Consumers’ perception and attitude toward retailers’ different sub-‐types of private label

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Master Thesis, MSc BA Marketing Management

Consumers’ perception and attitude

toward retailers’ different sub-‐types of

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Master Thesis, MSc BA Marketing Management

Consumers’ perception and attitude

toward retailers’ different sub-‐types of

private label

Author Aldijana Alic Dorprichterstraat 32 8431 BZ Oosterwolde Telephone: 06-‐30373010 E-‐mail: alic.aldijana@hotmail.com Student number: S2048256

University of Groningen

Faculty of Economics & Business Master Thesis Business Administration Specialization: Marketing Management Date, 19-‐05-‐2013

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Management Summary

The main goal of this study was to investigate what the effect of price consciousness, value consciousness, deal proneness, psychological risk, brand consciousness, brand loyalty and quality perceptions is on private label attitude regarding three sub types of private label: Euroshopper PL, AH PL and Excellent PL. Additionally, we wanted to investigate whether private label type has a moderating effect regarding private label attitude. To measure the attitude toward the different sub-‐ types of private label the Dutch supermarket chain Albert Heijn is used as a case study. An online questionnaire was set up to collect the data for this study. The problem statement of this study is:

Which consumer characteristics and perceptions affect private label attitude toward the different sub types of private label, and is there a difference regarding attitude between the different sub

types of private label?

Based on previous studies a positive effect was expected between the relationship of price consciousness with the attitude towards Euroshopper PL, AH PL and Excellent PL. In addition, it was expected that this positive relationship was the strongest for Euroshopper PL and the weakest for Excellent PL. However, only a positive significant relationship is found between price consciousness with the attitude towards Euroshopper PL and AH PL. Thus, no significant evidence was found for the relationship of price consciousness with the attitude towards Excellent PL. Next, it was expected that value consciousness is positively related with the attitude towards the three types of private label, and that this positive effect is the strongest for AH PL and weakest for Excellent PL. However, no significant results could be found to support this assumption. Thus, in this research no significant evidence was found for the relationship of value consciousness with the attitude towards the three types of PL. Furthermore, it was expected from the literature reviewed in chapter two that deal proneness could influence private label attitude. Significant evidence regarding a positive relationship of deal proneness with the attitude towards Euroshopper PL was found. As for the other two types of PL, no significant relationship is found.

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between psychological risk and private label attitude for Euroshopper and Excellent, and no significant relationship with AH PL. Furthermore, no significant results could be found for the relationship of brand consciousness with the attitude towards Euroshopper PL and AH PL. We did find significant evidence with the attitude towards Excellent PL. However, this relationship was positive. This means that a higher brand consciousness leads to a higher attitude specifically for Excellent PL. In addition, a significant negative relationship of brand loyalty with the attitude towards Euroshopper PL is found. Additionally, no significant relationship is found for AH PL and Excellent PL. Next, no significant evidence is found for the relationship of quality perceptions with attitude towards the three private labels.

This study provides insight in which consumer characteristics and perceptions of private label influence the attitude regarding a specific private label type, which can help to understand consumers’ choice for a specific private label sub type. As such, positioning strategies and marketing-‐ communication tactics can be better determined.

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Preface

I am very happy writing this specific part of my thesis, as I am realizing now that I am finalizing my master thesis. This is the last step in obtaining my Master’s degree in Marketing and I still cannot believe how time has flown and that my life as a student is really ending anytime soon.

During my study I have obtained mainly scientific knowledge and I am ready now to put this knowledge into practice and obtain new experiences. It is time for the next step: finding a job in Marketing. As Albert Einstein once said:

“Information is not knowledge. The only source of knowledge is experience”.

I would like to thank professor Peter Verhoef for his invested time, patience and his supervision during this research. In addition, I would also like to thank professor Laurens Sloot for his final comments. Finally, I would like to thank my family and friends for their support and motivation.

