Private labels a threat to legacy brands, says Interpublic Group MD Terry Peigh

Updated: October 1, 2019 7:04:45 AM

Even though audit firms and management consultancies are increasingly strengthening their portfolio by building capabilities to address the marketing needs of clients, Peigh believes that advertising networks such as IPG do not have much to worry about.

From a talent perspective this collaborative culture demands individuals who have a “renaissance point of view towards marketing”, Peigh adds.

By Venkata Susmita Biswas 

Legacy brands will need to quickly rethink their strategies to compete with the rising popularity of private labels from both retailers and e-commerce companies. A global study by FCB titled New Consumers, New War, New Rules highlights that private label brands are growing three times faster than branded products in some markets.

Spearheading the report, Terry Peigh, MD, Interpublic Group (IPG), further says that legacy brands are particularly under threat because millennials, unlike older generations, don’t perceive private labels to be cheap or of poor quality. “In fact, in many cases private labels have shed their negative image and are more premium than regular brands,” Peigh tells FE. As compared to consumers in cou-ntries like the US, China, Russia, Brazil and South Africa, Indian consumers are the “most satisfied” with private label brands.

Peigh points out that traditional brands are ill-prepared to take on private labels and that they can try to win this battle by creating new experiences to drive engagement and make specialised offerings backed by innovation.

The findings of the report suggest that influencer marketing, which has become an integral part of a brand’s marketing plan, has to be reevaluated. Consumers now understand that influencers are being paid to speak on behalf of the brand, and therefore “their influence is not rooted in real product knowledge”, says Peigh.

Interestingly, there has been a 20% drop in the number of consumers buying products based on recommendations from influencers they follow online.

The growing concern about the truthfulness of social media messaging has led to a major trust dip in news and information shared via social media. Brands are grappling with finding a genuine influencer, which is prompting them to go for ‘nano influencers’, who are people with follower counts lower than 5,000. Since many of them don’t even get paid to advocate on behalf of the brand and work on the basis of a barter system, their recommendation is perceived to be more genuine.

In addition to nano influencers, brands also need to consider enlisting their employees as advocates of the brand, Peigh suggests. “Companies also need to worry about what consumers say to each other about products. Because the most powerful marketing vehicle is person-to-person communication,” he says. “Globally, people are losing trust in the media and are, instead, finding information from people they know to be more trustworthy”.

Weighing in on whether or not brands should take a stand on social and political issues, Peigh notes that consumers across the world have more faith in brands over governments, to make progress on social issues. “As people are questioning the power of governments and other formal institutions to address problems, they are looking at brands to help accomplish large social changes. But this has to be authentic, because too many brands are attaching themselves to social causes to check a box,” Peigh says.

Even though audit firms and management consultancies are increasingly strengthening their portfolio by building capabilities to address the marketing needs of clients, Peigh believes that advertising networks such as IPG do not have much to worry about. Commenting on one of the most recent high profile acquisitions of advertising agency Droga 5 by Accenture, Peigh shares his scepticism, “Buying out a small agency is not the same thing as agencies like IPG’s FCB, Lowe Lintas or McCann Erickson. Time will tell how long a highly creative enterprise can live within the world of Accenture”.

At a time when IPG’s competitors across the world, including the WPP group, are focussing their efforts on simplifying organisational structures, merging agency brands and breaking down silos that were created within agencies, Peigh says that IPG believes in an open architecture model that encourages collaborations across agencies. “We don’t strip people off their employment from an agency and put them in a new team. We have realised that keeping people at their home agency keeps them motivated,” he says. “No exceptionally talented person wants to work for a team; they want to work for an agency brand.” From a talent perspective this collaborative culture demands individuals who have a “renaissance point of view towards marketing”, Peigh adds.

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