Tesco Nappies

Own brand products are ubiquitous in supermarkets. Why are they there? How do the supermarkets convince us to buy them?

As I walked around Tesco earlier today I noticed the huge similarity between Tesco own brand goods and branded items (made by a separate supplier).

Let's take the example of nappies. Here Pampers (owned by Proctor and Gamble) is the leading brand. They occupied about 60% of the shelf space in the nappy category. Approximately 20% were Huggies and a further 20% were own brand; Tesco. (This is a rough guide of market share).

The first question is why were Tesco competing with P&G in the nappy market anyway?

The answer lies in the profit margin. By selling their own goods, supermarkets cut out the middleman. They make more money selling their own brand goods than branded ones. However, each individual product space, or 'facing', is at a premium. The rate of sale is important. This leads us onto the second question.

How does Tesco convince us to buy their own brand products?

When an own brand product is in direct competition with a branded one, like the nappies pictured, the supermarket will try to convince us that their (usually) cheaper product does "just as good a job". It uses tricks such as the following to promote similarity between the different products:

• Placement. Own brand goods are often placed right next to branded ones, and often in the best position ("eye-level is buy-level").
• Colour. The pictures of the nappies above are a textbook example of a supermarket copying the colour of the market leader. Colour is of huge importance in our brains, and colour schemes are nicked wholesale from the branded goods.
• Emotional intent. There is a picture of a smiling baby on every pack of nappies in the store (the one exception is a line of uber-cheap Tesco nappies, occupying a tiny section of the bottom shelf).
• General aspects of design. For example, the number of nappies is on the bottom right corner.
• Packaging. Both types of nappies come in similar plastic packaging, and are of similar size.

Thus supermarkets use psychology and behavioural economics in an attempt to persuade that their product is just as good.

Does that make us fools for buying own brand goods??

No. Well, not necessarily. The own brand stuff may genuinely be just as good, or even better. Remember, branded goods are constantly trying to keep you loyal. They do not like it when you try out the competitors - they might be better!

Conclusion?

Be rational.

Realistic conclusion?

At least try to be aware of what shops and suppliers are trying to make you feel, think and do.

How??

Know some behavioural economics!