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Chapter 1: Introduction

1.1 Background problem

The success of private label brands has grown significantly in the past decade. Private labels, also known as store brands, are generally brands owned, controlled, and sold exclusively by retailers (Sethuraman & Cole, 1999). Since the late 1990’s, every major grocery retailer had introduced a credible private label, and almost every household has purchased some private label items, as one of every five items sold every day in U.S. supermarkets, drug chains, and mass merchandisers is a private label. This figure is even higher in Western Europe, which is the most developed private label region (Kumar & Steenkamp, 2007). For example, private label goods account for up to 43% of total consumer packaged goods consumption in the U.K., 39% in Germany, and 34% in France (Geyskens et al, 2010). Although you can find private labels in almost every product category in the supermarket nowadays, retailers are still trying to increase their private label products even further (Ailawadi & Keller, 2004). There are several reasons for retailers to introduce and grow their private labels namely, higher retailer margins, negotiating leverage with national brand manufacturers, and higher consumer store loyalty (Ailawadi & Harlam, 2004; Hoch & Banerji, 1993; Kumar & Steenkamp, 2007). Other reasons are to differentiate from competitors and to provide consumers with greater assortment choices (Sprott & Shimp, 2004).

Store brands are being introduced for several strategic reasons. They are being introduced as a value led alternative or sometimes even as a complete substitute to national brands (for e.g. Marks & Spencer (UK), Trader Joe’s (USA) (Liu & Wang, 2009). The success of store brands can be explained by its relative perceived quality and brand equity (Erdem et al, 2004). On the other hand, research of Dekimpe and Steenkamp (1997) has shown that private labels are not equally successful in all product categories. The product categories where private labels are doing well regarding market share, its is due to the fact that there is already a base of loyal PL consumers or due to conquering power (a base of switching consumers) or even both. These findings lead to the following improvements by retailers: quality improvements regarding their private label, rising stores image and increasing consumer loyalty.

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compete with national brands and create loyalty to the store instead of to national brands. Despite the growth of private labels in recent years, this phenomenon has received very little attention in the literature. Especially little attention is paid to the different types of private label (for example, economy and premium private label) and consumer attitudes and perceptions towards retailers’ different types of private labels. This raises the following question: Do customer attitudes and perception toward retailers’ different sub-‐types of a private label differ, and is there a difference between the types of private label?

1.2 Multi-‐tier private label program

The most common and the one that has been mainly introduced at first by retailers is the standard private label (Ailawadi & Keller 2004). This private label type has been around now quite some time. Over the last years, retailers started to introduce multi-‐tiered private label offerings.

Geyskens et al. (2010) distinguish private labels in three PL types regarding its positioning: low quality tier (low quality/low price), mid quality tier (mid quality/mid price) and top quality tier products (high quality/high price). The economy PL is positioned as a low quality tier, the standard PL is positioned as a mid quality tier and the premium PL as a top quality tier. The focus of this study is based on these three types of PL.

One of the benefits of following a multi tiered PL strategy is that a much wider consumer base can be reached. In addition, retailers are able to compete with national brands on different levels (for e.g. on price and quality).

1.3 Problem statement

As mentioned in the previous section, the sales of private labels increased fast in recent years. The research of Erdem et al (2004) analysed how consumer attitudes toward risk, quality and price play an important role in consumers’ choice for a private label. A key determinant of private label success is the perceived quality (Hoch & Banerji 1993; Richardson, Dick, & Jain 1994). However, consumers perceive the quality of private labels as poorer, when compared to national brands. Research has showed that private labels appeal to price-‐conscious consumers but generally fail to attract the more quality conscious consumers (Ailwadi et al, 2001).

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consumer point of view is missing in literature. As such, this study will investigate whether consumers’ attitude toward the different sub-‐type private labels differs. In addition, there will be investigated if the antecedents that effect attitude of for example a premium private label differ compared to an economy private label.

This study focuses on private label brands in the grocery retailing industry, where private labels are especially dominant. To measure the attitude toward the different sub-‐types of private labels and its loyalty drivers, the Dutch supermarket chain Albert Heijn will be used as a case study. Albert Heijn is a well-‐known and large supermarket chain in the Netherlands, and is by far the dominating player in the private label market with a market share of 31%. Albert Heijn follows a multi-‐tiered private label strategy and offers several alternatives for the well-‐known branded products, namely: AH Excellent (premium PL) AH Puur & Eerlijk (Pure & Honest, which is a more organic PL), AH (medium priced PL) and Euro-‐Shopper (a PL at the bottom end). In this research we will only focus on AH PL, Euroshopper PL and Excellent PL, since the AH Puur & Eerlijk is a different sub-‐type of private label, which can’t be compared with the others on several aspects. These three different types of private labels will be used to investigate whether customers’ attitude differs toward the different sub-‐types PL.

