Therefore, among respondents to the survey, only 7% said they were getting set to splurge even though their financial circumstances had not changed. The vast majority, 93%, reported that they would continue to be frugal.

In the grocery aisles, the premium quality and progressiveness of the current generation of private-label products has been a boon to shoppers who are maintaining a more frugal lifestyle, whether as a long-term philosophy, a sensible adjustment to the economic downturn, or a remedial treatment for previous excess.   Brand lines such as Costco's Kirkland Signature, the private-label based Trader Joe's, Target's Archer Farms, Wegmans store brand products, and Whole Foods 365 rank among the red badges of savvy shopping.


A Packaged Facts Food Shopper Insights Survey reported in our recent study on private label foods and beverages  found that nearly two-thirds (62%) of shoppers believe that private label food and beverage products are usually as high quality as name brands, and more than half (53%) believe that private label products are often a better value than national name brands.

The contemporary premium private label product is often priced only slightly below that of the national brand, reinforcing the sense of equity between the two.  However, the private label brand is then offered at a promotional discount price, often available only to loyalty cardholders. In this way the private label products satisfy the need for saving without making shoppers feel that they are sacrificing quality.  Thus is frugal fatigue defeated!

The successful interplay of shopper needs and perceptions and marketer efforts to develop and promote quality store brand products can be seen in the financial results of grocery retailers. The Kroger chain of supermarkets, for example, reported for 2011 that its private label products represent over a25% of its sales dollars and 35% of units sold. The overall growth rate for private label products at Kroger is greater than that for national brands. Several other grocery marketers indicate that they are targeting their private label products to account for a third of total sales in the next few years.

All this makes it easier for shoppers to keep on keeping on with their careful spending, with lower risk of frugal fatigue.   Moreover, the ever-evolving private label product lineups help support the 21% of the NFCC survey respondents who said they have “made lifestyle changes, but they are positive and I intend to keep them.”  For smart shoppers committed to careful spending as the “new normal,” premium private label products can wield a lot of brand appeal.

For more information on our full report:

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