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Private labels versus national brands: The effects of branding on sensory perceptions and purchase intentions
Journal of Retailing and Consumer Services 27 (2015) 74–79
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Journal of Retailing and Consumer Services journal homepage: www.elsevier.com/locate/jretconser
Private labels versus national brands: The effects of branding on sensory perceptions and purchase intentions Patricia Rossi a,n, Adilson Borges b, Marat Bakpayev b a b
IESEG School of Management, Catholic University of Lille, 3 rue de la Digue, 59000 Lille, France NEOMA Business School, 59 rue Pierre Taittinger, 51100 Reims, France
art ic l e i nf o
a b s t r a c t
Article history: Received 6 February 2015 Received in revised form 12 July 2015 Accepted 12 July 2015
Consumers increasingly consider private labels to be as good as national brands. This research raises the question of whether national brands and private labels equally affect consumers’ sensory perceptions and purchase intentions. The results of two studies show that consumers reverse their evaluation of private labels (vs. national brands) when tasting the product in an informed (vs. blind) condition. When consumers are not aware of brand names, they indicate better taste and higher purchase intentions for private labels. However, the opposite is true when they try products in an informed condition. We discuss the implications for private labels and national brands. & 2015 Elsevier Ltd. All rights reserved.
Keywords: Branding National brands Private labels Purchase intentions Sensory perception
1. Introduction It is important for managers to know how to position a private label1 vis-a-vis national brands (Hoch, 1996). Today, this question remains relevant particularly because private labels are growing in quality and adopting different positions to serve different market segments (Geyskens et al., 2010; Liu and Wang, 2008). Past work suggested that the best positioning strategy for a private label depends on how it competes with national brands and its own quality level (Choi and Coughlan, 2006). Given the fact that some private labels can objectively be of better quality than national brands (Sethuraman and Gielens, 2014), especially premium private labels (Braak et al., 2014; Geyskens et al., 2010), the competition between private labels and national brands remains an important subject for research. Historically, private labels represented lower-price, lowerquality options than competing national brands (Fitzell, 1982; Goldsmith et al., 2010). However, recent industry studies show n
Corresponding author. E-mail addresses: [email protected] (P. Rossi), [email protected] (A. Borges), [email protected] (M. Bakpayev). 1 In the literature, private labels are defined as products sold under a retailer’s own name or a different name created exclusively by the retailer; whereas national brands are manufacturer brands (Boyle and Lathrop, 2013; Geyskens et al., 2010; Goldsmith et al., 2010; Huang and Huddleston, 2009; Olbrich and Grewe; 2013; Steenkamp et al., 2010). http://dx.doi.org/10.1016/j.jretconser.2015.07.006 0969-6989/& 2015 Elsevier Ltd. All rights reserved.
that consumer perceptions of private labels have changed over the years. For example, nine out of ten American consumers consider private labels to be as good as national brands (Deloitte, 2014). In the United Kingdom, almost half of consumers believe that private labels and national brands are produced in the same factories with different packaging, and 59% of consumers believe that private labels are more expensive only because of advertising costs and not as a result of better raw materials (Euromonitor International, 2014). In addition, the latest market share data show that private labels continue to spread in popularity across Europe and account for at least 30% of all products sold in 15 countries, the highest figure yet (PLMA, 2014). Although consumers claim they make food choices based on product quality and taste, extrinsic cues, such as product brand, strongly impact their perceptions and decisions (Dotson et al., 2012). For example, extant research shows that brand name plays a major role in product evaluation, driving expectations about performance and quality (Poulsen et al., 1996). In addition, brands cause consumers to perceive better taste, and in blind versus informed conditions, they evaluate the same products differently (Fornerino and d’Hautville, 2010; McClure et al., 2004). Consumers now have favorable perceptions of private labels (Nielsen, 2014). The fact that they acknowledge private labels to be high-quality products (Deloitte, 2014; Euromonitor International, 2014) raises the question of whether product brands (national brands versus private labels) influence consumers’ inferences regarding product quality. Do consumers still view national brands
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as indicating superiority when they evaluate intrinsic attributes? Can private labels shape consumers’ taste perception as national brands can? In other words, have consumers revised their overall perceptions of private labels’ quality as industry reports suggest? This article aims to answer those questions.