1.3.1 Research Goal

The main goal of this research is provide retailers more insight on what customers’ perceptions and attitudes are toward a specific sub-‐type private label.

1.3.2 Research questions

In this study we will research consumers’ attitude toward the different sub-‐types of a private label and whether the attitude between the types of PL differ. Therefore the following research question:

Which consumer characteristics and perceptions affect private label attitude toward the different sub types of private label, and is there a difference regarding attitude between the different sub types of private label?

In order to answer the research question, the following sub-‐questions are formulated: 1. What are private labels?

2. What is a multi-‐tiered private label program? 3. What are consumer attitudes toward private labels? 4. What is the purchase behaviour toward private labels?

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1.4 Theoretical relevance

This study gives retailers insight in consumers’ attitude toward a specific sub-‐type private label. Literature has shown that introducing a private label has many benefits for retailers. With the development of a multi-‐tiered private label program, as a means to reach a much wider consumer base, retailers have to make decisions regarding the level and type of private label a retailer is going to introduce. According to research of Assael (1998) customers who feel satisfied with a product, have a positive attitude towards it, which eventually creates favourable perception in the customer’s mind. Knowing customers’ attitude toward a sub-‐type private label enables retailers to make positioning decisions when introducing a certain type of private label. As such, retailers can see if the introduction of a private label fits their current image and strategy.

1.5 Structure

This study is divided into the following chapters: first, it starts with a theoretical framework where an overview of relevant literature is provided. In this chapter different aspects regarding private labels will be discussed. Based on this literature answers will be given on the sub-‐questions. Second, the conceptual model and the hypotheses will be presented, which are based on forgoing literature. In the fourth chapter the research method is discussed, which describes how the research question will be answered. Then the results of the experiment used to test the hypothesis are presented and the research question is answered. The results provide information regarding the sample, constructs and variables. Finally, the outcomes and implications of the results, the study’s limitations, and directions for further research will be discussed.

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Chapter 2: Private labels

In this chapter an overview of relevant academic literature will be given. As such, the aim is to provide answers to the sub-‐questions given in chapter one, which will be discussed in the same order as given in chapter one. First, in sub-‐paragraph 2.1 relevant academic literature regarding private labels in general will be discussed. Second, a multi-‐tiered private label program will be discussed. Next, the conceptual model will be presented and discussed based on existing literature to get insight into the problem statement and the additional research questions. In addition, hypotheses are formulated after each construct.

2.1 Private labels and its benefits

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dependence of the store on national brands (Quelch & Harding, 1996) and private labels can be used to increase store loyalty (Richardson, Jain, & Dick, 1996).

One of the reasons why private labels grow in popularity among consumers is because private labels are priced lower than national brands products (Batra & Sinha, 2000). The price advantage is on average 21. However, the quality of private label products seems to be more important in determining the success of private labels than the price (Hoch & Banerji, 1993). In the past, retailers often introduced store brands as ‘best-‐value’ products to compete on price with national brands. However, nowadays retailers tend to improve the quality of their private labels by introducing a premium private label in order raise the image of their store and to encourage store loyalty (Dekimpe & Steenkamp, 1997). As such, retailers are able to compete with national brands and create loyalty to the store instead of to national brands.

