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private label

  1. 1. Perceptual categorization of private labels and national brands <br />The perceptual categorization into private label brands and national brands differs once private labels have been purchased. Users of private label brands did not see them as being any less trustworthy than national brands. However, non-users of private labels did use trust to discriminate between the two types of brands, and tended to use negative attribute information to categorize the brands into groups. Regardless of experience, however, private labels form a subgroup in consumers' memory, with low price and low quality as the main drivers of this categorization<br />traditionally, PLs have been priced below leading NBs. This is reflected in the expectations consumers have about the price of PLs ([27] Morton and Zettelmeyer, 2004). The second is that price has also been found to be the major selling point for PL brands in past studies.<br /> Historically, literature shows that consumers rely on both intrinsic and extrinsic cues when making quality judgments. In the case of PLs found that extrinsic cues influenced consumers' judgments of quality regardless of product ingredients. As the PLs examined were low priced, had poor packaging and were usually not advertised, these extrinsic cues were used to infer the (low) perceived quality of these products. Past research has shown that the consumers expect PLs to be of lower quality than NBs<br />Consumers" expectations about what PLs should stand for do continue to reflect their historical positioning. This indicates that there is a strong "halo effect", which could make the process of changing consumers" perceptions more difficult. The managers of PLs must take this difficulty into account when planning repositioning strategies, or the introduction of PLs that differ from this stereotype.<br />Suggetions-Pricing as a categorization driver remains particularly strong, both in the positive for PLs (low price) and in the negative for NBs (too expensive). Therefore, consumers perceive that the price of PLs should be below that of NBs. This was shown to be robust over the three categories and across user and non-user groups. Consistent with what retailers want to signal with their value and middle level tiers, this low price comes at the cost of foregoing quality, which consumers also considered in their schema formation <br />Low quality was the strongest negative driver for PLs and NBs categorization, with risk a close second. Since past research has found that the perceived quality differential is an important determinant of the difference in price consumers will pay for a NB over a PL, our findings suggest that because of the perceived quality differential, the price elasticity of PL brands, (when prices increase), will be greater than for NBs. This poses a challenge for the short-term success of the introduction of premium PL since these brands are often priced equal to or above NBs.<br />ADVT- the manufacturers of NBs face a dilemma of either lowering the price, which in turn may hurt the brand image and reduce margins; or they can keep the price high, but aim to increase the added value. The latter would involve more investments in innovation to provide the justification for buying a more expensive product to consumers. Finally, since retailers try to blur the physical differences between PLs and NBs, it is crucial for NBs manufacturers to keep up salience by maintaining national advertising spending. While PLs may have an advantage over NBs within the store, as they are given disproportionate shelf space and promotional support ([31] Nogales and Suarez, 2005), outside the store, PLs suffer from selective distribution and lack of national advertising. Thus it is easier for a NB to reach non-users, and this advantage should be used wisely.<br />PL User- PLs users see lower price as the key reason why they buy PLs. This again questions the retailers' ability to increase the prices of PLs. consumers are often buying PLs because they are cheaper and because they cannot afford NBs.<br />PL non-User- PL non-users use low price as an indicator of low product quality. This implies that, if retailers want to keep the prices of PLs lower than NBs, they have to put more efforts to signal the improved quality via other extrinsic attributes that customers utilize to judge the perceived quality prior to trial. This could be achieved by improvements in packaging and more in-store advertising.<br />Consequences of competition between national brands and private labels<br /><ul><li>Sample-Ready to eat-meat</li></ul>short-term it is to be expected that the product variety increases, the prices decrease and the turnover rises.<br />Findings<br /><ul><li>Variety The figure indicates that the number of listed national brands declined considerably in the investigation period in all three outlet formats, whereas the number of listed private labels has increased. The sharp decline in listed national brands has not been balanced out by the addition of new private labels.
