-What is the effect of packaging similarities between national brands and
private labels and of store image on private labels?-
Master thesis
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Author: Jakob van der Wier
Adress: Jacob van Lennepkade 263-2, Amsterdam
Phone number: 06-1857990
Student number: 1660780
E-mail:
j.j.van.der.wier@student.rug.nl
University of Groningen
Master Thesis Business Administration: specialization Marketing management
January 2010
Supervisor: Dr. L.M. Sloot
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ndSupervisor: Dr. J.E. Wieringa
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What is the effect of packaging similarities between national brands
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Management Summary
National brands have lost their distinct leading position in many categories in retailers´ shelves today. This is caused by the increasing market share of private labels. Despite the major success of those private labels, which are marketed by retailers, consumers still often perceive the national brands as more reliable products with higher brand value. Private labels are often not able to provide the same equity to consumers that national brands do. In marketing literature equity is defined as: consumer based brand equity and psychosocial meaning. In marketing literature it has been found that imitating national brand packaging can improve consumers´ attitude towards private labels. Besides, marketing literature indicates a favorable retailers´ store image can improve consumers´ private labels evaluations. After careful consideration of this information, the research questions for this thesis has been formulated as follows:
- What is the effect of packaging similarities between private labels and national brands on the perceived equity and consumers’ purchase behavior towards private labels?
- What is the effect of store image on the perceived equity and consumers’ purchase behavior towards private labels?
In order to answer the research questions of this descriptive research, we developed several hypotheses. Based on these hypotheses we put together a questionnaire in which we measured the opinions of the respondents towards these topics. The respondents were approached for personal interviewing in the retailer stores used for this research. We have selected two different retailer stores; one part of Albert Heijn retail chain and one part of C1000 retail chain. We devised questionnaires for four different product groups: food hedonic, food utilitarian, non-food utilitarian, and non-food hedonic. Those questionnaires were applied on the private labels of both retailers. In total 144 respondents participated in this research. The results of the questionnaires have been tested with correlations and regression analyses.
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retailers imitate packaging of national brands and improve their store image, this is positively related to consumers’ purchase intention of private labels to a small extent.
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Preface
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Table of Content
Chapter 1 Introduction ... 9 1.1 Background problem ... 9 1.2 Problem statement ... 10 1.2.1 Research goal ... 10 1.2.2 Research question ... 10 1.3 Structure ... 11Chapter 2 Theoretical framework ... 12
2.1 What are the differences between private labels and national brands? ... 12
2.1.1 Private label ... 12
2.1.2 National brand ... 13
2.1.3 Differences Private label and National brands ... 13
2.1.4 Conclusion ... 15
2.2 What is the store image of the retailer? ... 16
2.2.1 Definition Store image ... 16
2.2.2 Approaches of store image ... 16
2.2.4 Components of store image ... 16
2.2.5 Conclusion ... 18
2.3 What is brand equity and psychosocial meaning? ... 19
2.3.1 Definition Brand equity ... 19
2.3.2 Approaches of brand equity ... 19
2.3.3 Different perspectives ... 20
2.3.4 Components of brand equity ... 21
2.3.5 Psychosocial meaning ... 23
2.3.6 Conclusion ... 23
2.4 What is the purchase behavior of private labels? ... 24
2.4.1 Willingness to pay a price premium for a national brand ... 24
2.4.3 Purchase intention private labels ... 25
2.4.4 Conclusion ... 27
Chapter 3 Conceptual model ... 28
3.1 Hypotheses... 28
Chapter 4 Research Design ... 31
4.1 Design ... 31
4.2 Data collection ... 32
4.3 Sample ... 35
4.4 Pre-testing the questionnaire ... 36
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Chapter 5 Descriptive Results ... 39
5.1 Sampling design ... 39
5.2 Sample ... 39
5.3 Representativeness of the sample ... 40
5.4 Factor analysis ... 41
5.5 Reliability ... 42
5.6 Descriptive results ... 44
5.6.1 Similarities ... 44
5.6.2 Brand equity & psychosocial meaning ... 47
5.6.3 Purchase behavior ... 51
5.6.4 Store image ... 53
5.6.5 Conclusion ... 53
Chapter 6 Hypotheses testing ... 55
6.1 Relationships between packaging similarities and brand equity ... 55
6.2 Relationships between packaging similarities and psychosocial meaning ... 56
6.3 Relationships between store image and brand equity ... 58
6.4 Relationships between packaging similarities and the purchase behavior ... 59
6.4.1 Relationships between packaging similarities and the purchase intention of private labels ... 60
6.4.2 Relationships between packaging similarities and the willingness to pay a price premium for national brands ... 60
6.5 Relationships between store image and the purchase behavior ... 61
6.5.1 Relationships between store image and the purchase intention of private labels ... 61
6.5.2 Relationships between store image and the willingness to pay a price premium for national brands ... 61
6.5.3 Conclusion relationships ... 62
6.6 The effects on brand equity and purchase behavior of private labels ... 62
6.6.1 The effect of the independent variables on the brand loyalty towards private labels ... 65
6.6.2 The effect of the independent variables on the perceived quality towards private labels 65 6.6.3 The effect of the independent variables on the brand awareness/associations of private labels ... 65
6.6.4 The effect of the independent variables on the purchase intention of private labels... 65
6.6.5 The effect of the independent variables on the willingness to pay a price premium for national brands ... 66
6.6.6 Conclusion effects on brand equity and purchase behavior private labels ... 66
Chapter 7 Conclusions ... 67
References ... 73
Appendix 1 ... 76
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Chapter 1 Introduction
1.1 Background problem
Private label brands are becoming more and more successful today. Private labels can be described as products marketed by retailers instead of the national brand manufacturers (Keller, 2008). During the past couple of years the market share of private labels has been increasing. Across retail chains and product categories the market share of private labels in the Netherlands has increased from 19% in 2002 to 25% in 2009 (Distrifood 29-04-2009). Retailers aim to push this figure even higher, since private labels gives them higher margins than national brands. In the retailers’ stores private labels often have advantages over national brands, due to their disproportionate shelf space and promotional support (Nogales and Suarez, 2005). As a result, national brands have lost their distinct leading position for different categories in retailers’ shelves. Nenycz-Thiel and Romaniuk (2009) present another reason why many consumers switch to private labels: consumers perceive national brands as too expensive for what they deliver. This is because consumers do not believe the national brand price premiums offer them the promised surplus-value (Sinha and Batra, 1999). Consumers’ purchase behavior of private labels will be discussed in chapter 2.4.