2. Theoretical background and research hypothesis When private labels were first introduced, they were positioned as economy products (also known as the budget segment), offering lower quality and prices than national brands (Boyle and Lathrop, 2013; Fitzell, 1982; Goldsmith et al., 2010). However, during the 1980s, private labels improved their quality and these products became similar to national brands (International Markets Bureau, 2010). In the 1990s to 2000s, private labels turned to differentiation and further sophistication. Retailers then developed multiple types of private labels, expanding from fast-moving consumer goods to clothing, home-care products, and other categories (Boyle, 2003; Liljander et al., 2009). Nowadays, private labels are not merely generic alternatives to national brands; instead, they cover different categories and target many segments (Hoch, 1996). Retailers position their private labels using quality and pricing strategies, with “good,” “better,” and “best” approaches (Geyskens et al., 2010; Liu and Wang, 2008). For example, in the generic low-price, low-quality approach—the “good” approach—private labels follow an economy strategy, avoiding expensive ingredients to reduce costs (Boyle and Lathrop, 2013; Geyskens et al., 2010). The standard private label—the “better” approach—follows mainstream national brands and targets consumers looking for mid-quality alternatives (Kumar and Steenkamp, 2007). Finally, premium private labels—the “best” approach—are at the top end of the market and offer quality equal to premium national brands (Geyskens et al., 2010). Because branding can play a major role in the premium product segment in shaping consumers’ evaluations, this research focuses on premium private labels to examine whether they create the same consumer experience as more established national brands. Since private labels now have similar quality to that of national brands (Sethuraman and Gielens, 2014), one might assume that product brand have less significant impact on consumer perceptions. Industry reports indicate consumers recognize that private labels are growing in quality and the differences compared to national brands are only a matter of advertising expenses (Euromonitor International, 2014). As private label products increase in quality, consumers are likely to modify their product evaluations (e.g. Mendez et al., 2008; Steenkamp et al., 2010). From this perspective, brand name should have lower impact on consumer perceptions because product evaluation would be based on product quality. In other words, product quality would drive consumer behavior, regardless of product brand, leading to higher purchase intentions and superior sensory perceptions (Ailawadi and Keller, 2004; Bao et al., 2011; Batra and Sinha, 2000; Das, 2014; Hoch and Banerji, 1993). Based on this rationale, we propose: H1. Consumers will have similar purchase intentions toward premium private labels and national brands when they are either (a) informed of or (b) blind to the brand they evaluate. Apart from overall product quality perception, brands can shape consumers’ sensorial experiences (De Wulf et al., 2005). For instance, consumers often perceive that food tastes better when it is more expensive (Just et al., 2014) and when the brand has a good reputation (Belizzi and Warren, 1982; Makens, 1965). Similarly, brand information influences preferences (McClure et al.,
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2004). Nevertheless, since consumers now believe that premium private labels and national brands are produced in the same factory using the same raw materials (Euromonitor International, 2014), they should perceive that both premium private labels and national brands products generate equal sensory experiences in the form of taste perceptions. More formally: H2. Consumers will have similar taste perceptions of premium private labels and national brands when they are either (a) informed of or (b) blind to the brand they taste. Although private labels and national brands are growing more similar in quality, other aspects can play a major role in the competition to win consumers. Brand equity theory helps to understand the role that brands play in consumer decision making. Brand equity suggests that strong brands create value for the company by eliciting perceptions, feelings, and associations related to a target brand, including salience, imagery, and resonance (Aaker, 1996; Keller, 2003). In addition, brand equity causes consumers to use brand names as a heuristic cue to infer product quality (DelVecchio, 2001; Maheswaran et al., 1991), shaping their sensory perceptions and purchase intentions (Fornerino and d’Hautville, 2010; Grewal et al., 1998; Walgreen et al., 1995). From a brand equity perspective, brand names are powerful extrinsic cues that cause consumers to react favorably to products (Keller, 1993; Teas and Agarwal, 2000). In comparison with private labels, national brands have particularly strong brand equity so that consumers positively associate national brands with product quality (Sethuraman, 2003). As a result, national brands are highly likely to evoke superior perceptions (Richardson et al., 1994) and higher purchase intentions relative to private labels (Das, 2014; Grewal et al., 1998; Walgreen et al., 1995). If consumers associate national brands with higher quality, one might assume that these products will evoke higher sensory perceptions or better taste in comparison with private labels. Brands have been shown to boost food taste experiences, even when consumers taste the same product (Paasovaara et al., 2012). When food and drinks are identified by a favored brand, consumers indicate they taste better (Robinson et al., 2007). Furthermore, extrinsic cues distort basic sensorial experiences (Litt and Shiv, 2012). Thus, more formally, we propose: Alternative H1. (a) Consumers will have lower purchase intentions for private labels than for national brands when they are informed of the brand they are evaluating. (b) Consumers will have similar purchase intentions for private labels and national brands when they are blind to the brand they are evaluating. Alternative H2. (a) Consumers will have lower sensory perceptions of taste for private labels than for national brands when they are informed of the brand they are evaluating. (b) Consumers will have similar taste perceptions for private labels and national brands when they are blind to the brand they are evaluating. We undertook two experimental studies to investigate our research hypotheses. We used different products to increase the validity of our findings.
3. Study 1 3.1. Design, stimuli, and participants Study 1 was an investigation of product brand and brand information as they affect consumer evaluations. The study used a 2 (brand: national brand vs. private label) 2 (brand information: blind vs. informed) between-subjects experimental design. We
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tested the leading national brand of hazelnut spread for the national brand condition, and a premium private label of hazelnut spread marketed by a well-known retailer for the private label condition. A sample of 119 business school students participated voluntarily in the study (50.4% women, Mage ¼ 24.9; SD ¼ 2.8). On arrival, all participants tasted samples of hazelnut spread on a toast. In the informed (vs. blind) condition, participants were able (vs. unable) to see the brand name of the product they tasted. We used purchase intentions and perceived taste as the main dependent variables. After tasting the product, participants indicated their purchase intentions on a two-item scale (e.g., “I would likely buy this product,” 1 ¼strongly disagree; 7 ¼strongly agree). They evaluated product taste by responding to the question: “Overall, what do you think of the taste of this product?” (1 ¼bad; 7 ¼ excellent). We controlled for their state of hunger by asking them “Are you hungry right now?” (1 ¼not hungry at all; 7 ¼very hungry). In addition, to control for other possible explanations, we measured whether participants like chocolate (e.g., “How much do you like chocolate,” 1 ¼not at all; 7¼ a lot), their previous experience with brands of hazelnut spread (e.g., “How often do you eat hazelnut spreads,” 1¼ never; 7 ¼frequently), and their preferred brand. Finally, we measured their moods on a three-item scale (e.g., “I feel happy right now,” 1 ¼strongly disagree; 7¼ strongly agree) because mood can be a source of positive and negative food evaluations (Desmet and Schifferstein, 2008). 3.2. Results and discussion None of the control variables affected the dependent variables. For instance, hunger level and chocolate likeability showed no differences among participants in each condition (all p’s 4.1). Frequency of hazelnut spread consumption did not influence results (p 4.1). Although 80.7% of our sample indicated the national brand as their preferred brand, results were not statistically different between conditions (p 4.1). Participants’ mood (α ¼.776) had no effect on results (p 4.1). Therefore, we dropped these items from our analyzes. 3.2.1. Purchase intentions The two items used to test purchase intentions correlated highly (r ¼.82, p o.01). Results of a two-way ANOVA showed a significant interaction between product brand and brand information on purchase intentions (F(1,115) ¼ 5.10, p o.05). Participants who were aware of the brand indicated higher purchase intentions for the national brand than for the private label (MNB ¼5.03; MPL ¼3.70; F(1,115) ¼ 8.74; p o.05). In contrast, participants showed no difference in purchase intentions for the national brand and private label in the blind condition (MNB ¼4.43; MPL ¼4.33; F(1,115) ¼0.50, p ¼ns). These results support Alternative H1. 3.2.2. Perceived taste A two-way ANOVA (product brand x brand information) showed a significant effect on perceived taste (F(1,115) ¼4.45, p o.05). Specifically, in the informed condition, participants preferred the taste of the national brand to that of the private label (MNB ¼5.79; MPL ¼5.23; F(1,115) ¼4.79, p o.05). However, in the blind condition, national brand and private label have no significant difference (MNB ¼5.00; MPL ¼5.20; F(1,115) ¼0.62, p ¼ns). This result supports Alternative H2.
