A Positive Theory of Private Label: A Strategic Role of Private Label in a Duopoly National-Brand Market

This article offers an economic rationale for national brands to provide private labels to their retailers. We build a game-theoretic model that analyzes the interactions among two national brand manufacturers and one common retailer. In an interesting strategic role, the private label mitigates the promotion competition between the two national brands and provides benefits for all three members in the channel. Our analysis shows that offering a private label can be a credible commitment from a national brand manufacturer that it will not engage in promotions and decrease the incentive of the national brand rival to engage in promotions. In this way, we attempt to provide a reason for why national brand manufacturers provide retailers with private labels in practice. In addition, we discuss the optimal quality level of private labels.     

Analyzing the effects of private-label supplier disclosure on retailer image

Private-label retailers' disclosures of dual manufacturing agreements—that is, agreements with manufacturers that produce both their own national brands and private labels—can affect the images associated with the retailers. In this study, an experiment reveals moderating effects on retailer images, according to the images of both the national brand manufacturers and the retailers; and also depending on the brand equity of the private label. A low-image retailer's disclosure that a national brand manufacturer supplies its private label causes consumers to perceive that the retailer has a higher image. However, the positive effects of private label supplier disclosure on the retailer's image are weaker when the private label enjoys high equity.     

Consumer attitudes and loyalty towards private brands

Private or store brands improve the efficiency of consumer decision making by offering equivalent quality products at lower prices. The present study evaluated consumer attitudes towards private brands with the goal of understanding their appeal in order to enhance efforts to convince more consumers to buy them. We used three samples (ns = 279, 245 and 305) of US consumers to compare attitudes of buyers of private and national brands in three product categories: orange juice, cereal and bottled water. The results show that private label buyers (23% of orange juice, 6.5% of cereal and 14% of bottled water buyers) consider brands themselves to be less important and private brands to offer better performance than do national brand buyers. When asked about specific brands, national brand buyers tended to be price insensitive towards national brands, and private label buyers price insensitive towards store brands. In addition, the national brand buyers saw some of the national brands to be more relevant to their lifestyles and needs, but the private label buyers saw the private labels the same way. Being relevant to consumers' lives appears to influence brand selection. Besides touting lower prices, private brand promotions might stress the equivalent performance of private labels and create promotions showing how these brands can be relevant to consumers' lifestyles and needs.     

Coupons and private labels: A cross-category analysis of grocery products

This article examines the influence of coupons on private label shares of grocery products. The impact of national brand and private label coupons, distributed by manufacturers and retailers, is examined. A consumer framework and a typology of coupon effects are developed to explain different types of coupon usage behavior. Aggregate scanner panel data on 480 product categories are used in the analysis. Both the type of coupon and the method of distribution (by manufacturer or by retailer) are found to be important determinants of private label share response. Couponing activities by the national brand manufacturer are negatively related to private label share, thus indicating that they may be effective deterrents of private label penetration. However, couponing activities related to private labels do not help increase private label shares. The surprising finding is that national brand store couponing activity is positively related to private label share.     

Effects of intra-brand competition between private labels and manufacturer brands: Empirical results from the Italian market

A proliferation of private labels in European food retailing has been evident for several years now. The purpose of this study is to analyze the impact of competition between manufacturer brands and private labels on assortment and pricing practices by Italian grocery retailers. Previous studies emphasized both pro-competitive and anti-competitive effects of private label development. In this study, within an empirical analysis based on scanner data from Symphony IRI Group, all fast moving consumer goods product categories are investigated over a period of two years (from September 2008 to September 2010). The empirical results indicate that in Italy there is no clear and strong evidence of decreases in manufacturer brands' assortments, prices, and turnover caused by a proliferation of private labels. In particular, analyzing at the same time all categories and all retailers' data in the Italian Market there is not much evidence for the existence of a strategic trade-off between manufacturer's and retailer's brands.     

Beyond brand loyalty: Brand sustainability

Historically, measures of brand value have focused on brand awareness, customer brand equity and measured brand loyalty. While useful, these generally provide little visibility for the future of the brand. A new measure, brand sustainability, is proposed, described and illustrated. Drawing on over 1 million responses to online customer questionnaires, over a 10-year period, covering brands in 73 FMCG product categories, we create, illustrate and demonstrate a brand sustainability measure. That measure consists of brand share of preference, a calculation of their average annual growth rate. That is then compared to the consumer-stated no brand preference in that category. Net promoter scores are used to support those calculations. Findings show that manufacturer brands are challenged, not by private label, but by no brand preference in the category. Research suggestions are made on how to develop and use brand sustainability and the impact of that measure on future brand growth and development.     

