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COMPARATIVEANALYSISOFCUSTOMERS Ptreferences
COMPARATIVEANALYSISOFCUSTOMERS Ptreferences
COMPARATIVEANALYSISOFCUSTOMERS Ptreferences
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Harsh Purohit
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Abstract
Key Words: National Brands, Private Labels, Organized Retailing, Men's Apparel,
Consumer Behaviour, Consumer Preference
perceived risk associated with them. retail chains (Steiner 2004). The retail
Consumers are likely to rely on brand chains are expected to gain enhanced
reputation to minimize risk. Hoch and control over the brands they sell. They
Banjeri (1993) as well as Semeijn and want to leverage the acceptance of a
Ambrosini (2004) concluded that the private label brand across all product
c a t e g o r i e s ( S t e i n e r, 2 0 0 4 ) .
success of private label products is
(Narasimhan and Wilcox, 1998) found
greater when there are insignificant
that retailers are using successful
quality differences between private
private label brands as bargaining
labels and national brands. A number power for price negotiation with major
of studies conducted by (Raju 1995; national brands manufacturers.
Burton et. al., 1998; Ailawadi, Neslin Anselmsson & Johansson (2007)
and Gedenk 2001) also indicated that believe that when consumers purchase
private labels perform better in more private labels they become more
categories which are high price loyal to the store.
sensitive. Consumers seem to take the Ailawadi et. al., (2001) believed that
risk of buying private labels more often understanding demographic factors
when they have low financial risks. could be useful in formulating
Private labels are contributing appropriate marketing plan,
significantly to bottom lines, store segmentation, targeting and
differentiation and trustworthiness positioning (STP) strategies.
(Corstjens and Lal, 2000). Sales According to (Richard et. al., 1996)
volumes, market shares as well as the
older consumers with their vast
appeal of private labels to consumers
expertise might opt for private label in
have increasingly improved (e.g.
Dunne and Narasimhan, 1999). place of national brands. According to
“Keeping private labels provides (Ailawadi, 2001) the studies
numerous advantages like high gross undertaken later on pointed out that
margin, which can be 25% to 50% female were more likely to buy private
higher compared to national brands” labels than male consumers.
(Keller, 1993). Private labels are Educated consumers are more quality
becoming reputed brands on their own conscious (Ailawadi et. al., 2001).
merit, identities and quality images According to Hoch (1996) they have
(Keller, 2007). The private labels have minor price sensitivity. Thus, they are
become a strategic business tool for
free to opt for national brands. Some Neslin and Gedenk (2001) found that
researchers have found that private private labels are deeply linked with
label buyers have lesser formal “outlet trustworthiness, price
education than national brand buyers consciousness, and lesser quality”
(Omar, 1994). Income always which indicates that at the cost of
influences the consumers purchasing quality consumers shift cheap price
ability. Hoch (1996) pointed out that factor to the store loyalty. The research
other things being equal, high conducted by (Dick, Jain and
household income have an obvious Richardson, 1997; Pauwels and
negative association with private Srinivasan, 2004) found that the low
labels purchase. price positioning of private labels
Richardson et. al., 1994 found that leads to high store traffic and also
image, brand name and packaging are promotes store loyalty.
more important to consumers than Regular sales promotions have been
built-in quality. Image also elucidates common tactics used by national
why consumers are ready to shell out a brands to counter the private labels in
premium for national brands over the last few decades. According to (
private labels (Sethuraman, 2003). Lal, 1990; Quelch and Harding, 1996)
Narasimhan and Dunne (1999) this is a helpful strategy to cut the
affirmed that the choice decision private label penetration into the
between private labels and national market. In the recent years leading
brands is influenced by consumers' retailers have exercised meticulous
perception of price and quality advertisements and promotional
association between them. efforts to highlight the quality features
Earlier studies have already of their respective private labels
established that the price is a key (Akbay and Jones, 2005; Semeijn et.
indicator of quality. Hoch & Lodish al., 2004). According to Batra and
(1998) found that the price gap Sinha (2000), these marketing
between private labels and national activities have also established
brands increases consumers' perceived customer loyalty.
value for money (quality in relation to The studies conducted by (Curhan,
price). Study undertaken by Ailawadi, 1973; Dréje et. al., 1994; Desmet and
Max, Globus, lifestyles, Vishal are living area, employment status) and
easily accessible by the shoppers. private label vs. national brand
Before doing the survey, validity of products' buying characteristics. The
questionnaire was checked after the area of NCR was divided into 9
detailed literature review and geographic zones – North Delhi, East
discussions with senior managers of Delhi, Central Delhi, South Delhi,
leading retail chain and industry West Delhi, Noida, Ghaziabad,
experts of NCR Region of Delhi. Once Gurgaon and Faridabad. The sample
the questionnaire was finalized, the size was decided after consultations
data were collected using the mall-
from the supervisors and various
intercept and convenience sample
experts in this area. 600 respondents
survey method. In addition to this a
classified on basis of age, gender,
detailed discussions with the industry
marital status, education income level
experts, retailers and different
and type of profession were surveyed
consumer segments were conducted.
for this study. 504 useable responses
The researcher did the Pilot study and
were obtained which indicates a
all the scale questions were tested for
reliability using Cronbach's alpha healthy 83.3% conversion ratio.