3.2.3. Discussion Our results demonstrate that even when retailers offer premium private labels (i.e. high-quality products) to compete with national brands, consumers still perceive national brands more positively. While consumers acknowledge that private labels are as good as national brands (Deloitte, 2014), they still use brands as a cue defining their purchase intentions and perceptions of taste. However, when blind to the brand, consumers perceived similarity between the two products, showing no differences in purchase intentions and taste perceptions. To extend the findings, we tested the effects with a different product in Study 2.
4. Study 2 4.1. Design, stimuli, and participants Study 2 used the same 2 (product brand: national brand vs. private label) 2 (brand information: blind vs. informed) between-subjects experimental design. However, this time we tested reactions to champagne. Unlike other studies, in which all participants tasted the same product in all experimental conditions (Guidry et al., 2009), we used two different brands available on the market. In the national brand condition, we used a brand owned by one of the world’s leading wine and spirits groups. In the private label condition, we selected a premium brand champagne from the largest retailer in France. We carefully chose two intrinsically similar products: both the national brand and the private label were non-vintage brut champagne made from a blend of three grape varieties. A sample of 261 business school students participated voluntarily in the study (53% women, Mage ¼ 22.2; SD ¼1.0). All students were 21-years-old or older. On arrival, participants learned about the procedures of the study and then tasted a quarter of a small glass of champagne (3 cl). In the informed condition, participants could see the champagne bottle while tasting the product. However, unlike in Study 1, the retailer’s name was not visible on the label. Thus, participants received additional information allowing them to classify the product as a national brand or a private label. We adopted this procedure in the informed condition to ensure that participants would be aware of the product brand during the experiment. In the blind condition, participants could not see the label and received no information about the champagne brand. We used the same dependent variables as in Study 1—purchase intentions and perceived taste. In addition, because knowledge of a product category can affect how individuals process information on quality (Perrouty et al., 2004), we controlled for participants’ level of champagne expertize (1 ¼ absolute beginner; 7¼ expert). Similarly, we controlled for frequency of wine and champagne consumption (1 ¼ I don’t drink at all; 7 ¼I drink frequently), and we measured participant’s involvement with wine using a three-item semantic differential scale (e.g., “For me wine is” 1 ¼ unimportant; 7¼ important). 4.2. Results and discussion Participants in each condition showed no significant differences for level of champagne expertise, frequency of consumption for both wine and champagne, and involvement with wine (α ¼.817) (all p's 4.1). Because these control variables had no effect on the results, we dropped them from the analyses. 4.2.1. Purchase intentions The two items used to measure purchase intentions correlated
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highly (r ¼ .73; p o.01). The interaction between product brand and brand information significantly affected purchase intentions (F(1,257) ¼14.85, po .001). Specifically, in the informed condition, participants who tasted the national brand indicated higher purchase intentions than those who tasted the private label (MNB ¼3.83; MPL ¼ 2.86; F(1,257) ¼12.62, p o.01). However, in the blind condition, participants indicated higher purchase intentions for the private label (vs. national brand) (MNB ¼3.18; MPL ¼3.72; F (1,257) ¼ 3.69, p ¼.05). 4.2.2. Perceived taste A two-way ANOVA (product brand brand information) showed a significant effect on taste perception (F(1,257) ¼22.71, p o.001). In the informed condition, participants indicated that the national brand tasted better than the private label (MNB ¼5.11; MPL ¼4.32; F(1,257) ¼18.23, p o.01). However, when participants blind-tasted the champagne, they indicated that the private label product was better than the national brand (MNB ¼4.68; MPL ¼5.16; F (1,257)¼6.23, po.05). These results support Alternative H2. 4.2.3. Discussion Study 2, using a different product category, confirmed previous results. The participants of the Study acknowledged the high quality of premium private labels, as demonstrated in the blind tests. However, once participants knew which brand they had tasted, they perceived that the national brand was superior to the premium private label. Importantly, the retailer’s name was not visible on the private label champagne. We suggest that retailers may use this strategy to dissociate the product image from their own image. It might appear contradictory to put a retailer name on a so-called exclusive product such as champagne. Thus, even if consumers know that private labels can be of high quality, they will prefer national brands. In particular, the findings show that consumers have a negative bias against private labels, even when the product does not use the retailer’s brand name.
