Interplays between manufacturer advertising and retailer store brand introduction: Agency vs. wholesale contracts

In retail supply chains, manufacturers' advertising for national brands and retailers' store brand introduction may relate to each other, and two types of contracts, i.e., agency contract and wholesale contract, are widely used. This paper uses game-theoretic models to investigate the strategic interaction between a manufacturer's advertising strategy and a retailer's store brand introduction strategy. We derive the equilibrium outcomes, including wholesale price, retail price, market demand, retailer's and manufacturer's profits under different contract forms. We find that when the product cost is small relative to the perceived value of the store brand, the introduction of a store brand will benefit the retailer. The retailer is more likely to introduce store brands under the wholesale contract than under the agency contract. In addition, compared with the wholesale contract, the agency contract may increase both the manufacturer's and the retailer's profits and lead to Pareto improvement for them.     

On manufacturers complementing the traditional retail channel with a direct online channel

With the explosion of the Internet and the reach that it affords, many manufacturers have complemented their existing retail channels with an online channel, which allows them to sell directly to their consumers. Interestingly, there is a significant variation within product categories in manufacturer's use of the Internet as a direct distribution channel. The main objective of this study is to examine the strategic forces that may influence the manufacturer's decision to complement the retail channel with a direct online channel. In particular, we are interested in answering the following questions:

1. Why is it that in some markets only a few firms find it optimal to complement their retail channels with a direct Internet channel while other firms do not?
2. What strategic role (if any), does the direct Internet channel serve and how do market characteristics impact this role?

To address these issues we develop a model with a single strategic manufacturer serving a market through a single strategic retailer. In addition to the focal manufacturer's product the retailer carries products of competing manufacturers. Consumers in this market are one of two types. They are either brand loyal or store loyal. The retailer sets the retail price and the level of retail support, which impact the demand for the manufacturer's product. The retailer's decisions in turn depend on the wholesale price as well as the Internet price of the product if the manufacturer decides to complement the retail channel with an online channel. Our analysis reveals that the optimality of complementing the retail channel with an online channel and the role served by the latter depends critically upon the level of support that the retailer allocates to the manufacturer's product in the absence of the online channel. The level of support allocated by the retailer, in the absence of the online channel, depends upon the retail margins on the manufacturer's product relative to that on rival products in the product category. When the size of the brand loyal segment is small relative to the size of the store loyal segment then in the absence of the online channel, the manufacturer can lower wholesale price and enhance retail support, especially when the retail margins on the rival products are low. In contrast, when the size of the loyal segment is large and the retail margins on rival products are high the manufacturer will find it more profitable to charge a high wholesale price even if that induces the retailer to extend low levels of support. If the manufacturer decides to complement the retail channel with an online channel, some consumers who would have purchased from the retailer might prefer to purchase online. Our analysis reveals that when consumers' sensitivity to price differences across the competing channels exceeds a certain threshold it is not optimal for the manufacturer to complement the retail channel with an online channel. However, this price sensitivity threshold itself depends upon product/market characteristics, suggesting that manufacturers seeking to complement their retail channels with an online channel should look beyond the nature of threat the online channel poses to the retail channel in devising their optimal distribution strategies. When the retail margins on rival products are sufficiently small, complementing the retail channel with an online channel when optimal allows the manufacturer to price discriminate and enhance profits. In contrast when retail margins on rival products are sufficiently high, complementing the retail channel with an online channel serves to enhance retail support. We also identify market conditions under which profits of both the manufacturer and the retailer are greater with the online channel than that without it. This is particularly interesting since the online channel competes with the retail channel.     

Advertising Repetition as a Signal of Quality: If It's Advertised So Much,Something Must Be Wrong

Abstract

The author proposes that consumers infer brand quality from the level of advertising repetition for unfamiliar brands. Consumers are posited to associate high product quality with high levels of repetition because they see repetition as costly and think higher costs reflect the manufacturer's commitment to the product. However, at very high levels of repetition, consumers may perceive the expenditures as excessive and begin to doubt the manufacturer's confidence in product quality, which would lead to an inverted-U relationship between advertising repetition and product quality perceptions. The author demonstrates that the relationship between repetition and perceived brand quality is mediated by perceptions of the manufacturer's effort and confidence in quality rather than by irritation or boredom. The hypotheses were tested in an experiment in which the level of repetition and the color of the ad were varied.     

