Business Report The modern times are regarded as the era of increasing reliance on brands and marketing, however generic products are still not an obsolete concept, as according to primary research conducted by North Star in order to explore the market and create a feasibility report, this market holds a potential to be tested and profited from. Other firms in this business sector have benefited greatly, and hence it is worth taking the risk. The results of the mail survey conducted by North Star in August are as follows: Question All Consumers Largest Consumers Have you purchased a food generic product (such as canned fruit and vegetables) in the last month 36% Yes 64% No 29% Yes 71% No Was this the first time you had purchased a food generic product 18% Yes 82% No 20% Yes 80% No Have you purchased a non-food generic product (such as paper towels or soaps) in the last month 60% Yes 40% No 59% Yes 41% No Was this the first time you had purchased a non-food generic product 5% Yes 95% No 7% Yes 93% No When these consumers were inquired about their likely reaction to certain generic products at being offered 30% saving is as follows: Product YES (%) NO (%) DON’T USE (%) Bar of Soap 43 57 0 Deodorant 31 67 2 Ammonia 80 10 10 Chili 34 52 14 Canned Ham 19 44 37 Frozen Vegetables 54 39 16 This response indicates that the market for non-food generic products is stronger and more reliable than food generic products, since the people are already familiar with the product as 59-60% consumers state that they already purchase non-food generic products as compared to 29-30% for food generic products, and furthermore approximately 93-95% state that it is not the first time they have purchased non-food generic products while 80-82% have purchases food generics more than once.
However, this does not indicate that all non-food generics would be successful or all food generics would suffer disappointment, because further breakdown into products shows that the non-food items produced by North Star are not all likely to get a positive response, even after being offered a 30% price reduction, a bar of soap is likely to be purchased by 43% consumers, deodorant is further less at 31% only, however ammonia has the possibility of being purchased by 80% consumers.
When considering food items, the frozen vegetables gained a relatively better response and thus stand at 54% respondents answering affirmative.
Furthermore, personal observation of 20 arbitrarily selected supermarket chains depicted that the distribution channel would not be a problem, since 39 stores stocked generic products, and a high proportion of 37 out of these 39 stores currently stocked 100 or more generic items, this is also substantiated by Edward and McCleary who state that 86% stores nationwide (Rauch and McCleary, 2005, 119), and since the market share of generic products shows a positive trend as obvious in the Figure 1 below, the market of generic products shows a sharply positive trend for the 6 goods produced by North Star (Gary, 2007, 1027-1030): According to this trend and H.
R. Nolan the tendency of large manufacturers considering the option of producing generic products has increased significantly, either because of the growing market or idle capacity which could be utilized for the creation of non-brand commodities (Nolan, 2006, 35). Furthermore, the future prediction of observers’ state that this trend would move up to 25% in the coming five years, and this is an astronomical increase which could not be ignored if the firm is looking for market growth opportunities (Rauch and McCleary, 2005, 120).
In addition, the supermarkets have also recognized this increasing trend, and have thus started to allot increased space on shelves to generic and non-brand products (Rauch and McCleary, 2005, 119). In order to further check the feasibility of transition to this sector of business, secondary research also provides data which could help North Star immensely. Generic products is not an unexplored market when it comes to larger firms, renowned companies like ‘Alcoa’ which earns a good name owing to their specialty ‘Reynolds’s wrap aluminum foil’ and ‘Chicken of the Sea’ which is known for their canned tuna are also an established name in the production of generic commodities (Consumer Affairs, 2005).
Studies reveal that despite the dramatic increase and potential in this market, there is still a long way to go for it to become a common purchase for consumers, and it has been found that standardized goods receive a better response from consumers as compared to differentiated products (Prendergast and Marr, 1997). Therefore, North Star should focus on the production of standardized goods, as also obvious through primary research that main area of focus should be Ammonia and Frozen Vegetables, which got the greatest positive response, both these goods are standardized, and are thus likely as a start off.
It would help North Star to evade the costs of advertising which are incurred when branding and marketing the product. The main target of North Star should be budget conscious consumers, especially in the contemporary times of deepening economic recession, when incomes are low and consumers look for better quality products of low prices, hence catering to this market would be beneficial, in addition if the generic products are of good quality, then it would attract the consumers who focus more on quality than branding (Shaw, 2002).
As an initial step, the main focus of the company should remain the production of Ammonia and Frozen Vegetables, however this does not suggest that the other goods in the product range should be ignored, the market for the generic production of the remaining four commodities should be undertaken, since the growing market entails that the purchase of generic products gives an opportunity to consumers to improve living standards while keeping the budget low (Peters, 2010), and if North Star takes advantage of this opportunity in time, then it would translate into profits and sustenance for the company.
Works Cited Consumer Affairs. Store Brands Offer Competitive Quality, Study Finds. 2005. July 3rd 2010 Gary, IN. 2007. Hammond’s Market Reports Nolan. H R. No-Name Brands: An Update. 2006. Supermarket Management Prendergast. G P and Marr. N E. Generic products: who buys them and how do they perform relative to each other? .
1997. European Journal of Marketing, 31, 2, 94 - 109 Rauch. E J and McCleary. P G. National Brands to play a bit part in the future. 2005. Grocery Business Shaw. M. Marketing brand vs. generic products. 2002. July 3, 2010