Although sales of private labels have increased fast in recent years, national brands are still perceived as more reliable and have a higher brand value. According to Wulf et al. (2005) consumers perceive products of national brand manufacturers to be superior to private label products. This seems also to be true for the more generic grocery items, which consumers also perceive to be superior to private label grocery items on aspects like taste, reliability, aroma and overall quality. It seems that private labels appeal to the more price-‐conscious consumers and less to the more quality conscious consumers (Ailwadi et al, 2001). Also, private labels mostly do not provide the same level of equity and psychosocial meaning as national brands do. National brands have a higher level of equity and image which results from the strong and favourable brand associations in the memory of consumers (Keller, 1993). This might be explained by the fact that national brands have built their equity and image over decades of advertising and delivering consistent quality (Quelch et al, 1996). On the other hand, already in 1992 Fitzell found that consumers perceive the quality of private label products as equal as compared to national brand products. More recently, research conducted by the Nielsen Company (2008) showed that sixty three percent of the respondents find the quality of a private label to be as good as national brands and thirty three percent even said finding the private label of higher quality. The quality aspect can be seen as a very important factor in consumers purchase decisions. Since private label brands have succeeded in narrowing the gap regarding the perceived quality, an important reason for buying a higher priced national brand has been eliminated (Steenkamp & Dekimpe, 1997).

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consumers money. As such, the expenditure for their shopping basket will be lower. And lastly, for those consumers who have developed store loyalty, the presence of a private label with a good quality across a wide range of product categories can lead to a greater shopping experience (Steenkamp & Dekimpe, 1997).

Positioning of private labels

Nowadays most people include private labels in their mind set for at least some product categories (ACNielsen, 2005). Prior research has shown that consumers buy private labels almost in the same way as they buy national brands (Keng & Ehrenberg, 1984; Uncles & Ellis, 1989; Bound & Ehrenberg, 1997). Brand associations regarding the private label are being developed during the searching, buying and using process. These are mainly associations regarding brand performance in terms of meeting category needs, which under the Associative Network Theories of Memory model (Anderson & Bower, 1979) interact with associations of other brands. A key role of these category’s needs is to act as cues to retrieve the brand name or to evaluate the appropriateness of a brand once retrieved (Nedungadi, 1990). As such, every private label brand competes in consumer’s memory with manufacturer brands and other private labels.

Schemas regarding the positioning of private labels have not changed a lot over the years (Nenycz-‐ Thiel & Romaniuk, 2010). Traditionally, private labels have been positioned as low price/good value for money offerings. Private labels’ most important selling point has always been their price advantage compared to national brands. Therefore, they can act as a cue to trigger a perception of value (Zeithaml, 1988). For example, a product is perceived as a good value for money just because it is a private label.

Private labels’ had once a strong perceptual positing as being something very different compared to national brands. However, this has somewhat changed due to the introduction of premium, organic and health private labels, which often do not have a price advantage, compared to national brands (Richardson, 1997; Tarnowski, 2005). In addition, nowadays-‐private labels also have a comparable quality according to the Private Label Manufacturers Associations. For consumers this means that they are receiving two different messages regarding the positioning of private labels.

Different sub-‐types private labels

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reach a much wider consumer base: “Retailers seeking to expand private label share should consider broadening private label penetration across consumer segments through multi-‐tiered offerings.” In addition, The Food Marketing Institute (2005) has also advised its members to think about introducing three-‐tiered private label programs. These three-‐tiered private label programs follow a “good, better, best” approach, which consists of an economy and premium private label in addition to the standard private label that has been around for quite some time now (Ailawadi & Keller 2004). Multi-‐tiered private label programs have been developed in the United Kingdom, but are also growing in other European markets and parts of the world (Information Resources Inc. 2007; Kumar & Steenkamp 2007). The economy PLs (also known as value or budget PLs) are very basic PLS at the bottom end of the market that save on the more expensive ingredients to reduce costs, which is introduced to compete with hard discounters. The economy private labels can typically not be compared with the national brands in a supermarket’s product assortment regarding the quality aspect (Burt 2000). Standard PLs (also known as regular PLs) are an imitation of the mainstream national brands and are positioned as a mid quality alternative (Kumar & Steenkamp, 2007). Premium private labels belong to the higher end of the market and are of equal quality as premium-‐ quality national brands, but have typically a slightly lower price. The economy private label was introduced after the standard PL to consumer’s choice set and the premium PL as last (Kumar & Steenkamp, 2007).

More and more retailers have been selling different types of private labels and became successful. Kumar and Steenkamp (2007) have identified the following four types of private label namely: (1) generic, (2) copycat, (3) premium and (4) value innovators. We will discuss the first three types, since the value innovator can be compared with the characteristics of the premium private label. In addition, the focus of this report is only on the first three PL types.

