Know-How Exchange : Customer Behavior

It depends on whether you make more money on the parent brand or the private label. I would price the private label product so that your penny-profit per pound is the same as the branded product. That way you wouldn't care if there was any cannibalization or not.

If you spend a lot of money supporting the parent brand, and it's a clearly recognized superior and distinctive product, then you might not want to price the private label product very aggressively. You'd prefer to build your brand.

Why are you introducing the private label product to begin with? Is it a trade pressure thing, or is it part of a broader distribution strategy? Are there multiple consumer segments, and you're trying to have an entry that will appeal to each segment?

All of these factors should be considered. There isn't a simple answer -- like price it 10% lower, or anything else. I was even involved in a situation where there was a PREMIUM price on the private label brand ... because the manufacturer didn't really want anything competing with the parent brand unless it was more expensive at retail.

We can probably be more helpful if you can share more details with us. If that's not in the cards, you can contact me privately and I'll see if I can help.