Despite the consumers’ changing purchasing preference, consumers consider national brands mostly as the stronger brands, compared to private labels. A strong brand has strong, relevant, and unique associations in the customers’ memory (Keller, 2008). Consumers value of a brand is described in academic literature as brand equity and psychosocial meaning, which will be discussed in chapter 2.3. According to De Wulf et al. (2005), national brands enjoy a higher level of brand equity in comparison to private labels. Besides, consumers’ expectations towards private labels continues to be in line with their historical position as the more low quality for a low price alternatives (Nencycz-Thiel and Romaniuk, 2009). In recent years, however, the equity of private labels has increased. According to Richardson et al. (1996) consumer evaluations of private labels are influenced by store image, whereby a good store image should make private labels more attractive. The definition of store image will be discussed in chapter 2.2
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to one of those packaging characteristics of a national brand. For that reason consumers experience fewer differences in their evaluation of national brands and private labels. The differences between national brands and private labels will be discussed in chapter 2.1.
1.2 Problem statement
As mentioned before, private labels are successful nowadays, although, consumers often experience a higher level of equity and image from national brands. In this thesis we will focus on private labels of Albert Heijn and C1000, and how their similarities in packaging with the leading national brands relates with their brand equity, psychosocial meaning, and purchase behavior of consumers. Subsequently, we will focus on the relationships between the store image of both stores and the brand equity, and purchase behavior of those private labels. To investigate these dimensions we conducted this research. Based on the results we can discover in which way these dimensions influence the brand equity and purchase behavior towards private labels.
1.2.1 Research goal
The main goal of this research is to get better insights for retailers for positioning private labels in order to build stronger private label brands and generate higher private label sales.
1.2.2 Research question
In this study we will research the effect of packaging similarities between private labels and national brands, and the effect of store image, therefore the two main research questions are:
- What is the effect of packaging similarities between private labels and national brands on the perceived equity and consumers’ purchase behavior towards private labels?
- What is the effect of store image on the perceived equity and consumers’ purchase behavior towards private labels?
In order to answer this research questions the following sub-questions are formulated: 1. What are the differences between private labels and national brands?
2. What is store image of the retailer? 3. What is brand equity of the retailer?
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1.3 Structure
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Chapter 2 Theoretical framework
In this chapter we discuss an overview of relevant academic literature. By discussing the relevant academic literature we are aiming to answer the sub-questions given in section 1. Therefore the theoretical framework has the same order as the sub-questions. In paragraph 2.1 relevant academic literature for national brands and private labels will be discussed. Then, in paragraph 2.2. the relevant theoretical findings on store image will be discussed. In paragraph 2.3 we will discuss the relevant academic literature on brand equity. And finally, in paragraph 2.4 we will discuss the relevant academic literature on purchase behavior of private labels.
2.1 What are the differences between private labels and national brands?
In order to answer the sub-question: “What are the differences between private labels and national brands”, we will discuss the relevant academic literature on private labels and national brands. First we describe both definitions of private labels and national brands. Then we describe the main differences between private labels and national brands.
2.1.1 Private label
Since the eighties and nineties private label brands made a major step into the packaging good market (Ailawadi, 2001). The introduction of the private label brands gave retailers an increased negotiation position against the manufacturers of the national brands. Private labels are products that are marketed by the retailers and not by the national brand manufacturers (Keller, 2008). According to Collins and Lindley (2002), private labels carrying the store name or logo in a certain manner are considered as an extension of the brand name of the store. Most of the private labels distinguish from national brands in cost efficiency for making and selling the products and also provide higher margins for retailers than national brands do. Besides this, private labels give retailers stronger negotiation position against national brand manufactures (Keller, 2008), and by providing private labels retailers can create loyalty to their stores (Ailawadi and Keller, 2003).
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price alternative premium private labels (Nenycz-Thiel and Romaniuk,2009). As a result, private label positioning becomes more equal to national brand positioning.
2.1.2 National brand
National brands are the traditional high quality products in the retail environment branded by the manufacturers. The strongest national brands have built their consumer equities over decades of investing in advertising and through delivery of consistent quality (Quelch and Harding, 1996). National brand manufacturers have been investing heavily in retail stores for promoting their products (Martenson, 2007). As a result, consumers will pay a higher premium for national brands in categories that provide high amounts of consumption pleasure and consider them as assurance of quality (Sethuraman and Cole, 1999) (Quelch and Harding, 1996). Therefore, national brand managers can maintain a premium pricing strategy in product categories consumed for hedonistic reasons (Sethuraman and Cole, 1999). Subsequently, Hsu and Lai (2008) suggests that national brands can pursue premium pricing strategies based on their brand awareness, in product categories where consumer experience and knowledge with the products is important. National brands outperform private labels in most parts of the consumer perceptions. National brands can sustain this advantage by maintaining investments in product design and promotion, in order to create brand equity and personality (Cheng et al., 2007).
2.1.3 Differences private label and national brands
What are the main differences between private labels and national brands? Consumers generally do perceive differences between private labels and national brands across dimensions in equity and quality, price, physical differences, and influence on store image.These differences will be discussed below.
Differences in equity and quality
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do. However, Nenycz-Thiel and Romaniuk (2009) state that the quality of private brands is comparable to the quality of national brands. Quality is considered by Ailawadi (2001) as a critical factor that determines the success of private labels. Besides, today some retail chains also position private labels as high-quality/high-price alternatives, whereby the level of equity and image will be more equal to national brands or even higher.
Differences in pricing
As the result of the high level of equity and image consumers deduce from national brands, national brand manufacturers market price premiums. Private labels, however, are also able to market price premiums based on their added value in the high-quality/high-price segments (Cheng et al., 2007). On the other hand, Nenycz-Thiel and Romaniuk (2009) mention that often national brands are perceived as too expensive for what they offer, which results in consumers switching to the more mid-price private labels. For this reason, national brand manufacturers face the dilemma of either lowering the price, resulting in hurting brand image, or they can keep the price high by increasing the added value by making investments in innovations. Because non-users of private labels consider the low price as an indicator of low quality (Nenycz-Thiel and Romaniuk, 2009), Nenycz-Thiel and Romaniuk (2009) suggests that retailers who will pursue a lower price than national brands, have to improve the quality of their private labels by innovating package designs and increasing in-store advertising.