Generic private labels

The generic private labels can be compared with the economy private labels as discussed above. These products are inferior, priced very low and are positioned as generic products. Generic private labels do not carry the retailer’s name. An example is Albert Heijn’s private label brand “Euroshopper”. The main focus is on the price aspect and the goal is to be the cheapest in a product category. Furthermore, little to none marketing activities is used to promote the brand. Thus, price can be seen as the most important aspect.

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These are products that are literally copied from national or manufacturer brands. It is even sometimes difficult to distinguish the packaging of these private label brands from manufacturer brands. This type of private label can be also classified as the “standard private label”. An example is Albert Heijn’s “AH” brand.

Premium private labels

This type of private label is introduced to compete with manufacturer brands. These products do not differentiate themselves on low price, but they instead try to create added value for the customer. By introducing premium private labels, retailers attempt to create loyal customers by differentiating them from competitors and developing strong preferences for these products. An example is Albert Heijn’s “Excellent” brand. In figure 2.1 the different Albert Heijn’s private label types are depicted. The positioning of the different types of PL is shown along the quality-‐tier and price dimension.

FIGURE 2.1: AH’s private label type and its positioning

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but also the choice between retailer’s existing private label offerings. In their research they found that premium private labels cannibalize economy and standard private labels. Research of Nenycz-‐ Thiel and Romaniuk (2009) has shown that consumers evaluate premium private labels differently as compared to the value private labels. In their study they have researched whether consumers link different attributes (for e.g. good quality, value and trust) to premium private labels compared to the more traditional value private labels. They had created a list with different attributes, which might be important to customers and asked them to link (if applicable) each attribute to a product. This study showed that consumers see premium private labels as a different type of brand, compared to the traditional value private labels.

2.2 Conceptual model & hypothesis

After having explained what private labels are and its’ positioning in the previous paragraph, this paragraph will discuss the theoretical framework. Figure 2 presents a conceptual overview of predicted relationships between private label attitudes and the other latent constructs, which is based upon findings from existing literature.

FIGURE 2.2: Conceptual model

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The conceptual model as depicted above addresses linkages between consumers’ price and value preferences, consumers’ characteristics and private label perceptions and their

attitudes toward

private label products. Literature suggests that antecedents listed in the conceptual model are related (either positively or negatively) to private label attitude. The idea of the model is based upon the research of Burton et al. (1998), who investigated consumer’s attitude toward private label grocery products as a whole, rather than any particular private label brand or private labels for any specific grocery product category. In addition, they investigated whether there is a positive effect between private label attitude and consumer’s intention to buy private label and found that there was a positive relationship. However, our research differs somewhat from their research. First, we extend the model of Burton et al. (1998) by adding the different types of private labels. We want to understand why and for what reasons customers purchase products of a specific type of private label Therefore, this study investigates whether the different type of private labels (Euroshopper, AH and Excellent) have a moderating effect regarding private label attitude. These insights might help managers/retailers to plan their marketing programs more effectively.

In the next paragraph and sub-‐paragraphs each construct of the conceptual model will be discussed based on existing literature to get insight into the problem statement and the additional research questions. In addition, hypotheses are formulated after each construct to explain the relationships between the variables in the conceptual model.

2.3 Theory and hypotheses

In this paragraph, each construct of the conceptual model is discussed using existing literature to get insight into the problem statement and the research questions. In addition, hypotheses are formulated after each construct has been defined.

2.3.1 Private label attitude

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the most important antecedent of consumer’s intention to actually buy PL brands. This positive relationship is likely to hold across many different private label brand categories, because consumers are willing to spend more on private label brands. In addition, they are also willing to spread their expenditure across a more and more product categories (AC Nielsen, 2005). Attitudes do not only partly explain consumer behaviour, but marketing activities can also influence them. Therefore, many strategies that are aimed at ‘pursuing consumers’ have been based on influencing aspects of ‘attitudes’ or ‘subjective norms’ (Britt, 1978).