  2. 2. Price the average prices per kilogram of the private labels were kept well below those of the national brands by the retailers in all outlet formats. the prices per kilogram of the private labels in 2005 were approximately at (supermarkets and hypermarkets) or even above (discount stores) the level of the prices per kilogram of the national brands in 2000 (within the outlet formats), has probably not been noticed by consumers. Presumably, the consumers do not make any detailed records of the prices of the foods they have purchased over a period of six years. Hence, we assume that consumers only see the current prices on the shelf and therefore only notice that the prices per kilogram of the private labels are currently below those of the national brands. we suggest that the perception of well-priced private labels retained by many consumers persists because national brands are frequently used by retailers as reference products when setting prices. This means that the prices per kilogram of private labels are constantly kept below those of the national brands, although at an increasingly high level. In this context, it is remarkable that retailers have been given this opportunity by the prohibition of vertical price fixing and the associated freedom of price fixing on two levels.
  3. 3. Turnover From the national brands industry’s perspective, the rising prices do not necessarily mean positive effects on turnover and profits because their profits do not depend on consumer prices but on delivery conditions agreed with the retailers. As long as retailers do not want to completely risk renouncing national brands, the remaining national brands manufacturers will have a secure bargaining hand. However, as retailers can play one manufacturer off against the other – at least for as long as there are still two or three national brands in each product category from various manufacturers – the retailers are probably those who receive the larger share of the profits obtained through higher prices.</li></ul>in all three outlet formats the turnover of private labels rose over time, while the turnover of national brands, decreased over time.<br />retailers are achieving higher profit margins with private labels than with national brands (Hoch and Banerji, 1993). To this extent, it is possible that retailers will achieve lower turnover figures with higher proportions of private labels being listed, but, due to higher profit margins of private labels, will achieve a higher contribution margin. Accordingly, it may be attractive for retailers, at least to some extent, to forego higher turnover figures in favour of higher contribution margins.<br />Suggestion<br />For the purpose of a turnover as high as possible, these results lead to the implication for retail managers – especially for those of supermarkets and hypermarkets – of avoiding a delisting of national brands in the course of extending the number of listed private labels. Against this background, a “mixed assortment strategy” containing private labels as well as national brands seems to be preferable compared to a mainly “private-label-oriented-strategy” including primarily or solely private labels.<br />A Comparative Study on Consumers' Attitude Towards Private Labels: A Focus on Gujarat<br />Defination<br />Private labels are defined as the "products owned and branded by the organizations whose primary objective is distribution rather than production" (Schutte, 1969). Store brands or PLs are also defined as "brands owned, controlled and sold exclusively by retailer"<br />"Private label products encompass all merchandize sold under a retailer's brand. That brand can be the retailer's own name or a name created exclusively by that retailer.<br />Cunningham et al. (1982) observed that consumers rate NBs as superior to PLs and generic brands in terms of taste, appearance, labeling, and variety of choice. Rosen (1984) conducted a telephonic survey of 195 households and obtained ratings for generic, PL, and NBs and grocery products on three quality perceptions: overall quality, quality consistency over repeat purchases, and quality similarity across stores. Data gathered across nine product categories showed that PLs had lower scores in comparison to NBs for overall quality as well as quality consistency over repeat purchases. Omar (1994) conducted a similar quality test for PLs and NBs across three product categories. The results showed that consumers did not perceive any difference among the brands during a blind taste test but revealed taste test indicated that shoppers assigned superior ratings to NBs. Thus, private label offers were rated much lower in revealed taste test than in blind taste test. Invariably, all these studies indicated that PLs suffer from low quality image when compared to NBs despite improvements made in the quality.<br />consumers will prefer NBs to PLs if the level of perceived risk in buying the PLs in that category is seen as high. They also state that the degree of perceived risk increases with the degree of perceived quality variation.<br />Consumers rated NBs higher than PLs and generics on prestige, reliability, quality, attractive packaging, taste, aroma, color, texture, appeal, purity, freshness, uniformity and familiarity, among others, Bellizi et al. (1981).<br />As across all categories, attitude towards perceived risk as well as image was found to be unfavorable for PLs. Narasimhan and Wilcox (1998) argue that consumers will be less motivated to purchase private-label groceries if the level of perceived risk in that category is high.<br />