Physical differences
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Differences influence store image
A good store image enhances the attractiveness of each private label (Liu and Wang, 2008). According to Liu and Wang (2008) national brands are less influenced by store image, which is supported by Jacoby and Maursky (1984) who suggests national brands cannot be improved by store image. However, Jacoby and Maursky (1984) suggest that strong brands can improve the image of a retailer. According to Richardson et al (1996), consumers’ evaluations of private labels are more positive in case of a favorable store image, whereby their evaluations of the national brands were not affected by store image. According to de Wulf et al. (2005), the resulting synergies in brand image of private labels and the store image will in turn help to drive the sales, brand equity and the gross margin of the retail brands. However, for national brand manufactures the products are receiving all the effort of their branding.
2.1.4 Conclusion
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2.2 What is the store image of the retailer?
In order to answer the sub-question: “What is the store image of the retailer?””, we will discuss the relevant academic literature on store image in this section. The theoretical findings about store image first have to be discussed and subsequently we will decide which fits in our research.
2.2.1 Definition store image
Keller (2008) states that due to the associations to product assortment, pricing, and quality of service, retailers have their own brand images in consumers’ minds. According to Keller (2008), retailers create these associations through the products and brands they stock and the manner by which they sell them.
2.2.2 Approaches of store image
In the last decades researchers have studied a large number of attributes that influence overall image, such as: the variety and quality of products, services and brands sold, the physical store appearance, the quality of appearance, behavior and service, and so on. The researchers Lindquist (1974) and Mazursky and Jacoby (1986) where the first to gather these attributes into a smaller set of dimensions: location, merchandise, service and store atmosphere related dimensions.
2.2.4 Components of store image
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AccessThe location of a store and the distance a consumer has to travel are criteria for their store choice decision (Ailawadi and Keller, 2004). However, Ailawadi and Keller (2004) mention the trend of huge retail formats located far from shopping malls, and online retailing results decreases the importance for location as criterion. This is in accordance with the findings of Bell, Ho and Tang (1998), who says that location has no important role in store decisions anymore. On the other hand, Ailawadi and Keller (2004) suggest that consumers find location an important component of the shopping costs. Besides that, location is also important for retailers who focus on small basket shoppers. Hence, Blackwell et al (2006) finds that there is a difference between the actual distance consumers have to travel and the cognitive distance which are related to factors as ease of parking and quality of the surrounding stores.
Store atmosphere
According to Blackwell (2006), store atmosphere can be defined as: “The physical properties of the retail environment designed to create an effect on consumer purchases ”. Mehrabian and Russel (1974) says the store atmosphere results in three different dimensions of consumer reactions; pleasantness, arousal and dominance. A positive store atmosphere influences the behavior of consumers, resulting in greater likelihood of purchases (Ailawadi and Keller, 2004). According to Baker et al. (2002), the consumers’ perceptions concerning the psychical design of the store atmosphere influence their perceptions concerning the product prices, product quality, and employee and service quality. Blackwell et al. (2006) notes that store atmosphere can steer the direction and the duration of consumers’ attention, thereby stimulating purchasing.
Price and promotion
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Cross-category assortmentAccording to Blackwell et al. (2006), depth, breadth, and quality of assortment are important determinants of store choice and image. This corresponds with the findings of Ailawadi and Keller (2004), who found that the consumers’ perception of the breadth of different products and services of retailers influences store image. According to Ailawadi and Keller (2004), the breadth of assortment is in relation with the different situations a retailer is recalled by consumers. Thus, the greater the assortment the stronger the salience, whereby salience is an essential building block for a brand and refers to the awareness of an brand and how often and easily the brand is evoked under various situations and circumstances by consumers (Keller, 2008)
Within-category assortment
The consumers’ perception of the depth of a retailer’s assortment within product categories is also an important dimension of store image (Ailawadi and Keller, 2004). When the assortment of brands, flavors, and packaging size increases, consumers will experience this positively. This is in accordance with Kahn & Wansink (2004) who conclude that consumers will perceive more flexibility in their choices and they can find products that fit their desires.
2.2.5 Conclusion
The last decades researchers have studied several attributes that influence store image. In our research we will focus on the components developed by Ailawadi and Keller (2004): access, in-store atmosphere, price and promotion, cross-category assortment, and within-category assortment. On the scale developed by Chowdhurry (2001) we can measure store image dimensions.
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2.3 What is brand equity and psychosocial meaning?
In order to answer the sub-question: “What is brand equity and psychosocial meaning?”, we will discuss the relevant academic literature on brand equity and psychosocial meaning in this section. Firstly, the theoretical findings about brand equity have to be discussed, and subsequently we describe the components used for this research. Furthermore, we will discuss brand psychosocial meaning and we will describe how it fits in our research.
2.3.1 Definition brand equity
According to Keller (2008), branding is all about creating differences. Branding is considered as enhancing products and services with the value of the brand (Keller, 2008). According to Keller (2008), brand equity can be defined as the marketing effects that are uniquely attributable to a brand. The latter is the reason of different responses of consumers between branded and unbranded products.
2.3.2 Approaches of brand equity
According to Keller (1993), there are two different approaches of brand equity. The first is a financially based method, which is developed for estimating the value of brand more precisely for accounting purposes, for merger, acquisitions, or divesture purposes (Keller, 1993).
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2.3.3 Different perspectives
In the literature brand equity has been viewed from many different perspectives, and every researcher uses his own definition of brand equity. According to Aaker (1991), “Brand equity is a set of brand assets and liabilities linked to a brand, its name and symbol, that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers.” The brand assets from Aaker (1991) can add or subtract value for customers. These assets can help customers interpret, process, and store a lot of information about products and brands. Hence, they can also influence customers’ confidence in their purchase decisions.
Keller (2008) defines brand equity from the perspective of the customer and emphasizes the sources of brand equity. According to Keller (2008), “Customer-based brand equity is defined as the differential effect of brand knowledge on consumer response to the marketing of the brand”.
We will outline these different concepts as named in the definition.
Differential effect
The differential effect is the difference in consumer responses to the marketing of a brand and the responses to an unbranded variant of the product.
