How Strong Is Brand Loyalty?
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 Despite the growth of private-label brands, research by Cotton Incorporated (the Lifestyle Monitor™ and additional proprietary research) points to relatively low brand loyalty on the part of U.S. shoppers. In general, individual consumers own many different brands of clothing and show a proclivity to consider style, fiber, and price over brand name. One exception to this general finding is in men's bottomswear, which appears to enjoy greater brand loyalty than other men's and women's apparel categories. Nonetheless, men do seek out different brands even in products such as denim jeans, of which they own an average of four brands. As men age, they tend to own fewer brands of denim jeans: men aged 16 to 19 own 5.7 brands on average, while men aged 56 to 70 own 2.6 brands. The tendency of both men and women to buy fewer brands as they age is directly related to the decline in their apparel purchases. U.S. consumers embrace a diversity of brands, not just individually, but collectively. In the Lifestyle Monitor survey, consumers were asked to indicate their favorite brand of clothing. The brand named most frequently was mentioned by only 16% of consumers.
The relatively low brand loyalty in many apparel categories suggests one possible explanation for the recent growth of private-label brands—it is driven less by success in cultivating and maintaining consumer loyalty than by the need to manage supplychain costs. Another explanation for the growth is more familiar—private labels have been more likely than their national-brand competitors to be sold at markdown. The share of private-label products sold at discounted prices in the first 10 months of 2003 was 68%, compared with 64% for national brands. Among the major retail channels, the percentages of both national-brand and private-label apparel sold at discounted prices were largest at department and specialty stores and smallest at mass merchants. Nonetheless, even though mass merchants are known for low regular prices, they marked down more than half of all the apparel they sold.
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So how has branding, both private-label and national, fared as a marketing strategy to beat the climate of price deflation? Not so well. Recent research conducted by Cotton Incorporated examined the performance of the top brands in selected apparel categories by measuring changes in the “brand premium” over time. The brand premium is defined as the difference between the average retail price of a branded apparel product and the overall average retail price for that apparel category. The brand premium is positive for a branded product with an average price above the market average, and it is negative for a brand with an average price below the market average. In our study, we looked at unit prices and brand premiums for 1995, 2000, and 2002, using an index scale where the average retail price for a product equals 100.
Measurement of brand premiums over this eightyear period gave some startling results. In the category of women's tops, only 6 of the 30 leading brands increased their brand premium, and 10 lost premium, with the largest declines among the higher-priced brands. The remaining 14 brands experienced no net change in brand premium. An analysis of the men's and women's denim jeans market revealed a similar pattern. None of the top 19 brands of men's jeans increased their brand premium, and the premium for 11 brands declined. In women's denim jeans, none of the top 19 brands increased their premium, and 14 lost premium.
The failure of brand premiums to increase was accompanied by another interesting phenomenon: the “premium range”—the spread between the highest positive premium and the lowest negative premium—narrowed from 1995 to 2002. In women's tops, the premium range narrowed by 48% for women aged 25 to 34 and by 14% for women aged 35 to 44. In denim jeans, the premium range narrowed by 45% for men and by 30% for women.
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These research findings not only validate the price pressures at retail, but also raise the question of whether—and how—a brand can maintain a positive price premium. If a brand is forced to compete simply on the basis of price, its price will decline towards the “market center,” or average retail price. In other words, brands that engage in price competition to gain market share will almost inevitably lose their brand premium advantage over time. Once lost, a premium appears to be difficult, if not impossible, to regain—a pattern we refer to as the “black hole theory of brands.” Like a black hole in space, brands that collapse into the market center will find it difficult to escape the mass of brands competing on the basis of price.
 How can brands avoid losing premium and falling victim to the black hole? One obvious answer is for a brand to resist diluting its premium through discounting or marketing in too many different retail channels. Once consumers see a brand offered simultaneously at different channels, such as department stores and mass merchants, the ability to maintain a positive brand premium may be fatally compromised. A better strategy is to introduce a different brand name, perhaps affiliated with the original brand, but with enough independent brand identity so that consumers and retailers can differentiate products. Without differentiation, apparel products will compete largely on the basis of price.
Another strategy for preserving brand premium focuses on emphasizing the non-price attributes of the brand. Attributes such as packaging, labeling, and customer service can enhance a brand image without compromising the brand's retail price. Retailers and brands need to look for ways to enhance the perceived value of apparel products to consumers through product improvements or by emphasizing products' attributes that consumer research demonstrates are important to the purchase decision—such as style and fiber content.
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