5. General discussion and conclusions In today's competitive markets, differentiation is increasingly difficult to establish, so private labels are an important strategy for retailers (Mejri and Bhatli, 2014). Private labels contribute to higher margins, store traffic, consumer loyalty, and store profitability (Ashley, 1998; Braak et al., 2013; Collins-Dodd and Lindley, 2003; Hoch and Banerji, 1993; Narasimhan and Wilcox, 1998; Richardson et al., 1994; Semeijn et al., 2004). Despite providing so many benefits, retailers must improve perceptions of their premium private labels. Although consumers acknowledge that private labels can indicate products of high quality (Deloitte, 2014; Euromonitor International, 2014), brand image still plays a major role in consumer perceptions and intentions. In an experimental setting, we show that national brands lead to superior taste perceptions and purchase intentions only when consumers are informed of the brand. These results are consistent across two studies with different product categories. In contrast, in blind conditions, private labels and national brands either show no differences in terms of taste and purchase intentions (Study 1), or consumers perceive that private labels taste better and evoke higher purchase intentions (Study 2). At first glance, such results seem to demonstrate that private labels are “weak” compared to national brands, but they also reveal important growth opportunities. Although premium private labels have emerged as one of the hottest retailing trends (Kumar and Steenkamp, 2007), our results suggest that retailers can increase the brand equity of their products by focusing on
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branding and positioning strategies. We make several contributions through the studies we report in this article. We demonstrate that product brands can alter consumers’ perceptions. This aligns with research showing that product brands induce different evaluations (De Wulf et al., 2005). In addition, our findings highlight that brand equity and positioning are essential aspects of brand success (Erdem et al., 2004). These findings have important implications for retailers who want to gain market share by offering premium private labels. In particular, the results suggest that premium private labels should adopt all elements of brand equity, such as knowledge, salience, performance, and imagery (Keller, 1993). In other words, retailers should manage these products from a branding perspective (Cuneo et al., 2012), which would allow consumers to build positive associations (Aaker, 1996). Our results suggest that the “quality gap” that once existed between premium private labels and national brands is fading; but retailers must still confront the “brand gap.” Again, strong brands —or strong private labels—can combat the gap by providing positive associations (Olson, 2012). This does not mean that all private labels should adopt the brand equity perspective. We acknowledge that low-, mid-, and top-tier private labels target different segments. When consumers perceive little or no difference between available options, low-tier private labels are already succeeding. However, when targeting those who are looking for premium products, retailers might also use other features such as form, size, color, and packaging to win consumers. Past research supported such a strategy by showing that the ideal positioning for private labels depends on national brands. For example, when the two strongest national brands are undifferentiated, the private label should differentiate from them; however, when the national brands are differentiated, a high-quality private label should be positioned closer to the strongest national brand (Choi and Coughlan, 2006). In addition, product brand is an important source of information (Litt and Shiv, 2012), therefore, retailers should create strong brand names to help consumers make the link between brand and quality. By doing so, retailers can increase their market share especially because once consumers are satisfied with private labels, they do not return to national brands (Goldsmith et al., 2010). Our results show that consumers go beyond quality in differentiating between national brands and private labels. That is, product substitutability is not a one-dimensional concept; investment in quality alone without considering brand equity can obscure other features of private label differentiation (Choi and Coughlan, 2006). Thus, we suggest that retailers could also adopt other strategies besides managing premium private labels from a branding perspective. For instance, retailers could use a tasting strategy at the point of sale. In this case, blind sampling sessions in stores with high customer flow could promote a buzz and lead to positive intentions toward the product. Moreover, consumers would benefit by interacting and becoming more involved with the product, reducing the perceived risk of purchasing private labels (Erdem and Swait, 1998). Such strategies to get closer to consumers would positively impact their trust in the private label, with consequent sales growth. Our main focus in this paper is to uncover how private labels differ from national brands in terms of sensory evaluations and purchase intentions. However, it is also interesting to examine our results from the national brand perspective. For example, brand equity, positioning, and differentiation are relevant for national brands; these elements lead to stronger brand equity compared to private labels (Sethuraman, 2003). However, since premium private labels are becoming similar to national brands in terms of quality (as our results in the blind conditions show), national brands should try to differentiate themselves according to other
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dimensions. For instance, clearly establishing unique product features such as packaging and color may help to reinforce brand equity (Choi and Coughlan, 2006). In addition, national brands should pay attention to brand identity (Keller, 1993), which has clear positive effects on consumer identities and feelings of belonging to particular groups of brand users (Shouten and McAlexander, 1995). Therefore, national brands should concentrate on building stronger ties with consumers, extrapolating the dimension of high quality. In other words, national brands should position themselves to face the new market challenges by focusing on other aspects that can build brand equity and differentiation. 5.1. Limitations and future research This study has some limitations that also represent opportunities for future research. First, although price has often been associated with positive product perception (Doods et al., 1991), our research may be limited by the fact that we did not control for price. However, for private labels of food products, negative or small correlation coefficients between price and quality have been shown to prevent price from indicating quality (Olbrich and Jansen, 2014), which may attenuate the limitation. Second, we conducted our experiments in controlled environments. Future research could use a similar approach in real settings by conducting field studies, such as blind tests in supermarkets. Third, our studies focused only on taste perceptions. Future studies might attempt to replicate our results—superior sensory evaluation for private labels in blind conditions and for national brands in informed conditions —by using different product categories that activate other human senses. For example, would a product such as perfume, which activates smell rather than taste, yield the same pattern of findings? In addition, future studies could examine whether other extrinsic cues such as fair trade or eco labels have the same effect as product brands. Finally, further research could investigate underlying mechanisms for the proposed interaction, and also check whether such mechanisms remain the same for a variety of product categories and human senses.
Acknowledgements The first and second authors gratefully acknowledge support from the Conseil Regional Champagne-Ardenne through the Value Creation Grant.