The Effect of Product Innovation,Promotion, and Price on Consumer Switching to Private Labels

The channel conflict that exists between retailers and manufacturers of branded products has dynamically shifted as large retailers have expanded their offerings of private label products. This study investigates the ability of consumer packaged goods companies to exert influence in the channel by testing which marketing initiatives implemented by manufacturer brands are more efficient in preventing consumer switching to private labels. We use a hazard model to simultaneously measure the effects due to product innovation, promotion, and price on consumer switching and how strong those effects are. We find that as expected product innovation, promotion, and price exert a negative effect on the consumer likelihood of switching to private labels. However, we find the strongest effect on promotion suggesting the importance of understanding how consumers perceive value in the national brands offer.     

Understanding retail branding: conceptual insights and research priorities

With the growing realization that brands are one of a firm's most valuable intangible assets, branding has emerged as a top management priority in the last decade. Given its highly competitive nature, branding can be especially important in the retailing industry to influence customer perceptions and drive store choice and loyalty. We integrate lessons from branding and retail image research to provide a better understanding of how retailers create their brand images, paying special attention to the role of the manufacturer and private label brand assortment. We also highlight some important areas that deserve further research in the form of three sets of research priorities.     

The moderating effect of average wage and number of stores on private label market share: A hierarchical linear model analysis

Existing research on private label market share is primarily in the context of the Western market. The Chinese market context research is scarce, although private labels are developing rapidly in the past several years. This study investigates how the average wage and number of stores affect the Chinese market's private label market share. More importantly, this paper examines the moderating effect of the average wage and the number of stores on the relationship between the private label market share and product assortment as well as the relationship between the private label market share and pricing. Data collected from a Chinese supply chain dyad is analyzed to study category management using hierarchical linear models. The results reveal that the average wage and the number of stores positively affect the private label market share. Furthermore, the average wage enhances the negative effect of the number of brands, weakens the negative effect of the private label price, weakens the positive effect of national brand price. Meanwhile, the number of stores enhances the positive effect of the SKU proliferation of private label, enhances the negative effects of the number of brands, and enhances the negative effect of the private label price. This study contributes to category management. Furthermore, the findings will be valuable to domestic and international grocery marketers and retailers operating private labels in China.     

Consumer Willingness to Pay for Local Designations: Brand Effects and Heterogeneity at the Retail Level

This study examines consumer willingness to pay (WTP) for packaged ice cream with local, private label, and national brands at the retail level. Data were collected through in-person surveys conducted at retail grocery outlets in Utah in 2012. Study results suggest that shoppers are willing to pay significantly more for the national and local brands over the retailer’s private label brand. In fact, the local brand with the state-sponsored designation (Utah’s Own) had a WTP equal to that of the national brand. The use of local designations or labels is important as shoppers were not willing to pay a premium for the local brands in absence of the locally produced or state-sponsored designation label. Additionally, consumer WTP for different brands and the degree of response to local designations varies substantially by consumer attributes. These differences suggest that locally designated products do not compete directly with private label products in the market. This study provides clear evidence of the value of state-sponsored designations, as well as locally produced labeling for food products marketed in a traditional retail setting.     

Offering value and capturing surplus: A strategy for private label sales in a new customer loyalty building scenario

The competition between private label brand and national brands in the diaper category is investigated from the view of the private label brand manager. In this category, new customers routinely enter the category buying entry-level diaper sizes (for infants) and then progress to buy larger diaper sizes over time (as their child grows older). Thus, consumer comparisons between the private label brand and national brands are focused on single diaper sizes during any single purchase scenario. Because private label brands are known to suffer from low quality perceptions that often understate the true quality levels of private label brands, this paper advances a pricing strategy to optimize private label performance in the category. The private label brand should price significantly low for small diaper sizes (maintaining a sizeable price gap from national brand competitors). Then, in most cases, the private label brand should shrink the size of this price gap for large diaper size offerings. This strategy will successfully offer initial value to new customers, build private label brand quality perceptions and loyalty, and then capitalize on these gains through higher dollar sales in the late stages of the customer relationship. The price gap shrinking strategy is found to be generally effective, but high national brand competition and too high of an initial price gap diminish the effectiveness of the strategy.     

Private label personality: applying brand personality to private label brands

Private label brands (PLBs) are an important facet of the retail offering within the supermarket sector. Although research has focused on the risk factors of private label purchasing, there has been little research that explores the brand management of private labels including the development of a brand personality. In this study, we investigate how the Aaker brand personality scale applies to a PLB available in two different retail chains and examine its effect on customer attitudes towards private label quality. A factor analysis of these brand personality measurement items shows that five dimensions, confidence (a new dimension), sincerity, ruggedness, excitement and competence are relevant for PLBs. Although much of the original Aaker scale was included in the analysis, one factor, sophistication, was not evident. A regression analysis shows that all private label personality dimensions influenced the private label quality measure with the confidence and sincerity dimensions having the greatest impact.     