Brand knowledge
Brand knowledge can be considered as the associations customers have in mind with the brand. Brand knowledge can be split up in two components; brand awareness and brand image.
Consumer response to marketing
The Consumer response to marketing can be defined as the consumer perceptions, preferences, and behavior resulting from marketing mix activities.
Based on these concepts of customer-based brand equity we can say that a brand has a positive customer-based brand equity if consumers react more positively to the marketing mix elements than they do to the same marketing mix elements of an unbranded product. For reaching a positive customer-based brand equity, the favorability, strength, and uniqueness of the brand associations are essential in determining a differential response. Therefore, Keller (2008) considers brand knowledge central to the definition of customer-based brand equity.
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performance of a branded product, the psychosocial meaning that can be deduced from the brand and the level of brand-name awareness.
2.3.4 Components of brand equity
Brand equity consists of four dimensions: brand loyalty, perceived quality, brand awareness and brand associations, as stated by Aaker (1991, 1996) and Keller (1993). According to Yoo and Donthu (2001), these dimensions can be used for drawing conclusions in marketing research concerning brand equity. For this reason Yoo and Donthu (2001) developed a brand equity scale which measures these dimensions. However, their factor analysis did not produce four distinct brand equity factors. Only perceived quality, brand loyalty, and brand awareness/associations were consistently found in each sample. This because of the inseparability of brand awareness and brand associations.
The following section will give a description of the components of brand equity used in this research, which are brand loyalty, perceived quality, and brand awareness/associations.
The Brand loyalty can be considered as the basis of brand equity. In the framework of Aaker, brand loyalty is considered as a measure of the attachment that a customer has to a brand. According to Aaker (1991), it reflects how likely a customer will switch to another brand, especially when that brand makes a change, either in price or in product features. Yoo and Donthu (2001) consider brand loyalty as the tendency to be loyal to a brand, which is demonstrated by the intention to buy the brand as a primary choice.
Perceived quality is defined by Aaker (1991) as the perception of consumers on the quality in general or superiority of a product or service. Perceived quality is considered by Aaker (1991) as an intangible, general feeling about a brand. Mostly it will be based on underlying dimensions such as product characteristics to which the brand is attached like reliability and performance. However, Zeithaml (1988) considers perceived quality more as consumers’ judgement about a product’s overall excellence or superiority”
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name a brand from memory, when given the product category or some related cue. Subsequently, brand recognition can be describes as consumers who can identify the brand under different circumstances by giving some of the brand elements. Keller (2008) states that brand awareness has an important role in consumers’ decision making.
It is important that consumers associate the brand with the product category
It can influence consumer decisions about brands in their consideration set
Brand awareness affects consumer decision making by influencing the formation and strength
Brand associations are considered by Aaker (1991) as anything “linked” in memory to a brand. According to Aaker (1991) the set of associations are often the underlying value of a brand, whereby the associations are the base for purchase decisions and for brand loyalty. The link to a brand in memory will be stronger when it is based on more experiences and exposure. According to Riezebos (2002), brand associations can be separated in material and immaterial associations, whereby the relative value of these associations are of importance. Riezebos (2002) defines the immaterial brand associations as the extent to which a consumer receives a psychosocial meaning from a brand. This means that with a high level of psychosocial meaning, this can enable consumers to choose what they want to associate with. The material associations of Riezebos (2002) corresponds with the perceived quality of Keller (2008) and Aaker (1991). According to Aaker (1997), there are five components of the brand psychosocial meaning; Sincerity, Excitement, Competence, Sophistication and Ruggedness.
According to Keller (2008), brand associations are necessary for creating a positive brand image, whereby the favorability, strength, and uniqueness of the associations are important.
Favorability of brand associations
Associations can vary as to how favorably they are experienced by consumers. Brand associations are favorable when consumers believe the brand has attributes and benefits which satisfies their needs.
Strength of brand associations
The strength of brand associations depends on how the information of the brand reaches the consumer’s mind and on the way the consumer interprets the information.
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Brand associations may or may not be shared with other competing brands. The essence of brand positioning is that the brand has a competitive advantage which may gives consumers a reason for purchasing.
2.3.5 Psychosocial meaning
As described in the previous paragraph, Riezebos (2002) defines the added value of a brand as the perceived performance of a branded product, the psychosocial meaning that can be deduced from the brand and the level of brand-name awareness. The components of brand equity used for this research are to some extent comparable with components of Riezebos (2002), except for psychosocial meaning.
Immaterial brand association evaluations are expressed in the brand-added value model of Riezebos (2002) as the level to which consumers can get psychosocial meaning from a brand. Brands with a high amount of psychosocial meaning can make it possible for consumers to express who they like to be. Whereby, dependant on the circumstances for a given consumer different self-concepts are possible (Riezebos, 2002). According to Aaker (1997), consumers who are used to adapt their behavior to socially appropriate norms are more sensitive to brands with a high psychosocial meaning. The model Aaker (1997) developed makes use of five dimensions of psychosocial meaning, to be considered as brand personality; sincerity, excitement, competence, sophistication, and ruggedness.
2.3.6 Conclusion
Brand equity is a widely discussed item in marketing literature. Brand equity can be approached in two different ways, the financial approach and the consumer approach. Nevertheless, in this research we will focus only on the consumer based brand equity. In our research we describe the most used dimensions of brand equity based on the literature of Keller (1993) and Aaker (1991, 1996). These dimensions are; brand loyalty, perceived quality, brand awareness and brand associations. With the scale developed by Yoo and Donthu (2001) we can measure the dimensions of brand equity for this research.
Furthermore, we describe psychosocial meaning as the level of psychosocial meaning a consumer can receive from a brand. This component of Riezebos (2002) can be measured by the brand personality scale developed by Aaker (1997).
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responses, and finally focusing on active brand relationships. However, there is no empirical research on similarities in private label packaging to national brands. These imitation strategies can enhance the brand equity and psychosocial meaning for private labels. Besides, there is no empirical research on the relation between store image and the components of brand equity. With this research we will try to fill this research gap.
2.4 What is the purchase behavior of private labels?
In order to answer the sub-question: “What is the purchase behavior of private labels?””, we will discuss the relevant academic literature on private label purchase behavior in this section. The private label purchase behavior which includes the willingness to pay for national brands and the purchase intention for private labels will be discussed.