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Contents lists available at ScienceDirect
Journal of Retailing and Consumer Services journal homepage: www.elsevier.com/locate/jretconser
Private labels versus national brands: The effects of branding on sensory perceptions and purchase intentions Patricia Rossi a,n, Adilson Borges b, Marat Bakpayev b a b
IESEG School of Management, Catholic University of Lille, 3 rue de la Digue, 59000 Lille, France NEOMA Business School, 59 rue Pierre Taittinger, 51100 Reims, France
art ic l e i nf o
a b s t r a c t
Article history: Received 6 February 2015 Received in revised form 12 July 2015 Accepted 12 July 2015
Consumers increasingly consider private labels to be as good as national brands. This research raises the question of whether national brands and private labels equally affect consumers’ sensory perceptions and purchase intentions. The results of two studies show that consumers reverse their evaluation of private labels (vs. national brands) when tasting the product in an informed (vs. blind) condition. When consumers are not aware of brand names, they indicate better taste and higher purchase intentions for private labels. However, the opposite is true when they try products in an informed condition. We discuss the implications for private labels and national brands. & 2015 Elsevier Ltd. All rights reserved.
Keywords: Branding National brands Private labels Purchase intentions Sensory perception
1. Introduction It is important for managers to know how to position a private label1 vis-a-vis national brands (Hoch, 1996). Today, this question remains relevant particularly because private labels are growing in quality and adopting different positions to serve different market segments (Geyskens et al., 2010; Liu and Wang, 2008). Past work suggested that the best positioning strategy for a private label depends on how it competes with national brands and its own quality level (Choi and Coughlan, 2006). Given the fact that some private labels can objectively be of better quality than national brands (Sethuraman and Gielens, 2014), especially premium private labels (Braak et al., 2014; Geyskens et al., 2010), the competition between private labels and national brands remains an important subject for research. Historically, private labels represented lower-price, lowerquality options than competing national brands (Fitzell, 1982; Goldsmith et al., 2010). However, recent industry studies show n
Corresponding author. E-mail addresses: [email protected] (P. Rossi), [email protected] (A. Borges), [email protected] (M. Bakpayev). 1 In the literature, private labels are defined as products sold under a retailer’s own name or a different name created exclusively by the retailer; whereas national brands are manufacturer brands (Boyle and Lathrop, 2013; Geyskens et al., 2010; Goldsmith et al., 2010; Huang and Huddleston, 2009; Olbrich and Grewe; 2013; Steenkamp et al., 2010). http://dx.doi.org/10.1016/j.jretconser.2015.07.006 0969-6989/& 2015 Elsevier Ltd. All rights reserved.
that consumer perceptions of private labels have changed over the years. For example, nine out of ten American consumers consider private labels to be as good as national brands (Deloitte, 2014). In the United Kingdom, almost half of consumers believe that private labels and national brands are produced in the same factories with different packaging, and 59% of consumers believe that private labels are more expensive only because of advertising costs and not as a result of better raw materials (Euromonitor International, 2014). In addition, the latest market share data show that private labels continue to spread in popularity across Europe and account for at least 30% of all products sold in 15 countries, the highest figure yet (PLMA, 2014). Although consumers claim they make food choices based on product quality and taste, extrinsic cues, such as product brand, strongly impact their perceptions and decisions (Dotson et al., 2012). For example, extant research shows that brand name plays a major role in product evaluation, driving expectations about performance and quality (Poulsen et al., 1996). In addition, brands cause consumers to perceive better taste, and in blind versus informed conditions, they evaluate the same products differently (Fornerino and d’Hautville, 2010; McClure et al., 2004). Consumers now have favorable perceptions of private labels (Nielsen, 2014). The fact that they acknowledge private labels to be high-quality products (Deloitte, 2014; Euromonitor International, 2014) raises the question of whether product brands (national brands versus private labels) influence consumers’ inferences regarding product quality. Do consumers still view national brands
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as indicating superiority when they evaluate intrinsic attributes? Can private labels shape consumers’ taste perception as national brands can? In other words, have consumers revised their overall perceptions of private labels’ quality as industry reports suggest? This article aims to answer those questions.