Richardson et al. (1996) examined factors that are expected to influence consumer selection of store brands and private brand proneness. The factors that had influenced store brand proneness were: i.e. familiarity with store brands, the extent to which consumers rely on extrinsic cues such as price and packaging to judge product quality, intolerance for ambiguity, perceived quality variation between national and store brand products, perceived risk, perceived value for money, income and family size. Their researched revealed that familiarity with retailer’s private label brand is very important. This importance of familiarity suggests that consumers who are familiar with private label products are likely to see them as high quality, low risk products, producing good value for the money. On the other hand, consumers who do not have experience with private label brands are more sceptical towards these products and also consider them more as a risky choice. This might lead to consumers having low store brand quality perceptions and lower perceived value for money. Furthermore, unfamiliarity might also lead to customers relying more on extrinsic cues such as for example brand name, packaging, and price in quality assessment-‐areas in which retailers’ private labels suffer from deficiencies relative to national brand manufacturers. Also, the reliance on extrinsic cues in quality assessment is of high importance for consumers. The reliance on extrinsic cues has strong negative effects on consumers’ attitudes towards private labels. Relying on extrinsic cues leads increases perceptions of quality variation between national brands and PLs. In addition, it increases perceptions of risks associated with actually using private label products. Quality judgements are based on extrinsic cues when information regarding intrinsic quality is missing. Richardson, Jain and Dick (1996) argue that consumers’ propensity to purchase private label products depends on certain demographic factors, such as income, family size, age and education. Burton et al. (1998) also found that demographic factors influence private label attitude. They found that there is a significant difference between levels of education and family income and private label attitude. In their research they found that respondents who are better educated have higher mean scores on the attitude measure, and consumers with higher family income (< $50,000) score lower on the attitude measure. However, no evidence was found for gender and age.

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Burton et al. (1998) researched consumers’ attitude toward private label grocery products as a whole, rather than any particular private label brand or private labels for any specific grocery product category. They investigated several possible relationships between consumer’s attitude toward private label products and other constructs and found that value consciousness, price consciousness, price-‐quality perceptions, brand loyalty, risk averseness, impulsiveness, smart shopper, general deal proneness, price-‐related deals, non-‐price deals had and direct effect on private label attitude.

Consumers’ attitude toward private label brands depends mainly on their orientation toward, and perception of price. For example, consumers might evaluate private label brands positively, because they have the desire to pay low prices (i.e., price consciousness) or they might have the desire to maximize the ratio of quality received compared to the price paid (i.e. value consciousness). On the other hand, consumers might also evaluate them negatively because they think that price is a strong indicator of quality (i.e. price-‐quality schema). Burton et al. (1998) found that private label attitude is positively related to value consciousness and price consciousness, and negatively related to price-‐ quality perceptions. This means that consumers who buy private label products are driven by price-‐ quality aspects, and are viewed positively by those consumers whose needs are served by paying low prices. In addition, research from the price-‐perceived quality research stream provides evidence that consumers who are risk-‐averse are more likely to purchase higher-‐priced brands within a product category as a means of reducing the risk of purchasing a brand of low quality (Peterson & Wilson, 1985). However, Burton et al. (1998) found that risk averseness is not related to private label attitude. Furthermore, there is a positive relationship between consumers’ attitude towards private labels and consumers smart-‐shopper self-‐perceptions. Smart shoppers are consumers who are not easily influenced by national ad campaigns, who are less impulsive in their decision-‐making, and make rational choices among brand alternatives without being influenced by national brand product images (Blattberg & Neslin, 1990). A negative relationship is found between brand loyalty, impulsiveness and private label attitude/ purchase. Consumers of private labels see themselves more as ‘smart shoppers’ and therefore are willing to spend more time on seeking out private label products instead of just buying them on impulse. Finally, private label attitude is positively related to the general deal proneness level of the consumer. Although there is a positive relationship between the private label attitude and deal proneness, consumers who had a high percentage private label products of their total shopping basket, made fewer purchases using coupons or purchased products on sale. These findings suggest that consumers may choose between price-‐related deals and private label purchases.

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H1: There is a significant difference regarding private label attitude between the three PL types (a) Euroshopper PL, (b) AH PL and (c) Excellent PL.