2.4.1 Willingness to pay a price premium for a national brand
Most of private labels are typically cheaper than national brands. Because consumers often associate private labels with low cost characteristics they are willing to pay less for private labels than national brands (Cheng et al. 2007). Because of the high level of equity and image of national brands, national brand manufactures have the opportunity to demand price premiums for their products. NeverthelessCheng et al. (2007) suggests, when there is no consumers’ price perception difference between national brand and private labels, private labels are also able to market price premiums on their added value. Price premiums can be defined as the maximum price consumers will pay for national brands regarding to private labels.
Sethuraman and Cole (1999) investigated which factors influenced the price premiums consumers are willing to pay for national brands.
Perceived quality
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Consumption pleasure
Another factor Sethuraman and Cole (1999) have found, is that consumers will pay a higher premium for national brands in categories that provide high amount of consumption pleasure. National brand manufacturers can pursue premium pricing strategies in product categories consumed for hedonistic reasons. The hedonistic value can be increased through emotional advertising that focuses on the emotional needs and the benefits.
Demographic variables
Furthermore, Sethuraman and Cole (1999) suggest that the demographic variable income influences the price premiums consumers will pay for national brands. Sethuraman and Cole (1999) conclude that both low-income consumers and high-income consumers are more willing to pay price premiums for national brands than middle-income consumers. Sethurman and Cole (1999) suggest that the middle-income consumers’ price sensitivity has stimulated them to switch to private labels. According to Sethuraman and Cole (1999), high-income consumers are willing to pay price premiums because they can afford it, while low income consumers are paying price premiums and do not switch to private labels, because they have may have less knowledge about the quality of private labels.
2.4.3 Purchase intention private labels
Today, national brands are often perceived as being too expensive for what they deliver, which often encourages consumers to switch to private labels (Nenycz-Thiel and Romaniuk, 2009). This could be because consumers are less convinced that price premiums for national brands buys them better quality, superior features, and better ingredients (Sinha and Batra, 1999). Sinha and Batra (1999), suggest that consumers have become more price conscious, and consumers have created opinions on price quality relations and possible price unfairness of national brands. Consequently, consumers’ willingness to pay price premiums for national brands is decreasing. In the previous paragraph we have described which factors influence consumer willingness to pay a price premium for national brands. In this paragraphwe will discuss consumers’ susceptibility for buying private labels.
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Perceived risk
Perceived risk can be considered as consumers´ opinion regarding the uncertainty and negative consequences of buying products (Dowling & Staelin, 1994). This is supported by Hsu and Lai (2008), who defines perceived risk as the loss incurred when a product or brand does not meet up to expectations. According to Hsu and Lai (2008) private label purchases in a category increases when consumers perceive reduced consequence of making a mistake in choosing a product in the specific category.
Search characteristics
Consumers develop ways of reducing risk by searching for information that gives them confidence in possible situations of uncertainty (Murray, 1991). According to Hsu and Lai (2008) it is normal that consumers in risky and uncertain purchase situations obtain information as a strategy of risk reduction. Hsu and Lai (2008) suggest, when private labels include as much objective information about ingredients and quality on their package label, consumers will be more likely to purchase private labels.
Prior experience has been shown to decrease consumers perceived risk towards their purchase (Murray and Schlacter, 1990). This is supported by Corbitt (2003) who has found the purchasing experience leads to increased trust, thus decreasing their perceived risk. In product categories where the attributes are of “experience” type, instead of being of the “search ” type, strong national brands will have a higher purchase probability because awareness will decrease consumers’ perceived risk (Hsu and Lai, 2008). In such experience categories private labels will have often a lower purchase probability, because of their lower level of brand awareness.
Degree of price consciousness
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2.4.4 Conclusion
In this section we discussed the factors that influence the willingness to pay a price premium for national brands, and the factors that influence the purchase intention of private labels. National brands pursue price premium strategies to ensure the perception of their quality. Nowadays, however, consumers are less convinced that a price premium is a guarantee for surplus value against private labels. In order to increase consumers’ private label purchase behavior, private labels should focus on innovating packaging design and advertising, although Choi and Coughlan (2006) mention it is more cost efficient for private labels to imitate national brands in packaging design and features. Besides, when retailers pursue imitation strategies for package design, consumers may experience less added value of national brands. This is supported by Sinha and Batra (1999), who suggest consumers must clearly see the added value of the brand in order to show a willingness to pay price premiums. Therefore, we want to investigate if there is a negative relation between the similarities of national brands and private labels, with the willingness to pay price premiums for national brands. Furthermore, we want to investigate if there is a positive relation between the similarities of national brand and private labels with the purchase intention of private labels. Subsequently, we want to study the relation between the store image and the purchase behavior of private labels. According to Liu and Wang (2008), a positive store image can enhance consumers’ private label attitude, which is supported by Richardson et al. (1996) and de Wulf et al. (2005), who suggest a favorable store image has a positive influence on the private label sales.
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Chapter 3 Conceptual model
Based on insights we obtained from the theoretical framework on the different components store image, similarities between packaging, brand equity and psychosocial meaning, and the purchase behavior of private labels we constructed the following conceptual model (figure 3.1). The relations between the variables are explained by the hypotheses in the following paragraph.
Figure 3.1: Conceptual model
3.1 Hypotheses
In the conceptual model the hypotheses of this thesis are given, and in the next section the hypotheses are shortly explained.
The components of brand equity we have applied in our research are the most used in literature (Keller, 1993 and Aaker (1991); brand loyalty, perceived quality, brand awareness, and brand associations. Besides that, we have applied psychosocial meaning (Riezebos, 2002) in our research, which can be measured by the brand personality scale of Aaker (1997).
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Based on the literature study on this subject the following hypotheses can be formulated:
1a There is a positive relationship between the perceived similarities between the packaging of national brands and private
labels and the brand loyalty towards private labels
1b There is a positive relationship between the perceived similarities between the packaging of national brands and private
labels and the perceived quality towards private labels
1c There is a positive relationship between the perceived similarities between the packaging of national brands and private
labels and the brand awareness/associations towards private labels
1d There is a positive relationship between the perceived similarities between the packaging of national brands and private
labels and the psychosocial meaning towards private labels
As described in the theoretical framework, good store image can enhance the attractiveness of private labels. We have also found national brands are less influenced by store image (Liu and Wang, 2008 and Richardson et al. 1996). We want to investigate if store image, besides influencing the attractiveness of private labels, also influences the brand equity components of private labels.