2. Theoretical background and research hypothesis When private labels were first introduced, they were positioned as economy products (also known as the budget segment), offering lower quality and prices than national brands (Boyle and Lathrop, 2013; Fitzell, 1982; Goldsmith et al., 2010). However, during the 1980s, private labels improved their quality and these products became similar to national brands (International Markets Bureau, 2010). In the 1990s to 2000s, private labels turned to differentiation and further sophistication. Retailers then developed multiple types of private labels, expanding from fast-moving consumer goods to clothing, home-care products, and other categories (Boyle, 2003; Liljander et al., 2009). Nowadays, private labels are not merely generic alternatives to national brands; instead, they cover different categories and target many segments (Hoch, 1996). Retailers position their private labels using quality and pricing strategies, with “good,” “better,” and “best” approaches (Geyskens et al., 2010; Liu and Wang, 2008). For example, in the generic low-price, low-quality approach—the “good” approach—private labels follow an economy strategy, avoiding expensive ingredients to reduce costs (Boyle and Lathrop, 2013; Geyskens et al., 2010). The standard private label—the “better” approach—follows mainstream national brands and targets consumers looking for mid-quality alternatives (Kumar and Steenkamp, 2007). Finally, premium private labels—the “best” approach—are at the top end of the market and offer quality equal to premium national brands (Geyskens et al., 2010). Because branding can play a major role in the premium product segment in shaping consumers’ evaluations, this research focuses on premium private labels to examine whether they create the same consumer experience as more established national brands. Since private labels now have similar quality to that of national brands (Sethuraman and Gielens, 2014), one might assume that product brand have less significant impact on consumer perceptions. Industry reports indicate consumers recognize that private labels are growing in quality and the differences compared to national brands are only a matter of advertising expenses (Euromonitor International, 2014). As private label products increase in quality, consumers are likely to modify their product evaluations (e.g. Mendez et al., 2008; Steenkamp et al., 2010). From this perspective, brand name should have lower impact on consumer perceptions because product evaluation would be based on product quality. In other words, product quality would drive consumer behavior, regardless of product brand, leading to higher purchase intentions and superior sensory perceptions (Ailawadi and Keller, 2004; Bao et al., 2011; Batra and Sinha, 2000; Das, 2014; Hoch and Banerji, 1993). Based on this rationale, we propose: H1. Consumers will have similar purchase intentions toward premium private labels and national brands when they are either (a) informed of or (b) blind to the brand they evaluate. Apart from overall product quality perception, brands can shape consumers’ sensorial experiences (De Wulf et al., 2005). For instance, consumers often perceive that food tastes better when it is more expensive (Just et al., 2014) and when the brand has a good reputation (Belizzi and Warren, 1982; Makens, 1965). Similarly, brand information influences preferences (McClure et al.,
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2004). Nevertheless, since consumers now believe that premium private labels and national brands are produced in the same factory using the same raw materials (Euromonitor International, 2014), they should perceive that both premium private labels and national brands products generate equal sensory experiences in the form of taste perceptions. More formally: H2. Consumers will have similar taste perceptions of premium private labels and national brands when they are either (a) informed of or (b) blind to the brand they taste. Although private labels and national brands are growing more similar in quality, other aspects can play a major role in the competition to win consumers. Brand equity theory helps to understand the role that brands play in consumer decision making. Brand equity suggests that strong brands create value for the company by eliciting perceptions, feelings, and associations related to a target brand, including salience, imagery, and resonance (Aaker, 1996; Keller, 2003). In addition, brand equity causes consumers to use brand names as a heuristic cue to infer product quality (DelVecchio, 2001; Maheswaran et al., 1991), shaping their sensory perceptions and purchase intentions (Fornerino and d’Hautville, 2010; Grewal et al., 1998; Walgreen et al., 1995). From a brand equity perspective, brand names are powerful extrinsic cues that cause consumers to react favorably to products (Keller, 1993; Teas and Agarwal, 2000). In comparison with private labels, national brands have particularly strong brand equity so that consumers positively associate national brands with product quality (Sethuraman, 2003). As a result, national brands are highly likely to evoke superior perceptions (Richardson et al., 1994) and higher purchase intentions relative to private labels (Das, 2014; Grewal et al., 1998; Walgreen et al., 1995). If consumers associate national brands with higher quality, one might assume that these products will evoke higher sensory perceptions or better taste in comparison with private labels. Brands have been shown to boost food taste experiences, even when consumers taste the same product (Paasovaara et al., 2012). When food and drinks are identified by a favored brand, consumers indicate they taste better (Robinson et al., 2007). Furthermore, extrinsic cues distort basic sensorial experiences (Litt and Shiv, 2012). Thus, more formally, we propose: Alternative H1. (a) Consumers will have lower purchase intentions for private labels than for national brands when they are informed of the brand they are evaluating. (b) Consumers will have similar purchase intentions for private labels and national brands when they are blind to the brand they are evaluating. Alternative H2. (a) Consumers will have lower sensory perceptions of taste for private labels than for national brands when they are informed of the brand they are evaluating. (b) Consumers will have similar taste perceptions for private labels and national brands when they are blind to the brand they are evaluating. We undertook two experimental studies to investigate our research hypotheses. We used different products to increase the validity of our findings.
3. Study 1 3.1. Design, stimuli, and participants Study 1 was an investigation of product brand and brand information as they affect consumer evaluations. The study used a 2 (brand: national brand vs. private label) 2 (brand information: blind vs. informed) between-subjects experimental design. We
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tested the leading national brand of hazelnut spread for the national brand condition, and a premium private label of hazelnut spread marketed by a well-known retailer for the private label condition. A sample of 119 business school students participated voluntarily in the study (50.4% women, Mage ¼ 24.9; SD ¼ 2.8). On arrival, all participants tasted samples of hazelnut spread on a toast. In the informed (vs. blind) condition, participants were able (vs. unable) to see the brand name of the product they tasted. We used purchase intentions and perceived taste as the main dependent variables. After tasting the product, participants indicated their purchase intentions on a two-item scale (e.g., “I would likely buy this product,” 1 ¼strongly disagree; 7 ¼strongly agree). They evaluated product taste by responding to the question: “Overall, what do you think of the taste of this product?” (1 ¼bad; 7 ¼ excellent). We controlled for their state of hunger by asking them “Are you hungry right now?” (1 ¼not hungry at all; 7 ¼very hungry). In addition, to control for other possible explanations, we measured whether participants like chocolate (e.g., “How much do you like chocolate,” 1 ¼not at all; 7¼ a lot), their previous experience with brands of hazelnut spread (e.g., “How often do you eat hazelnut spreads,” 1¼ never; 7 ¼frequently), and their preferred brand. Finally, we measured their moods on a three-item scale (e.g., “I feel happy right now,” 1 ¼strongly disagree; 7¼ strongly agree) because mood can be a source of positive and negative food evaluations (Desmet and Schifferstein, 2008). 3.2. Results and discussion None of the control variables affected the dependent variables. For instance, hunger level and chocolate likeability showed no differences among participants in each condition (all p’s 4.1). Frequency of hazelnut spread consumption did not influence results (p 4.1). Although 80.7% of our sample indicated the national brand as their preferred brand, results were not statistically different between conditions (p 4.1). Participants’ mood (α ¼.776) had no effect on results (p 4.1). Therefore, we dropped these items from our analyzes. 3.2.1. Purchase intentions The two items used to test purchase intentions correlated highly (r ¼.82, p o.01). Results of a two-way ANOVA showed a significant interaction between product brand and brand information on purchase intentions (F(1,115) ¼ 5.10, p o.05). Participants who were aware of the brand indicated higher purchase intentions for the national brand than for the private label (MNB ¼5.03; MPL ¼3.70; F(1,115) ¼ 8.74; p o.05). In contrast, participants showed no difference in purchase intentions for the national brand and private label in the blind condition (MNB ¼4.43; MPL ¼4.33; F(1,115) ¼0.50, p ¼ns). These results support Alternative H1. 3.2.2. Perceived taste A two-way ANOVA (product brand x brand information) showed a significant effect on perceived taste (F(1,115) ¼4.45, p o.05). Specifically, in the informed condition, participants preferred the taste of the national brand to that of the private label (MNB ¼5.79; MPL ¼5.23; F(1,115) ¼4.79, p o.05). However, in the blind condition, national brand and private label have no significant difference (MNB ¼5.00; MPL ¼5.20; F(1,115) ¼0.62, p ¼ns). This result supports Alternative H2.