2.3.2 Loyalty

Brand loyalty reflects how likely a consumer will switch to a different brand, especially when this specific brand makes a change, either in price or in product features (Aaker, 1991). Brand loyalty is considered as a measure of the attachment that a customer has to a brand. Yoo and Donthu (2001) view brand loyalty as the tendency to be loyal to a brand, which is typified by the intention to buy the brand as a first choice. Literature on private label attitudes (Burton et al., 1998; Garretson et al., 2002) suggests a negative relationship between brand loyalty and private label attitude. This, because they believe that consumers who are concerned with paying low prices are less brand loyal and are more variety seekers (Blattberg & Neslin, 1990; Garretson & Burton, 1998). In general these consumers might find the transactional utility associated with the purchase of a brand more important than the benefits associated with the repetitive purchase of any specific brand. As such, we expect the following relationship between loyalty and PL attitude:

H2: Brand loyalty is negatively related with the attitude towards (a) Euroshopper PL, (b) AH PL and (c) Excellent PL.

As it is expected that loyalty is negatively related to private label attitude, we expect that this negative relationship is stronger for the generic private label type, since researched suggests that consumers concerned with paying lower prices are less loyal towards specific brands and instead tend to have stronger variety-‐seeking tendencies (Blattberg & Neslin, 1990; Garretson & Burton, 1998). In addition, we expect that this negative relationship is the weakest for the premium private label ‘Excellent’, since this is the most expensive private label type and differentiate them on value. Therefore, the following hypothesis is formulated:

H3: The relationship of brand loyalty with PL attitude is the strongest for (a) Euroshopper (PL), (b) AH (PL) and lowest (or even positive) for (c) Excellent PL.

2.3.3 Definition of value and perceived value

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value is whatever I want in a product, (3) value is the quality I get for the price I pay, and (4) value is what I get for what I give. Schechter (1984) gives even a broader definition of value. He defines value as “all factors, both qualitative and quantitative, subjective and objective, that make up the complete shopping experience”. Some consumers perceive value as paying a low price and others might perceive the benefits they get from the product as the most important “value” aspect. In addition, consumers might also make a trade-‐off between what they “give” (price) and what they “get” (quality). For some consumers value means all the relevant “get” aspects and also all the relevant “give” aspects. According to Zeithaml (1998) these four different consumers perceptions of value can be defined as follow: “perceived value is the consumer's overall assessment of the utility of a product based on perceptions of what is received and what is given”. There if a difference in what is received and what is given across consumers. For example, some consumers want to have the best quality and others would like to have convenience.

2.3.3 Value consciousness

Lichtenstein et al (1993) define value consciousness as “a concern for paying low prices subject to some quality constraint”. In addition, product value can be defined as “the ratio of the perceived quality of a product divided by the price paid for that product” (Zeithaml, 1988). Several studies have shown that making a trade off between price and quality aspects are related to PL attitudes (e.g. Denveny, 1993; Liesse, 1993). Consumers have a more favourable attitude towards private label products when they make a trade-‐off between quality and price. For example, in the study of Kirk (1992) 75% of respondents found that quality was the most important reason for buying private label products and 67% found price the most important factor. Moreover, the success of private labels and the increase in market share is due to its increase in the overall levels of quality. Thus, based on the literature of Zeithaml (1998) on value and price relationships and research that has shown that measures of value are positively related to PL attitude (Burton et al., 1998; Richardson, Jain and Dick, 1996), we conclude that consumer value consciousness should directly and positively affect attitudes toward private label types.

H4: Value consciousness is positively related with the attitude towards (a) PL Euroshopper, (b) AH PL and (c) Excellent PL.

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H5: The relationship of value consciousness with PL attitude is strongest for AH (PL) and lowest for Excellent PL.

