Bill's Blog

Brands are an everyday part of us. Everywhere you look they're front and center. In the communications business, branding is such a compelling topic of conversation because there really is no right or wrong. There are as many theories about branding as there are brands. The most interesting of which is the branding philosophy that companies employ. It really comes down to two choices - are you a branded house or a house of brands? This debate can rage on for hours in marketing conference rooms.

As the economy continues to sour, another branding strategy is gaining traction. It's been around for years, but it's evolving in its incarnation as brands are better positioning their "house brand" offerings. At one time, they were called store brands; but today they're cleverly marketed and promoted as stand-alone brands within a retailer's brand portfolio. This is especially true in the big box home center space.

It may be coincidence that it coincides with the holidays, but there's been an increase in tool advertising on television. Two of the tools I see advertised most often are Ryobi and Kobalt. The spots for these two brands are slick and well produced but have that really close tie-in to their parent retail brands. Kobalt is the house tool brand for Lowe's. The Lowe's halo is everywhere. In fact, in the spots you'll see Lowe's brand endorser Jimmy Johnson, winner of his third consecutive Sprint Cup Championship, using the Kobalt Tools in a variety of DIY suburban settings. Visualizing Jimmy Johnson doing home repairs or do-it-yourself projects doesn't seem to work. With as much money as he earns, he could have a full complement of handymen on staff.

When you go to the Kobalt.com website, www.kobalttools.com, it's interesting to see the Lowe's ID halo - color schemes and design elements. Check the retail locator. The only place you'll get directed to is Lowe's. What's fascinating is that Lowe's has employed the strategy of having a separate house tool brand rather than a Lowe's tools brand. It would be interesting to do a quantitative study to see how many people associate Kobalt Tools being sold exclusively by Lowe's. Or, who makes it for Lowe's for that matter? It's a house brand strategy that works.

What Home Depot is doing with Ryobi is no different. Their initial strategy as a home center retailer was to stock a tool crib area filled with the best tool brands. They used this as a way to build cachet and credibility for the Home Depot brand in direct comparison to the tool and industrial distributors against whom they had to compete. To be taken seriously by contractors, they had to stock the leading tool brands. The association with the best tool brands gave them immediate credibility with the trades. Ryobi is filling price point gaps in the Home Depot tool line.

Depot has extended their house brand philosophy within several different aisles in the store, most notably paint. The paint brand that is synonymous with Home Depot is Behr. Don't even think about trying to find Behr at any place other than Home Depot. Again, the Behr web presence www.behr.com promotes the capabilities and personality of Behr as a brand with a subtle Home Depot tie-in. You have to ask yourself, would Home Depot paint, as a traditional store brand, be as successful as the Behr entrée? For many brands, it is a simple choice - Lowe's or Home Depot. Olympic is very much the house brand of stain and paint for Lowe's. It's a decision that brands have to make as they get intoxicated with the volume that comes from being on the shelves of big boxes. If you choose one, you can't be in the other. Furthermore, don't even think about trying to penetrate independent paint dealers. These paint brands have made their bed and they have to sleep with the 800 lb. big box gorilla. Thus the benefits and risks of being today's house brand.

The house brand phenomenon is really exploding in the supermarket category. An interesting story a couple of weeks ago in Business Week discussed how house and/or store brands in supermarkets are evolving in today's tough economic times -http://www.businessweek.com/magazine/content/08_45/b4107062252752.htm.
According to Business Week, sales of private label goods rose 10% in the year ending June '08. At one time, it was purely a store brand and the product was inferior in quality to the name brands. As Business Week points out, that is not the case today, as the production quality is far better than you would have expected a decade or two ago. Stores are quickly realizing that the incremental profit margin and customer acceptance is far better with today's house brands and/or store brands. It's an intoxicating combination for any marketer.

This new battle on the branding front makes for very good conversation. Having a house brand involves spending a lot more money than a store brand. Home Depot is doing that with Ryobi Tools as is Lowe's with Kobalt Tools. There is no question that house brands are here to stay in this economy. Private label brands offer the ability to distinguish stores, if implemented properly. With house and store brands being "in," the branding battles rage on.