3.2.3. Discussion Our results demonstrate that even when retailers offer premium private labels (i.e. high-quality products) to compete with national brands, consumers still perceive national brands more positively. While consumers acknowledge that private labels are as good as national brands (Deloitte, 2014), they still use brands as a cue defining their purchase intentions and perceptions of taste. However, when blind to the brand, consumers perceived similarity between the two products, showing no differences in purchase intentions and taste perceptions. To extend the findings, we tested the effects with a different product in Study 2.
4. Study 2 4.1. Design, stimuli, and participants Study 2 used the same 2 (product brand: national brand vs. private label) 2 (brand information: blind vs. informed) between-subjects experimental design. However, this time we tested reactions to champagne. Unlike other studies, in which all participants tasted the same product in all experimental conditions (Guidry et al., 2009), we used two different brands available on the market. In the national brand condition, we used a brand owned by one of the world’s leading wine and spirits groups. In the private label condition, we selected a premium brand champagne from the largest retailer in France. We carefully chose two intrinsically similar products: both the national brand and the private label were non-vintage brut champagne made from a blend of three grape varieties. A sample of 261 business school students participated voluntarily in the study (53% women, Mage ¼ 22.2; SD ¼1.0). All students were 21-years-old or older. On arrival, participants learned about the procedures of the study and then tasted a quarter of a small glass of champagne (3 cl). In the informed condition, participants could see the champagne bottle while tasting the product. However, unlike in Study 1, the retailer’s name was not visible on the label. Thus, participants received additional information allowing them to classify the product as a national brand or a private label. We adopted this procedure in the informed condition to ensure that participants would be aware of the product brand during the experiment. In the blind condition, participants could not see the label and received no information about the champagne brand. We used the same dependent variables as in Study 1—purchase intentions and perceived taste. In addition, because knowledge of a product category can affect how individuals process information on quality (Perrouty et al., 2004), we controlled for participants’ level of champagne expertize (1 ¼ absolute beginner; 7¼ expert). Similarly, we controlled for frequency of wine and champagne consumption (1 ¼ I don’t drink at all; 7 ¼I drink frequently), and we measured participant’s involvement with wine using a three-item semantic differential scale (e.g., “For me wine is” 1 ¼ unimportant; 7¼ important). 4.2. Results and discussion Participants in each condition showed no significant differences for level of champagne expertise, frequency of consumption for both wine and champagne, and involvement with wine (α ¼.817) (all p's 4.1). Because these control variables had no effect on the results, we dropped them from the analyses. 4.2.1. Purchase intentions The two items used to measure purchase intentions correlated
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highly (r ¼ .73; p o.01). The interaction between product brand and brand information significantly affected purchase intentions (F(1,257) ¼14.85, po .001). Specifically, in the informed condition, participants who tasted the national brand indicated higher purchase intentions than those who tasted the private label (MNB ¼3.83; MPL ¼ 2.86; F(1,257) ¼12.62, p o.01). However, in the blind condition, participants indicated higher purchase intentions for the private label (vs. national brand) (MNB ¼3.18; MPL ¼3.72; F (1,257) ¼ 3.69, p ¼.05). 4.2.2. Perceived taste A two-way ANOVA (product brand brand information) showed a significant effect on taste perception (F(1,257) ¼22.71, p o.001). In the informed condition, participants indicated that the national brand tasted better than the private label (MNB ¼5.11; MPL ¼4.32; F(1,257) ¼18.23, p o.01). However, when participants blind-tasted the champagne, they indicated that the private label product was better than the national brand (MNB ¼4.68; MPL ¼5.16; F (1,257)¼6.23, po.05). These results support Alternative H2. 4.2.3. Discussion Study 2, using a different product category, confirmed previous results. The participants of the Study acknowledged the high quality of premium private labels, as demonstrated in the blind tests. However, once participants knew which brand they had tasted, they perceived that the national brand was superior to the premium private label. Importantly, the retailer’s name was not visible on the private label champagne. We suggest that retailers may use this strategy to dissociate the product image from their own image. It might appear contradictory to put a retailer name on a so-called exclusive product such as champagne. Thus, even if consumers know that private labels can be of high quality, they will prefer national brands. In particular, the findings show that consumers have a negative bias against private labels, even when the product does not use the retailer’s brand name.