Based on the literature study on this subject the following hypotheses can be formulated
2a There is a positive relationship between the store image of the retailer and the brand loyalty towards the private labels 2b There is a positive relationship between the store image of the retailer and the perceived quality towards the private
labels
2c There is a positive relationship between the store image of the retailer and the brand awareness/associations towards
the private labels
As described in the theoretical framework, national brands often receive a high level of equity and image. Based on these high levels of equity and image national brands are able to market price premiums. Nowadays, however, consumers are less convinced that price premiums are a guarantee for surplus value against private labels. To increase consumers’ private label purchase behavior, private labels should focus on innovating packaging design and advertising. However, we have found in the theoretical framework, it is more cost efficient to imitate national brands in packaging design and features. Besides, when retailers pursue packaging imitation strategies, consumers may experience less added value from national brands. Therefore, we want to investigate if there is a negative relation between the similarities of national brands and private labels, with the willingness to pay for national brands. Subsequently, we want to investigate if there is a positive relation between the similarities of national brand and private labels with the purchase intention of private labels.
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3b There is a negative relationship between the perceived similarities between the packaging of national brands and private labels and the willingness to pay a price premium for national brands
As described in the theoretical framework, a positive store image can enhance consumers’ private label attitude. Besides it was found a favorable store image has a positive influence on private label sales. Therefore, we want to study the relation between the store image and the purchase behavior of private labels. We want to investigate if there is a negative relation between store image and the willingness to pay for national brands. Subsequently, we want to investigate if there is a positive relation between store image and the purchase intention of private labels.
Based on the literature study on this subject the following hypotheses can be formulated;
3c There is a positive relationship between the store image of the retailer and the purchase intention of the private labels 3d There is a negative relationship between the store image of the retailer and the willingness to pay a price premium for national brands
In the next part this conceptual model with the hypotheses is the basis of our research, and is empirically analyzed. For obtaining the information to answer hypotheses and the research question, we will first discuss the research design in the next chapter.
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Chapter 4 Research Design
A research design can be considered as the framework or blueprint for conducting a marketing research project (Malhotra, 2007). In this chapter we will explain which procedures were followed to obtain the necessary information to answer the research question. In paragraph 4.1 the research method will be discussed. Next, in paragraph 4.2, the data collection for this research will be described. In paragraph 4.3 the groups used for the sample will be examined. Subsequently, in paragraph 4.4 the questionnaire will be discussed. Finally, in paragraph 4.5, the analysis which has to be performed for this research will be examined.
4.1 Design
According to Malhotra (2007), there are two types of research: explorative research and conclusive research. The main objective of explorative research is to gain insights and understanding in the problem. Exploratory research is mostly performed for getting a better problem definition, or for gaining more insights into a problem before developing an approach. For this type of research non-representative samples are used only for gaining more insights into problems, therefore the findings of exploratory research should be considered as tentative and only be used as input for further research.
Conclusive research is more formal and structured than exploratory research (Malhotra, 2007). This type of research is based on representative and large samples with quantitative data. Conclusive research is used for testing specific hypotheses and relationships. Therefore the findings can be used as input for academic research.
Subsequently, conclusive research can be split up in two types; descriptive research and causal research. The objective of descriptive research is to describe market characteristics or functions. Causal research is a type of conclusive research with as major objective obtaining evidence regarding cause-and-effect (causal) relationships. This research will be a combination of descriptive and causal research, because we want to validate the positive and negative relationships presented in the conceptual model and want to validate the causes in order to answer the research question.
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whereby only one sample of respondents of the target population is required. The respondents only have to fill in a questionnaire once.
4.2 Data collection
In this study we have investigated fourdifferent product groups. These product groups consist of a utilitarian group in non-food (detergent), an hedonic group in non-food (hair gel), an utilitarian group in food (margarine), and finally a hedonic group in food (coffee pads). In each product group we study both manufacturer brands and private label brands. The two private label brands selected for this research are the private label brands from retailers: Albert Heijn and C1000. During interviewing, the national brand and private label packaging were demonstrated.
In this study we describe the relationships between the similarities in private label packaging to national brands with the variables out of the conceptual model, and the relations between store image of the retailer with the variables out of the conceptual model. In order to receive sufficient responses to the questions concerning the store image of a retailer, two different retailers have been selected; Albert Heijn and C1000. Those two retailers have been selected because of their differences in consumer evaluations on store image. These differences are based on the outcome of consumer evaluations on store image in the ´GFK-zomerrapport’ by Koomen (2009). In this study consumers evaluated retailers on; tidiness, fresh food, assortment, product quality, low prices, offers, and employee friendliness. The result of this report has indicated Albert Heijn as the best retailer and C1000 fourteenth out of twenty-five retailers. Finally, in order to receive good responses to the component willingness to pay a price premium, we have made use of the original prices of the national brands and private labels.
The respondents were approached for personal interviewing; these personal interviews took place in the selected retailer stores. This method of interviewing can be compared with the mall-intercept interviews as described by Malhotra (2007). While performing these interviews, respondents were intercepted while shopping (Malhotra, 2007). According to Malhotra (2007), one advantage of mall-intercept interviews is the fact that it is more efficient for the respondents to move toward the interviewer than for the interviewer approaching the respondent.
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can be seen in the right column of table 4.1 the questionnaire contains propositions which are based on already existing frameworks from the academic literature. For measuring brand equity we used the brand equity scale as constructed by Yoo and Donthu (2001). The psychosocial meaning (Riezebos, 2002) is measured by the brand personality scale of Aaker (1997). Subsequently, for measuring the image of the retailer we applied the scale of Chowdhury et al. (2001).
For the component similarities between packaging national brand and private label we have cited in table 4.1 “researcher” as scale. This because there are no existing frameworks in the academic literature available. Therefore, we have developed our own propositions for this component, which are partly based on a scale used for a research named: “Look-A-Like Onderzoek” by EFMI. For the component of purchase behavior of private label there are also no existing scales in the literature available, therefore we have developed our own propositions. We assume these propositions were able to measure consumers’ purchase intention and willingness to pay a price premium.