The Contingency Effects of Supplier Influence Strategies and Their Implications for Retailer Cooperation

Abstract

The success of manufacturers' consumer marketing programs often hinges on whether they are implemented at the retail level. Manufacturers use various influence strategies to persuade retailers to adopt their marketing programs. We investigate how well those influence strategies shape the retailers' positive attitudes toward their suppliers' marketing programs. We find that the effectiveness of those influence strategies depends upon the extent of uncertainty in the retailers' market. We also find that the manufacturer's investment in specific assets to support its relationship with the retailer strongly affects the retailer's attitude toward the supplier's programs.     

Country of Origin Association in Retail and Wholesale Branding

ABSTRACT

The purpose of this article is to consider country of origin in terms of its association with brand heritage and its implications in fashion branding, thus providing a new perspective within the context of retail and wholesale brands. This qualitative study demonstrates how country of origin is widely used as a communicative tool by retail and wholesale brands, associated with brand heritage. However, the way country of origin is manifested and/or associated (e.g., brand name, color, etc.) varies depending on a brand's history, positioning, brand value, and the type of market sector that the retail and wholesale brands are targeting.     

The strategic implications of clarifying how marketers interpret “brands”

This paper is concerned with clarifying how brand strategies can be developed. By reviewing the evolution and rationale for manufacturer and distributor brands, it enables marketers to consider which branding route is most appropriate. Criteria to decide between being a manufacturer's brand or supplying distributor brands are addressed. To follow either of these routes the organisation must clarify its understanding of the brand asset and four broad interpretations are discussed. There would appear to be two key componenets characterising brands and through the use of a two dimensional matrix, a method to identify the type of brand and guide brand strategy development is presented.     

Determinants of Supplier Willingness to Invest in Supporting a Manufacturer's Line

Abstract

This study examines the significance of supplier's expectation of continuity of its relationship with a manufacturer, perception of manufacturer's reputation, trust in manufacturer's credibility, trust in manufacturer's benevolence, and dependence on manufacturer as determinants of its willingness to invest in supporting a manufacturer's line. Data collected from Malaysian and Korean auto suppliers indicate that expectation of continuity of relationship, manufacturer reputation, and trust in manufacturer's credibility are significant determinants of supplier willingness to invest, while supplier dependence and trust in manufacturer's benevolence are not.     

The fight between store brands and national brands—What's the score?

In the Western world market shares for store brands have increased across all product categories. The competitive position of store brands compared to national brands may depend on the product category and a retail chain's overall brand assortment strategy. In order to investigate these possible chain and category effects we have selected five chains with different store brand strategies and three product categories that differ with respect to the number of strong national brands in a category. The results we report focus on the competitive position of store brands compared to national brands from a consumer point of view. We find that store brands are in a weak competitive position compared to national brands independent of category and retail chain brand assortment strategy.     

Retail brand equity: Conceptualization and measurement

This article focuses on retail brand equity to understand where this retail brand value stems from and how to measure it. A conceptual framework is defined based on Keller's contributions about brand equity. A qualitative methodology and a confirmatory analysis enable the conception of a model. This one is tested through structural equation modeling with Path-PLS. Results show that retail brand awareness and perceived quality explain the most significantly retail brand equity. Retail brand personalities and retailers with particular managerial values have also a significant influence. Hence, the performance of retail brands depends on the same factors as those of other brands.     

Distorted competition: Below-cost legislation, ‘marges arrière’ and prices in French retailing

Abstract

The aim of this article is to demonstrate that the French Galland Act, outlawing below-cost resale via new and more severe invoicing regulation, has reduced the intensity of price competition among retailers in relation to branded goods. Moreover, the reduced intensity of price competition in the retail industry has encouraged a lessening of competition among the manufacturers of major industrial brands. Together, these two effects have sown the seeds of a sustained increase in the price of major brands, accentuating retail competition based more on differentiation than on price. These sustained policies have favoured the development of retailer brands and of hard discount stores and finally encouraged new types of reactions from major retailers and leading manufacturers, such as new types of promotions circumventing the Galland Act and a more intense lobbying activity in order to reform it.     