5. General discussion and conclusions In today's competitive markets, differentiation is increasingly difficult to establish, so private labels are an important strategy for retailers (Mejri and Bhatli, 2014). Private labels contribute to higher margins, store traffic, consumer loyalty, and store profitability (Ashley, 1998; Braak et al., 2013; Collins-Dodd and Lindley, 2003; Hoch and Banerji, 1993; Narasimhan and Wilcox, 1998; Richardson et al., 1994; Semeijn et al., 2004). Despite providing so many benefits, retailers must improve perceptions of their premium private labels. Although consumers acknowledge that private labels can indicate products of high quality (Deloitte, 2014; Euromonitor International, 2014), brand image still plays a major role in consumer perceptions and intentions. In an experimental setting, we show that national brands lead to superior taste perceptions and purchase intentions only when consumers are informed of the brand. These results are consistent across two studies with different product categories. In contrast, in blind conditions, private labels and national brands either show no differences in terms of taste and purchase intentions (Study 1), or consumers perceive that private labels taste better and evoke higher purchase intentions (Study 2). At first glance, such results seem to demonstrate that private labels are “weak” compared to national brands, but they also reveal important growth opportunities. Although premium private labels have emerged as one of the hottest retailing trends (Kumar and Steenkamp, 2007), our results suggest that retailers can increase the brand equity of their products by focusing on
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branding and positioning strategies. We make several contributions through the studies we report in this article. We demonstrate that product brands can alter consumers’ perceptions. This aligns with research showing that product brands induce different evaluations (De Wulf et al., 2005). In addition, our findings highlight that brand equity and positioning are essential aspects of brand success (Erdem et al., 2004). These findings have important implications for retailers who want to gain market share by offering premium private labels. In particular, the results suggest that premium private labels should adopt all elements of brand equity, such as knowledge, salience, performance, and imagery (Keller, 1993). In other words, retailers should manage these products from a branding perspective (Cuneo et al., 2012), which would allow consumers to build positive associations (Aaker, 1996). Our results suggest that the “quality gap” that once existed between premium private labels and national brands is fading; but retailers must still confront the “brand gap.” Again, strong brands —or strong private labels—can combat the gap by providing positive associations (Olson, 2012). This does not mean that all private labels should adopt the brand equity perspective. We acknowledge that low-, mid-, and top-tier private labels target different segments. When consumers perceive little or no difference between available options, low-tier private labels are already succeeding. However, when targeting those who are looking for premium products, retailers might also use other features such as form, size, color, and packaging to win consumers. Past research supported such a strategy by showing that the ideal positioning for private labels depends on national brands. For example, when the two strongest national brands are undifferentiated, the private label should differentiate from them; however, when the national brands are differentiated, a high-quality private label should be positioned closer to the strongest national brand (Choi and Coughlan, 2006). In addition, product brand is an important source of information (Litt and Shiv, 2012), therefore, retailers should create strong brand names to help consumers make the link between brand and quality. By doing so, retailers can increase their market share especially because once consumers are satisfied with private labels, they do not return to national brands (Goldsmith et al., 2010). Our results show that consumers go beyond quality in differentiating between national brands and private labels. That is, product substitutability is not a one-dimensional concept; investment in quality alone without considering brand equity can obscure other features of private label differentiation (Choi and Coughlan, 2006). Thus, we suggest that retailers could also adopt other strategies besides managing premium private labels from a branding perspective. For instance, retailers could use a tasting strategy at the point of sale. In this case, blind sampling sessions in stores with high customer flow could promote a buzz and lead to positive intentions toward the product. Moreover, consumers would benefit by interacting and becoming more involved with the product, reducing the perceived risk of purchasing private labels (Erdem and Swait, 1998). Such strategies to get closer to consumers would positively impact their trust in the private label, with consequent sales growth. Our main focus in this paper is to uncover how private labels differ from national brands in terms of sensory evaluations and purchase intentions. However, it is also interesting to examine our results from the national brand perspective. For example, brand equity, positioning, and differentiation are relevant for national brands; these elements lead to stronger brand equity compared to private labels (Sethuraman, 2003). However, since premium private labels are becoming similar to national brands in terms of quality (as our results in the blind conditions show), national brands should try to differentiate themselves according to other
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dimensions. For instance, clearly establishing unique product features such as packaging and color may help to reinforce brand equity (Choi and Coughlan, 2006). In addition, national brands should pay attention to brand identity (Keller, 1993), which has clear positive effects on consumer identities and feelings of belonging to particular groups of brand users (Shouten and McAlexander, 1995). Therefore, national brands should concentrate on building stronger ties with consumers, extrapolating the dimension of high quality. In other words, national brands should position themselves to face the new market challenges by focusing on other aspects that can build brand equity and differentiation. 5.1. Limitations and future research This study has some limitations that also represent opportunities for future research. First, although price has often been associated with positive product perception (Doods et al., 1991), our research may be limited by the fact that we did not control for price. However, for private labels of food products, negative or small correlation coefficients between price and quality have been shown to prevent price from indicating quality (Olbrich and Jansen, 2014), which may attenuate the limitation. Second, we conducted our experiments in controlled environments. Future research could use a similar approach in real settings by conducting field studies, such as blind tests in supermarkets. Third, our studies focused only on taste perceptions. Future studies might attempt to replicate our results—superior sensory evaluation for private labels in blind conditions and for national brands in informed conditions —by using different product categories that activate other human senses. For example, would a product such as perfume, which activates smell rather than taste, yield the same pattern of findings? In addition, future studies could examine whether other extrinsic cues such as fair trade or eco labels have the same effect as product brands. Finally, further research could investigate underlying mechanisms for the proposed interaction, and also check whether such mechanisms remain the same for a variety of product categories and human senses.
Acknowledgements The first and second authors gratefully acknowledge support from the Conseil Regional Champagne-Ardenne through the Value Creation Grant.
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