In order to analyze the underlying structure in the propositions we measured a factor analysis was conducted. All of the propositions were measured with a seven-point Likert scale. With this scale respondents were able to give their opinion to which extent they agree or disagree with the propositions. All of the questions are based on the conceptual model and the hypotheses, except for the general questions. These general questions have to be asked in order to gain insight into the sample, which concerns; Age, Gender, Usage, Education, Household and Income. The questionnaire can be found in appendix 1, and the components and propositions are displayed in table 4.1.
Component Proposition Scale
Similarities between packaging national brand and private label
I see a lot of similarities between the packaging, considering the colors of the packaging
I see a lot of similarities between the packaging, considering the shape of the packaging
I see a lot of similarities between the packaging, considering the brand name on the packaging
I see a lot of similarities between the packaging, considering the content of the text on the packaging
Researcher
Brand equity; Brand loyalty I consider myself to be loyal to X
X would be my first choice
I will not buy other brands if X is available at the store
Yoo and Donthu, 2001
Brand equity; Perceived quality The likely quality of brand X is extremely high
The likelihood that brand X would be functional is very high
Yoo and Donthu, 2001
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brand associations I am aware of X
Some characteristics of X come to my mind quickly I can quickly recall the symbol or logo of X I have difficulty in imagining X in my mind
2001
Brand added value; Psychosocial meaning; Sincerity; Down-to-earth Honest Wholesome Cheerful Aaker, 1997 Excitement; Daring Spirited Imaginative Up-to-date Aaker, 1997 Competence; Reliable Intelligent Successful Aaker, 1997 Sophistication; Upper class Charming Aaker, 1997 Ruggedness; Outdoorsy Tough Aaker, 1997
Store image retailer; Employee Service;
<store name> employees are very friendly The services at <store name> is excellent
I am pleased with the service I receive at <store name>
Chowdhury et al. (2001)
Product Quality
<store name> sells only high quality products I like <store name> brand products
I can count on the products I buy at <store name> being excellent
Chowdhury et al. (2001)
Product selection
<store name> has a large variety of products Everything I need is at <store name> <store name> carries many national brands
Chowdhurry et al (2001)
Atmosphere
The appearance of <store name> is appealing <store name> is always dirty
<store name> is old-fashioned
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Convenience <store name> is easily accessible <store name> is convenient It is easy to get into the store
Chowdhury et al. (2001)
Prices/Value
The prices at <store name> are fair
I obtain value for my money at <store name> I can buy products for less at <store name>
Chowdhury et al. (2001)
Purchase behavior Willingness to pay a price premium;
The packaging of X pictures a good price/quality combination
When I look at the packaging, the price explains the added value
Researcher
Purchase intention;
When I need something out of the category, I consider to purchase product X
When I look at the packaging, this gives me good arguments to purchase product X
Researcher
Table 4.1: overview components
4.3 Sample
The sample has been divided in four groups of 18 respondents for both retailers; group A, group B, group C, and group D. Group A has received the questionnaire for the hedonic group in food (coffee pads), group B has received the questionnaire for the utilitarian group in food (margarine), group C has received the questionnaire for the utilitarian group in non-food (detergent), and group D has received the questionnaire for the hedonic group in non-food (hair gel).
The questions have been presented in the following hierarchy: 1. General usage information
2. Determining the degree in similarities between private label packaging and national brand packaging, with the scale of the researcher
3. Judging the National brands and Private Labels with the scale of Yoo and Donthu (1994) and Aaker (1997).
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4.4 Pre-testing the questionnaire
The questionnaire has been pre-tested on 15 individuals, who are friends and fellow students. The main goal of pre-testing the questionnaire was to find out if the questions were understandable. After gaining some new insights out of this pre-test , the final questionnaire was developed.
4.5 Analysis
In table 4.2 we give an overview of how we test the hypothesis. First we describe the hypothesis, then we give the variables, and finally we name the analyses.
As can be seen in the most right column of table 4.2 each hypotheses is tested with correlation analyses. According to Malhotra (2007), product moment correlation (r) can be considered as a statistic which summarizes the strength of association between two metric variables. This statistic is a widely used statistic for determining whether a linear relationship exists between two variables.
The variables of table 4.2 were analyzed with correlation analyses. First, we aimed to determine whether there is a positive correlation between the variables similarities in packaging (independent variable) and the brand equity/psychosocial meaning of the private labels. Secondly, we explored if there is a positive correlation between the store image of the retailer and the brand equity of the private labels. Subsequently, we explored if there is a positive correlation in the
similarities between the packaging and purchase behavior of private labels. Finally, we determined if there is a positive relationship between the store image of the retailer and the purchase behavior of private labels.
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Hypotheses Variables Tests
1a There is a positive relationship between the perceived similarities between the packaging of national brands and private labels and the brand loyalty towards private labels
Brand loyalty, Similarities national brand/private label
Correlation
1b There is a positive relationship between the perceived similarities between the packaging of national brands and private labels and the perceived quality towards private labels
Perceived quality, Similarities national brand/private label
Correlation
1c There is a positive relationship between the perceived similarities between the packaging of national brands and private labels and the brand awareness/associations towards private labels
Brand awareness/ associations, Similarities national brand/private label
Correlation
1d There is a positive relationship between the perceived similarities between the packaging of national brands and private labels and the psychosocial meaning towards private labels
Psychosocial meaning, Similarities national brand/private label
Correlation
2a There is a positive relationship between the store image of the retailer and the brand loyalty towards the private labels
Store image retailer, Brand loyalty
Correlation
2b There is a positive relationship between the store image of the retailer and the perceived quality towards the private labels
Store image retailer, Perceived quality
Correlation
2c There is a positive relationship between the store image of the retailer and the brand awareness/associations towards the private labels
Store image retailer, brand awareness/associations
Correlation
3a There is a positive relationship between the perceived similarities between the packaging of national brands and private labels and the purchase intention of private label brands
Similarities national brand/private label, purchase intention
Correlation
3b There is a negative relationship between the perceived similarities between the packaging of national brands and private labels and the willingness to pay a price premium for national brands
Similarities national brand/private label, Willingness to pay
Correlation
3c There is a positive relationship between the store image of the retailer and the purchase intention of the private labels
Store image, Purchase intention
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3d There is a negative relationship between thestore image of the retailer and the willingness to pay a price premium for national brands
Store image, Willingness to pay
Correlation
Table 4.2: Overview hypotheses testing
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Chapter 5 Descriptive Results
In this chapter the results of the research are described. Information concerning the results of the sample, constructs and variables is presented. In paragraph 5.1 the sampling design of the research is described. Next, in paragraph 5.2 the sample characteristics are described. Subsequently, in paragraph 5.3 the representativeness of the sample towards the population is discussed. In paragraph 5.4 the underlying structures from the propositions are analyzed, and in paragraph 5.5 the variables’ reliability and validity is explored. Finally, in paragraph 5.6 the most prominent outcomes of the research are presented.
