In order to encourage customers to purchase the private-label products, CVS employs a series of marketing techniques. Thus, for instance, the company sees to the fact that the labels of their products are partially similar to those of the branded offers (see Fig.1). Kumar and Steenkamp (2007) name this method “a copy-cat approach” (33).
This technique serves to create an impression of familiarity in customers, which is critical, as companies do not normally spend significant resources on the promotion and advertising of private-label products (Chernev, 2010). As a result, the customers are less inclined to doubt the quality of CVS’s products when associating it with that of the items they typically buy.
Apart from making the private-label products look similar to brand products, CVS also tries to attract their customers with the help of the low-cost strategy that they use for this type of production. The reduced prices can be easily explained by the fact that the promotion of private-label products is generally less costly.
Thus, experts note that companies save considerable money on the advertising campaigns and distribution management –as a rule, such products are not sold by external retailers, neither they are widely advertised (Gázquez-Abad, MartĂnez-LĂłpez, Esteban-Millat, MondĂ©jar-JimĂ©nez, 2014).
Another approach that CVS employs for leading their customers to buy the private-label product resides in extending their clientele base. Thus, Hitt, Ireland and Hoskisson (2008) point out that the company offers special conditions for their employees under which the latter receive a beneficial discount in case they buy the private-label production (185). One more technique that the company employs in order to sell its private-label product resides in the so-called “bundling offers.”
In other words, CVS offers to buy a set of private-label products for a lower price. According to Rao (2009), this method is particularly useful for private-label sales as it encourages customers to purchase the items they are not likely to choose along with those they really need.
Another critical point that needs to be noted is the allocation of the private-label products. Hence, private-label items need to be beneficially allocated as they are less likely to be searched for by clients intentionally (Kumar & Steenkamp, 2007). As a result, CVS places their private-label production next to a well-recognized brand. In such a manner, customers looking for a particular brand item are sure to notice CVS’s product and the chances that it will be sold increase significantly as the latter has a substantial competitive advantage in terms of pricing.
The company’s pricing strategy for its private-label production is determined by a series of factors. First and foremost, the company realizes that the customers’ awareness of private-labels is lower than that of the brand-labels; thus, the production is in an unbeneficial position in terms of recognition. However, CVS takes into account the fact that this production is less costly as it does not require a consistent contribution to either promotion or advertising management.
It allows CVS set relatively low prices for these types of products. The copy-cat approach, in its turn, creates an impression of reliability in customers, increasing, in such a manner, the sales. In addition, special offers for the employees as well as the “bundling sets” help CVS push up the sales.
Experts point out that the pricing policy CVS pursue is rather effective – a considerable percentage of customers have already changed their buying habits in favor of the low-cost private-label products (Tuttle, 2012).
Reference List
Chernev, A. (2010). Strategic Brand Management. Chicago, Illinois: Cerebellum Press.
CVS rolls out store-brand home care line. (2013). Web.
Gázquez-Abad, J.C., MartĂnez-LĂłpez, F.J.,Esteban-Millat, I., & MondĂ©jar-JimĂ©nez, J.A. (2014). National Brands and Private Labels in Retailing. New York, New York: Springer.
Hitt, M., Ireland, R.D., & Hoskisson, R. (2008). Strategic Management: Competitiveness and Globalization, Concepts. New York, New York: Cengage Learning.
Kumar, N. & Steenkamp, J.B. (2007). Private Label Strategy: How to Meet the Store Brand Challenge. Thousand Oaks, California: Harvard Business Press.
Rao, V.R. (2009). Handbook of Pricing Research in Marketing. Northampton, Massachusetts: Edward Elgar Publishing.
Tuttle, B. (2012). Brand Names Just Don’t Mean as Much Anymore. Business Time. Web.