Worth of Stuff, Part II: What Really is the "Best"?

Countless number of times I hear people go on and on to justify why they buy only brand-name "XXX," or go to this or that restaurant. Most of the reasons revolve around the "best." People buy certain brands of cars because they are "safer" or "more reliable." They buy certain types of brand-name foods because they "taste better," without even venturing out to try the store brands or private labels. Sometimes such decisions are worth it, but many times they are not—this week we will focus on the "they are not" portion.

To illustrate our point this week, take a moment and watch this short video. Be warned, there is some strong language placed here and there, but overall the main point takes a look at how people interpret the expense of items (and a marketing department's power of suggestion).

If you decided to skip the video it basically analyzed consumer's perceptions of what is considered to be the best, which is often in the mind. Confounding evidence in the video could have shown that people didn't want to look uncultured in such a "cultured" restaurant, but that's not a reason to overpay for crap concentrate.

When I was a student at Georgia Tech, we ran an investment club and I performed an experiment where people were given name brand soda, and cookies compared to the Kroger store brand version and had them rate the products based on taste. (Our budget was somewhat low, so we worked with what we had). Most chose the private label (store) brand over the national brand or had no preference toward the name brand. Yet, few could be convinced that buying private labels is worth the financial savings.

Now don't get me wrong—some brand names deserve their respect. Take cookouts for instance. I can definitely tell the difference on something like aluminum foil—Reynolds's Wrap tends to be a more superior product versus er.."Wrap-It" Foil. You can usually tell when you get to the grill and the integrity of the foil fails under heat. However, there is no real difference between condiments, relish, plastic utensils and cups, etc. Buying brand names for such products when having a large event can definitively dent your budget if you're not careful. The purpose is not to be "cheap," but to know a quality product when you see it and to know if it's worth your money.

Next week, we conclude our analysis of the "Worth of Stuff" by analyzing why people think that store brands are usually better, and we suggest ways to choose store brands and private labels designed to save you money without losing quality. See you next week.

Store Up on Your Savings!

Hi Readers,

This week I've decided to tackle an "everyday" situation we face every day. Let's take a typical example--going to the grocery store. There are many of you out there that are anti- store brand types and there are some out there giving it the old College Try. I fall in the latter category and wanted to put up a few points for you to consider on your next visit to your grocery store.

- Although in many cases people claim to "know" their national brands and so claim a clear preference for them, a 2005 double-blind taste study found the opposite was true in many cases:

Testers (80 percent of whom claimed to "regularly" buy national brands) said snack foods were almost a toss-up, although store-brand chocolate-chip cookies got the nod, 56 to 44 percent, and national-brand potato chips topped the store brands, 53 to 47 percent.

What about the Quality? And what could this mean from a cost perspective?
What's stunning is that people are completely unwilling to try store brands because of upbringing, and misinformation about how the store brands and how their products are made.

Generally, the store brands are made by smaller manufacturers who use the same techniques and formulas. For example, think about orange juice. If you could buy juice concentrate from the same place as the big guys, and you can make the same type of product line as the big guys and get it to a grocery store with virtually no advertising expenditures, you can splurge a little on the packaging and undercut the national brand at the shelf. It's happening in large numbers.

A University of California, Davis, Graduate School of Management analysis published last winter in the Journal of Product & Brand Management found that for the one out of four product types (from tuna to soap to instant coffee) in which the store brand was higher in quality than the comparable national brand, the national brand cost 30 percent more.

Store brands have come a long way indeed. When I was little, stores generally seemed to have taken a very lax approach to presenting their product next to the Big Guys. I could see why people would shun the black-and-white box Honey Round-Os when compared to the Honey Nut Cheerios in the crisp honey and gold colored box. At some point though, the private labels decided to take a more forward position in their products and are now being rewarded.

In closing, I would urge you to consider experimenting with store brands and other private labels in the stores. Try substituting your garlic bread for the Kroger brand. Try the Wal-Mart Honey Nut Spins, Publix Orange Juice, or the Pathmark Chips. If you don't like it, you can switch back. You could really make a good dent in your shopping bill.

What do you all think? Share your experiences (positive, negative, etc.) with the brands you've tried at stores near you. Perhaps there are more of you out there than you think.