Are they always promising? An empirical analysis of moderators influencing consumer preferences for economy and premium private labels

The identification of conditions under which premium or economy private labels are more promising from a consumer perspective is of high managerial relevance. This paper is first to analyze the moderating impact of store-, category-, and private label-characteristics on consumer preferences for premium vs. economy private labels. The results reveal that premium (economy) private labels are more preferred at high-priced (low-priced) retailers and in categories of high (low) brand relevance. However, consumers' believes whether the private label is produced by a well-known manufacturer or the retailer itself do not moderate consumer preferences for premium vs. economy private labels.     

Will they return? Getting private label consumers to come back: Price,promotion, and new product effects

Using a hazard model specification with two years of consumer panel data, this study simultaneously quantifies the effects of price gaps, non-monetary promotions, and new products on consumer switching from private labels back to manufacturer brands. The research focuses on the switching phenomena, rather than choice, such that time is a relevant variable. According to the results, non-monetary promotions and new products are more effective for recovering consumers than price gap reductions. These findings underscore the importance of understanding how consumers perceive the value of manufacturer brands.     

Private labels ain’t bona fide! Perceived authenticity and willingness to pay a price premium for national brands over private labels

Abstract

As private labels are consolidating their gains in national markets, a conventional recommendation to national brand manufacturers would most likely be to invest more in marketing in order to increase the perceived quality gap between national brands and private labels. It is assumed that the quality gap would boost consumer willingness to pay a price premium for national brands over private labels. Differing from this conventional approach, the current study focuses on the perceived authenticity gap between national brands and private labels, to explore whether and how this factor influences the effect of marketing and manufacturing variables on willingness to pay. This relationship is relevant in milieus where consumers might take brand authenticity rather than quality perceptions to guide their brand evaluations. The current study finds that the perceived authenticity gap mediates the effect of only some particular conventional marketing tools on willingness to pay. The study suggests that national brand managers should take the presence of private labels in the national markets as an opportunity to exploit the dynamics of authenticity evaluations, rather than as a threat.     

Private label positioning: Quality versus feature differentiation from the national brand

This paper investigates the retailer's problem of positioning her private label against two national brands in terms of both product quality and product features. Using a demand function derived from consumer utility, we show that the private label's best positioning strategy depends on the nature of the national brands’ competition and its own quality. When the national brands are differentiated, a high quality private label should position closer to a stronger national brand, and a low quality private label should position closer to a weaker national brand. When the national brands are undifferentiated, the private label should differentiate from both national brands.     

Private labels versus national brands: The effects of branding on sensory perceptions and purchase intentions

Consumers increasingly consider private labels to be as good as national brands. This research raises the question of whether national brands and private labels equally affect consumers’ sensory perceptions and purchase intentions. The results of two studies show that consumers reverse their evaluation of private labels (vs. national brands) when tasting the product in an informed (vs. blind) condition. When consumers are not aware of brand names, they indicate better taste and higher purchase intentions for private labels. However, the opposite is true when they try products in an informed condition. We discuss the implications for private labels and national brands.     

商店忠诚、自有品牌态度及其购买意向的关系研究——消费者交易倾向和产品社会可见性的调节作用

文章探讨商店忠诚、自有品牌知识对自有品牌态度的影响,以及自有品牌态度对购买意向的影响,并考察消费者交易倾向和产品社会可见性对上述关系的调节作用。研究发现,自有品牌知识和商店忠诚对自有品牌态度都有正面作用,交易倾向正向调节自有品牌知识对自有品牌态度的影响,负向调节商店忠诚对自有品牌态度的影响;自有品牌态度对自有品牌购买意向有正面作用,产品的社会可见性负向调节这种影响作用,质量易评估性的调节作用缺乏显著性。     

Defensive strategy against a private label: Building brand premium for retailer cooperation

We build a game-theoretic model of price competition between a national brand manufacturer and a retailer that also sells its private label. In particular, we examine a national brand's strategy of building brand premium in the context of channel coordination. The importance of national brand's brand equity has been well-documented in many empirical and behavioral studies. We reinforce the argument that building brand premium should be the first line of defense for a national brand instead of aggressively cutting wholesale price. Not only does the national brand manufacturer benefit from it, but also the retailer who sells both the national brand and its own private label has less incentive to promote the latter. Therefore, it can induce retailer cooperation, which is essential for a successful strategy in a distribution channel.     

Consumers’ choice of private label considering reference price and moderating effect

Retailers frequently place private labels (PLs) next to the top-moving sales national brands (NBs) and utilize comparative pricing that is related to the national brands. There is thus always an external reference price between the private labels and the national brands. In this study, two categories of products were selected, and a hierarchical non-linear model used to study the impact of external reference prices on consumers’ choice of private labels. In addition, the effects of package size and average disposable income (ADI) were introduced into the analysis for the relationship between external reference price and consumers’ choice of private label. The findings show an inverted U-shaped curve between consumers’ choice of private labels and the external reference price discrepancy. Consumers in areas with high ADI are more likely to buy private labels. Package size and ADI have different direct and moderating effects on two categories of products. This study contributes to reference dependence theory and category management.