Role of (r)etail in Brand Communication
Integrated marketing communication processes overlap communication channels owned by brands quite significantly. A major part of brand communication is overtaken by external distribution channels and business partners of companies (producers), in particular if brands do not have their own distribution network or direct distribution channels regardless of their operation in an offline or online marketplace. This situation is very common in FMCG, white goods and consumer electronics segments. However effective that situation may seem, the implementation in practice is influenced by a host of factors, ranging from the business relationship setting through the distribution price war to the right and correct comprehension of multiple brands by retailers.
Brand communication and its positioning towards competitive brands usually starts during the new product launch phase on the market. Thanks to a marketing analysis, such products should also have precisely defined positioning. Its lifecycle just begins, its awareness should be deeply engraved in customers’ and distribution channels’ mind (i.e. retailers in our case). Well-established products need the same attention; the right understanding of all their points of difference is of major importance.
Retail does not work only as an important distribution channel. As a link in a corporate push-pull strategy, the retail industry plays the role of a communication channel, a paid channel, of course. Brands have a chance to buy profitable advertising space at specific retailers. If I say profitable advertising space, I mean not only space in flyers, customer magazines and retailer digital space (website, online shop, microsite, mobile apps, terminals, etc.), but also a place which improves visibility at the point of sale.
Producers, i.e. brand owners, expect retailers to offer the following competencies when acting as marketing communication tools:
proper understanding of the brand positioning
flawless application of corporate elements
keeping agreed pricing strategy
The brand or product positioning strategy forms a solid basis for future sales; and therefore, proper understanding should be of retailers’ interest. Thanks to that understanding, it is possible to identify the key points of difference, set up exact targeting, and also name all reasons that motivate consumers to buy. Such elaborated positioning has a potential to co-create the brand image, which has synergy effects with respect to the creation of the whole brand story. Together with the positioning, the customer must be able to differentiate the brand from others based on unique visual communication; this is what ensures corporate image. The producers’ pricing strategy is often diametrically different from the price level set up by retailers whose competitiveness is closely influenced by the ability to adapt to the market situation and consumers’ expectations.
A problem with understanding products as representatives of a specific brand arises as early as during the listing phase. During this phase, one mostly works with the basic goods characteristics, price and the accompanying visual materials such as product images and videos. Due to the enormous number of brands and products in one distribution channel, it is almost impossible to work with inputs such as the brand essence, brand story or brand image. Naturally, every retailer has a different approach to product communication but in general, we could say that only a minimum of them use other data than descriptive and technical information for brand and product differentiation and that a different price often is the only point of difference in terms of differentiation from another product within a specific category.
Money given from producers to retailers is used not only for brand communication – for brand purpose and sales support, it also covers a significant part of retailer’s operating expenses. An effective split of investment from brand marketing sources plays an important role in achieving profit and creating a competitive advantage of these distribution channels. As we can see in the KPMG survey (see infographic), retailers also mark the costs for merchandising as the biggest threat to profitability – next to some input costs. These costs are related to visibility and the complex brand promotion.
Czech retailers are facing the same situation. Fear from insufficient profitability is influenced by a massive increase of e-tail. The penetration retail into e-tail (and vice versa) has come to the next stage and is a direct result of the market development. As the market environment changes, the ratio of doing business through offline and online channels is changing and e-commerce increasingly gains in importance. The price war of segment players in the online environment is one of the most critical e-commerce areas. The market development and the apparently lower purchasing power of end consumers are reflected in lower turnover. Motivation of more sceptic consumers becomes even more challenging. And this situation cannot be solved through a low price of goods either.
Retailers must show a strong will to increasingly differentiate brands in specific categories so that end consumers get savvy about the confusing brand spectrum due to the hyper-demand and hyper-competition accelerated by producers. In his successful book Marketing as Strategy, N. Kumar describes the issue of brand portfolio rationalization. Producers wanting to control bigger market shares agglomerate brands and produce an enormous number of products, with which they do not contribute to effective differentiation (it is the contrary: the range of products becomes flatter and hence more unclear).
If we take a look from a wider perspective, we cannot ignore the fact that every retailer is its own, autonomous brand which also differs from the competitive brands itself. So, we have two levels of brand management – brand management of the retailer and delegated brand management of all brands in the product selection portfolio (in listing). In such cases, it is often very complicated to manage all brand processes of a retailer, not to mention at least the elementary management of all “represented” brands. If the producers (brand owners) were able to finance brand management through retailers and to supervise specific processes, the primary goals of retailers would be – even so – efforts to effective positioning setting in its own category (e.g. white goods, food, etc.), achievement of as high a market share as possible and profit from the real sell-out of the brands in their portfolio.
The market saturation with products and brands leads to permanent changes in consumer behaviour. Producers as well as retailers await a non-sluggish demand, but as for the achievement of green numbers, they do not proceed symbiotically. Marketing communication tools which should support good product differentiation on a brand value level and simplify the understanding of the selection mix (brand mix) are used at random, non-systematically, or they are intentionally ignored by retailers. The main criteria of communication is mostly “fast-movingness” of the goods on stock together with the price reduction deeply below the price which is defined by the brand positioning (regardless of differentiation). This limited attitude reflects a pure selling concept that is focused just on transactions, and it has an irreversible impact on the brand image. These brands are losing their points of difference and all humanizing aspects on the brand story background.
Retail plays its irreplaceable role in brand communication. In terms of brand image, positioning and above all product differentiation, it is not able to – according to entirely evident reasons – fulfil all expectations of brands. It often results in pulverization of the points of difference and in degradation of the brand value to a mere product as a negotiable entity without emotions, brand story or a unique and coherent mix of characteristics that differs a brand from its competitors. There is an inevitable conflict between retailers and producers which constantly destroys their long-term relationships. It is a crucial paradox in the contemporary and most effective marketing concept – i.e. holistic marketing where long-term relationships and synergies ensure the potential for future growth.
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