What Makes Consumers Pay More For National Brands Than For Store Brands - Image Or Quality?

Overview: Private labels or store brands have become a major force to reckon with in grocery products. They account for over one-fifth of total volume sales in the United States and are growing faster than national brands. This article attempts to understand why consumers are willing to pay a higher price for national brands than for store brands in grocery products. Is it because of perceived quality differential or non-quality utility? It draws upon a general utility framework and develops an econometric model for separating the total price premium that consumers are willing to pay into three components -perceived quality differential, quality sensitivity, and non-quality utility. The key qualitative insight is that perceived quality differential and non-quality utility or brand image dominate in different stages of the purchase process. Perceived quality differential or acceptable store brand quality is the primary driving force in a consumer's decision to participate in or consider store brand purchase. However, when it comes to deciding how much more to pay for national brands over store brands, brand image or brand equity is the dominant factor. The paper also discusses several other finding and their implications for segmentation and promotion strategies for both manufacturers and retailers.

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Format: PDF | Size: 116KB | Date: Nov 2000 | Pages: 40