5.1 Sampling design
Our sampling design starts with specifying the target population, which is necessary for performing effective research (Malhotra, 2007). The elements desired for this research are: male or female individuals above the age of 18, which had at least once purchased products in one of the product categories. The sampling technique we used for collecting our respondents is known as judgment sampling. According to Malhotra (2007), judgmental sampling is a type of convenience sampling in which the respondents are selected based on the judgment of the researcher. For this research the respondents are consumers of the private labels of the selected retailer stores.
At the selected retailer stores C1000 (Leek) and Albert Heijn (Uithoorn) consumers were invited to participate in the research. The questionnaire consisted of 42 questions and took about 7 minutes to fill in. For each retailer four identical groups of respondents were approached for filling in a questionnaire, which varies only in four different product categories (non-food hedonic, food hedonic, non-food utilitarian, and food utilitarian). First of all the questions aim to determine the similarities in private label packaging to national brands, secondly they were aimed to determine the brand equity, psychosocial meaning and purchase behavior, and finally to determine the store image.
5.2 Sample
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the final 4.9% of the respondents were between the age of 65 and 80. 50% of the respondents enjoyed higher education (15.3 University, and 34.7 HBO), 22.2% enjoyed MBO, and 27.8% enjoyed college (3.5% VWO, 8.3% HAVO, and 16.0% MAVO). The sample consists of 25.0 % respondents who had a single person household, 34.7 % lives with a partner without children, 38.2% lives with a family, and the final 2.1% lives in other household situations. Of the respondents 97.2 % regularly did their basic purchases in the store, and 2.8% did not. Each respondent (100%) was buyer of the product category of the questionnaire, whereby 1.4 % of the respondents purchased the products more times a week, 9.0% each week, 34.7% more times a month, 39.6% each month, 15.3% occasionally, and the final 4.2% had never purchased the products before.
5.3 Representativeness of the sample
The sample selected for this research should be a representative subgroup of the population. Therefore our sample is compared with the population figures of the Central Bureau of Statistics. The population should share common characteristics with the sample in order to perform a sufficient descriptive/causal research. CBS (2009) Sample (n=144) Chi-square Gender ,182 Men 49,5 % 43,1 % Female 50,5% 56,9% Age ,000** 0-18 years 21,4 % 0% 18-40 years 28,1 % 52,7% 40-65 years 35,5 % 42,4% 65 + 15% 4,9% Household ,014* Single person household 35,8 % 25 % Multiple person household 29,6 % 34,7 % Multiple person household with children 34,5 % 38,2 % Other household situations 0,7 % 2,1%
* Significant at the p< 0.05 level. ** Significant at the p< 0.01 level.
Table 5.1: population versus sample figures
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mostly aged between 20 and 40. Besides, the chi-square test indicated that both categories from CBS and our research are significant different (p<0.01). Looking at the category household, it can be stated that there are differences between the figures. This could be the result of persons who are part of households are more represented in retail stores then in general. Besides, the chi-square test indicated that both categories from CBS and our research are significant different (p<0.05). In spite of the differences it can be assumed the sample is representative.
5.4 Factor analysis
In order to analyze the underlying structure in the propositions we measured (the brand equity scale as formed by Yoo and Donthu (2001), the psychosocial meaning as formed by Aaker (1997), and the store image as formed by Chowdhurry (2001)) a factor analysis was conducted (See appendix 2). To be able to examine if a factor analyses is a correct approach, the Bartlett’s test of sphericity and the Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy have been applied. The Barlett’s test of sphericity is a test statistic used to examine the hypothesis that the variables are uncorrelated in the sample (Malhotra, 2007). If this hypothesis cannot be rejected (<0.05), then the appropriateness of factor analysis should be questioned. Like the Barlett’s test of sphericity, the latter test (KMO measure of sampling adequacy) is also used to examine the appropriateness of factor analysis (Malhotra, 2007), whereby the value of the KMO statistic should be greater than 0.5 in order to indicate that the correlations between pairs of variables can be explained by other variables and that factor analysis may be appropriate (Malhotra, 2007).
The KMO test (with respectively values of 0.87, 0.85, 0.77) and Barlett’s test (with respectively values of 0.00, 0.00, 0.00) point out factor analyses is a correct approach. In spite of our factor analysis shows some small deviations, the factor analyses indicates enough similarities to the scales of Yoo and Donthu (2001), Aaker (1997), and Chowdhurry (2001) for forming the same constructs with our data. Therefore, we can conclude that our factor analysis represents the same factors as indicated by Yoo and Donthu (2001), Aaker (1997), and Chowdhurry (2001) (see appendix 2).
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the scale for similarities in private label packaging to national brands the factor analysis indicated we had to apply two components (see table 5.2).
Component 1 Component 2
Similarities 1 ‘color’ ,759
Similarities 2 ‘shape’ ,850
Similarities 3 ‘brand name’ ,773
Similarities 4 ‘text’ ,624
Similarities 5 ‘font size’ ,847
Table 5.2: Rotated factor matrix (principal component analysis)
For interpreting table 5.2, the variables that have large influences on the same factor had to be identified. In the rotated factor matrix of figure 5.2, factor 1 has high coefficients for variables similarities 3 (brand name), similarities 4 (text), and similarities 5 (font size). For that reason, this factor will be labelled as an informative packaging similarities factor. Factor 2 is highly related with variables similarities 1 (colour) and similarities 2 (shape). Therefore, factor 2 will be labelled as a signing packaging similarities factor. For factor 1 we apply the term informative packaging similarities in order to emphasise these specific variables provide information for the consumers such as the brand name on the packaging, text on the packaging, and the font size on the packaging. Consequently, we apply for factor 2 the term signing packaging similarities in order to stress the more signing characteristics for consumers such as the colour and shape of packaging.