Achieving and Managing Global Brand Equity: A Critical Analysis

ABSTRACT

According to some experts, brand equity is a company's most important asset. In this article, the authors first study the durability of brand equity in the long run. Then they examine the maintenance of that brand equity. The study analyzes the relative position of the top 50 most important global brands. Rank correlations indicate that, in the short run, the top 50 brands maintain strong equity levels, but in the longer run, this equity dissipates. In order to empower global brands in the long run, the authors put together a general global brand strategy model that would achieve and maintain brand equity. The model has three important components: strategic action, generating brand power, and achieving sustained brand equity. Such a model could balance the success in achieving brand equity globally both in the short and long run.     

Taiwanese Retailing: Market Analysis and Retail Branding Model Application

ABSTRACT

The Taiwanese retail market is in a highly competitive stage. In the past three decades, the Taiwan retail grocery market has experienced many developments and changes, and recently, has started to realize the importance of developing its own retail brand. Although the idea of retail branding is still new in Taiwan, the major hypermarket players have tried to build up their own brand image and create new own label products which differ from other competitors. This paper explores retail branding in the Taiwan hypermarket industry through macro/micro environment analysis and applying retail branding models to the Taiwanese retail market. The macro/micro environment analysis is undertaken by the two STEPs model and the retail branding model is created from Dawson's three levels model combined with previous studies and theories. The approach in this study involves literature reviews and secondary research in the field of the Taiwanese retail market. The outcome of this study is to highlight key issues that deserve further research.     

Manufacturer encroachment with competing dual-purpose online retail platforms

This study investigates the manufacturer encroachment strategy within a supply chain composed of a manufacturer and multiple competing dual-purpose online retail platforms who value profit and consumer surplus. We examine the strategic interactions among manufacturer encroachment, platform dual-purpose concern, and retail competition. Some interesting results are obtained. First, with a single platform, the manufacturer's encroachment incentive exhibits a non-monotonic relationship with respect to the platforms' concern of consumer surplus. However, with multiple competing platforms, the increased concern of consumer surplus and retail competition intensity dampen the manufacturer's encroachment incentive. Second, manufacturer encroachment benefits platforms (supply chain) only when the platform's concern of consumer surplus is low and commission fee is moderate (low enough). Moreover, the increased retail competition intensity and the platform's concern of consumer surplus further aggravate the detrimental effect of manufacturer encroachment on the platforms and supply chain. Third, the dual-purpose concern of the platforms may hurt consumer surplus, whereas the increased retail competition intensity may contrarily alleviate this adverse effect to some extent. Finally, the profits for the platform and supply chain and consumer surplus are non-monotonic with respect to the platform's concern of consumer surplus.     

Brand and quality effects on introduction of store brand products

This paper considers a supply chain with a single manufacturer selling a national brand product via a single retailer. The retailer has the option to introduce a product under his own brand into the market with the same functionality as the national brand product. We simultaneously consider the consumer bases of the national brand and store brand along with consumers' willingness to pay for quality and the supply chain control (centralized vs. decentralized). By analyzing the game-theoretic models, we offer managerial insights about the influences of brands' consumer bases on the quality and pricing decisions of the retailer, and on the manufacturer's willingness-to-collaborate when the retailer introduces the store brand product. We find that, although it is usually easier for the retailer to introduce a product under a store brand with a large consumer base, doing so with manufacturers of well established national brands can be difficult, when the retailer often has to greatly mark down his store brand product's quality and price. We also find that a store brand product with a small consumer base shall be launched only when the supply chain is switched to a centralized control and when the manufacturer's national brand has a large consumer base. These important findings offer guidance to both national brand manufacturers and retail store managers regarding the launch of store brand products.     

Are we who we follow? Computationally analyzing human personality and brand following on Twitter

Abstract

In this study, we present a computational method for analyzing the congruence between personality of a brand’s Twitter account and the personality of their followers. We investigated attachment to brands on Twitter by computing personalities through a machine-learned computational analysis of Twitter postings rather than traditional personality tests. By studying three different brands, results revealed that on average, brand followers have personalities that are more congruent with the personality of brands they follow compared to users that do not follow those brands. Taking these findings into consideration, we discuss some considerations for advertising researchers and practitioners, as well as provide a new tool, the Brand Analytics Environment (BAE), to allow individuals without computer programming backgrounds to conduct this method themselves.     