2.3.4 Price consciousness

Price consciousness can be defined as the “degree to which the consumer focuses exclusively on paying low prices” (Lichtenstein, Ridgway, & Netemeyer, 1993), which is also a predictor of purchase. Research of Gabor and Granger (1979) has showed that consumers who have a lower income are more price-‐conscious. In addition, the level of price consciousness is also higher among consumers who are deal prone (Babakus, Tat, & Cunningham, 1988). According to Sawyer and Dickson’s (1984) attribution theory, a low price for private label products might be negatively associated with quality aspects of the product, which is then again perceived as inferior in the overall level of quality. Also, lower priced products within a product group are viewed less favourably (Lichtenstein & Burton, 1989). Moreover, Wolinsky (1987) also argued that consumers’ attitude toward private label are directly affected by the degree to which they draw inferences from price and brand names to assess quality. This might mean that consumers view the lower priced private label type less favourable. Hsu and Lai (2008) suggest that private label buying increases as consumers’ price consciousness increases. This is supported by the research of Sinha and Batra (1999) who conclude that price consciousness is a good predictor for private label purchases.

H6: Price consciousness is positively related with the attitude towards (a) Euroshopper PL, (b) AH PL and (c) Excellent PL.

As it is expected that price consciousness is positively related to private label attitude, we expect that this positive effect expect is strongest for the generic private label, since this one has the lowest price. In addition, we expected the effect to be the weakest (or even negative) for the premium private label since this one has a high price. Therefore, the following hypothesis is formulated:

H7: The relationship of value consciousness with PL attitude is strongest for Euroshopper PL and lowest (or even negative) for Excellent PL.

2.3.5 Perceived quality

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perception and judgement of quality might change over time due to increased competition in a product category, availability of more information and also due to changing consumer’s expectations. Consumer’s perceived quality and objective quality can be distinguished. Perceived quality is more abstract. Consumers make a more global assessment of a product that sometimes also lays close to attitude, and judgements regarding quality are usually made based on a consumer’s evoked set. In addition, objective quality is used to describe a product’s technical superiority and excellence (Monroe and Krishnan, 1985; Zeithaml, 1988). Consumers’ base their judgements regarding the quality of a product on quality cues; this might be either on intrinsic or extrinsic cues (Olson, 1972; Olson & Jacoby, 1972). Intrinsic cues are associated with the physical part of the product, which are unchangeable unless (a part or the complete) physical product changes (for e.g. colour, taste, shape, smell). Extrinsic cues are not part of the physical product, but still product associated with the product (for e.g. price, brand and store name). Richardson et al (1994) found that the reliance on extrinsic cues has strong negative effects on consumers’ attitudes towards private labels. In addition, private labels appeal to price-‐conscious consumers and generally fail to attract the more quality conscious consumers (Ailwadi et al, 2001). Therefore, we expect that quality perceptions are negatively related with the attitude toward PL.

H8: Quality perceptions are negatively related with the attitude towards (a) Euroshopper PL, (b) AH PL and (c) Excellent PL.

According to the research of Choi and Coughlan (2006), private labels are more positively evaluated on quality when they are more similar to leading national brands. Since the regular private labels are literally copied from national or manufacturer brands and even sometimes difficult to distinguish the packaging of these private label brands from manufacturer brands, and the premium private are positioned as being of superior quality compared with national brands mainstream-‐quality products (Kumar & Steenkamp 2007), it is expected that the this negative relationship is the weakest (or even a positive relationship) for these private label types. As such the following hypothesis:

H9: The relationship of quality perceptions with PL attitude is strongest for Euroshopper PL and lowest (or even negative) for Excellent PL.

2.3.6 Brand consciousness

Consumers’ perception and attitude toward retailers’ different sub-­‐types of private label

Master Thesis, MSc BA Marketing Management

Consumers’ perception and attitude

toward retailers’ different sub-­‐types of

Master Thesis, MSc BA Marketing Management

Consumers’ perception and attitude

toward retailers’ different sub-­‐types of

private label

Management Summary

Preface

Table of contents

Chapter 1: Introduction

1.1 Background problem

1.2 Multi-­‐tier private label program

1.3 Problem statement

1.4 Theoretical relevance

1.5 Structure

Chapter 2: Private labels

2.1 Private labels and its benefits

2.2 Conceptual model & hypothesis

2.3 Theory and hypotheses

Consumers’ perception and attitude toward retailers’ different sub-‐types of private label

toward retailers’ different sub-‐types of

toward retailers’ different sub-‐types of

1.2 Multi-‐tier private label program