Brand vulnerability to product assortments and prices

Abstract

The assortment of brands that a specific brand competes against varies from one point of sale to another. The competitive landscape changes further because of within-assortment price variations at each location. The joint variation in assortment composition and pricing creates a complex set of scenarios under which a brand needs to compete. In this paper, we develop an approach to assess changes in a brand's vulnerability under alternative assortment and price configurations. We specifically propose that, in market environments with high variability in the competitive set and prices, it is more appropriate to assess a brand's strength relative to alternative assortment configurations rather than against individual competing brands. We build a model that depicts a brand's vulnerability in latent assortment space rather than the traditional brand space. The results from an illustrative model application are used to draw inferences about changes in brand vulnerabilities under shallow and deep promotions.     

Modeling Dependencies in Brand Choice Outcomes Across Complementary Categories

We build an econometric model of a household's contemporaneous brand choice outcomes in complementary product categories. This model explicitly captures cross-category dependencies in brand choice outcomes of a household. Such dependencies have not been modeled in existing multi-category demand models.Our model accommodates cross-category dependencies that arise on account of three component effects: (1) complementarity due to the additional utility that a household derives from the joint purchase of brands in complementary categories, (2) marketing spillovers due to the effects of brands’ prices in one category affecting the households’ latent utilities for brands in the complementary category, (3) unobserved dependencies due to correlations in households’ latent utilities for brands across categories.We estimate our proposed multi-category brand choice model using scanner panel data on cake mix and frosting categories. We find that complementarity accounts for the vast majority of the estimated cross-category effects in demand. We also find that as much as 55 percent of the total retail profit impact of price promotions arise on account of brand-level (focus of our study), as opposed to category-level (focus of previous studies), dependencies in household demand. Finally, we propose an easily interpretable visual representation – Largess and Free-Ride Plot – of cross-category price elasticities that summarizes the differential abilities of brands to influence, or be influenced by, brands in the complementary category.     

Antecedents of Belief in Global Citizenship: A Two-Country Empirical Investigation

ABSTRACT

This research contributes to the existing literature by investigating the antecedents of belief in global citizenship. Previous literature in global brand management has provided strong evidence of the importance of perceived quality and social prestige of global brands in influencing consumers’ evaluations of global brands. Accordingly, the authors’ model focuses on the perceived quality and social prestige of global brands as antecedents of consumers’ belief in global citizenship. In addition, they examine the direct and indirect effects of consumer ethnocentricity and cultural openness on consumers’ belief in global citizenship. They empirically examine this framework within a rich cross-cultural context using samples from the United States and India (developed and developing countries). The proposed model suggests that perceived quality and social prestige of global brands are mediators of the relationship between ethnocentricity and cultural openness and consumers’ belief in global citizenship. They followed Gerbing and Anderson's two-step approach to develop a measurement model with an acceptable fit to the data and then conducted a structural model to test the hypothesized relationships. The authors conducted χ² difference tests to examine the structure of their hypothesized relationships across the United States and India. The results support partial mediation for perceived quality and social prestige of global brands on the relationship between ethnocentricity and cultural openness and consumers’ belief in global citizenship. Furthermore, they demonstrate some interesting differences in the relationships in the model across the two samples.     

A model of consumer's retail atmosphere perceptions

The authors propose a new model of the effects of four perceived atmosphere constructs on hedonic and utilitarian shopping evaluations. Survey data demonstrate that the perceived atmosphere constructs are positively associated with both hedonic and utilitarian evaluations of retail shopping value. Importantly, the relationship between the customer's perception of the store's level of sophistication (perceived style) and the customer's overall assessment that the store is a pleasant place (perceived overall atmosphere) is different for different retail brands. The results suggest that the relationship between constructs can be used to detect differentiation between retail brands.     

eWOM across channels: comparing the impact of self-enhancement,positivity bias and vengeance on Facebook and Twitter

Abstract

When sharing personal details, versus talking about others, consumers tend to accentuate the positive experiences they have with brands in order to self-enhance amongst friends. Consumers also take vengeance on brands in public venues. Turning to social network sites (SNSs), it is unclear which is dominant. Here historical Facebook and Twitter eWOM (n = 47,907) is analyzed for a static group of 783 active US consumers. Self-enhancement is found on both SNSs. The majority of eWOM is positive Vengeance was rare, occurring only in 10.3% of all eWOM. eWOM appears to mirror a consumer's non-eWOM sentiment valence across SNSs. In this cross-platform comparison we suggest that SNS affordances alter eWOM creation Facebook has privacy expectations and limits direct brand interactions. Twitter is a public platform with less privacy expectations and a larger customer service component. Here eWOM is more prevalent on Twitter but contrary to our expectations is more positive.