(which was above 0.7 in all cases i.e. Malhotra (2009) has advised that for
very acceptable). any empirical study like the one in
The sample was selected with respect question, the sample size should be
to both demographics (gender, age, 300-500.
Sample Characteristics
The table given below shows the profile of the sample for this study.
Table 2: Sample Profile
Gender Male Female
88.70% 11.30%
Symmetric Measures
Value Approx. Sig.
Phi .159 .000
Nominal by Nominal
Cramer's V .159 .000
N of Valid Cases 504
a. Not assuming the null hypothesis.
b. Using the asymptotic standard error assuming the null
hypothesis.
Out of the 12 attributes, the default null image, service and durability. 3
hypothesis is accepted in 3 attributes – attributes, which are significantly less
H06 for store image, H011 for social important according to this study are –
recognition and H012 for packaging, convenience, and
distinctiveness. This means these 3 promotion.
attributes are important from the Comparison in preference of private
customers' perspective. 6 attributes are labels and national brands
coming out to be significantly high in The 2 sets of data, mentioned in the
importance for preference of national
above analysis were subjected to
brands – quality, price, variety, brand
Parameter Mean for private labels Mean for national brands Sig. (2-
tailed)
quality 1.31 1.19 .000*
price 1.53 1.67 .000*
packaging 2.83 2.73 .002*
convenience 2.17 2.20 .373
variety 1.68 1.63 .201
store image 2.02 2.05 .384
brand image 1.76 1.52 .000*
service 1.81 1.79 .586
promotion 2.35 2.29 .075
durability 1.82 1.71 .000*
social recognition 2.20 2.06 .000*
distinctiveness 2.08 1.97 .001*
The results indicate that there is labels while rest 6 attributes are
significant difference between 7 coming out to be significantly more
attributes in influencing the preference important for national brands. Variety
towards private labels and national and service are equally very high in
brands viz. quality, price, packaging, importance in both the categories,
brand image, durability, social store image is equally important while
recognition and distinctiveness. By convenience and promotion are
looking at their means, we can see that equally not important for both the
out of these 7, only 1 attribute - price is categories. The implications are
coming out to be significantly more private labels have not been able to
important for preference of private match upto the benchmarks set by
The KMO measure is much larger than Sphericity also came out to be
0.5 indicating that the sample was significant indicating enough level of
adequate for conducting factor correlation between the individual
analysis. The Bartlett's Test of variables. The following table shows
The factors which have been extracted can be seen in the rotated component
matrix given below'
The factors have been named as – F1: Exclusivity, F2: Image, F3: Packaging, F4:
Durability, F5: Price, F6: Experience, F7: Convenience, F8: Promotion and F9: Variety
dependent variables (categorical data), a The factors identified earlier were saved
classification equation can be created. as new variables for further multivariate
This equation can also be used as a analysis. As explained earlier,
prediction model to predict the considering these factors to be
probability of the new respondent falling independent variables and preference of
into which category. Here Discriminant men's apparel (private labels vs. national
Analysis is being used to predict the brands) as dependent variable,
preference of customers for private Discrminant Analysis was conducted.
labels or national brands. The results are reproduced below:
Eigenvalues
Function Eigenvalue % of Variance Cumulative % Canonical Correlation
a
1 10.031 100.0 100.0 .843
a. First 1 canonical discriminant functions were used in the analysis.
Wilks' Lambda
Test of Function(s) Wilks' Lambda Chi-square df Sig.
1 .270 14.984 9 .031
F5 .484
F6 -.062
F7 .092
F8 .565
F9 .218
(Constant) .000
Unstandardized coefficients
The mean of this function lies at - national brands. This is the prediction
0.059. Any customer's perceptions can model for preference in men's apparel
be measured on the 9 independent category which has been developed in
variables on a 1 to 5 scale and input in this study.
the Discriminant Function equation. If To check the robustness of this model,
the Z score comes less than -0.059, the the 'leave one out' option was used in
customer is likely to prefer private SPSS to get the classification results,
labels while for Z score higher than - which are reproduced below.
0.059, the customer is likely to prefer
The results show a high level of correct classification in cross-validated cases and
hence, the discriminant model is very robust and appropriate.
this perception, customers are unlikely loyal to national brands and inclined to
to switch from national brands in a major switching or buying private labels.
way. Retailers may gain sales for their private
Ÿ With the use of Factor Analysis label brands by continuously seeking to
and Discriminant Analysis techniques, a improve customer perceptions of
predictive model was established as quality. We see the negative perceptions
follows: of private label quality to be a major
(Discriminant Function) Z = -0.020F1 - roadblock to increased volume. Efforts
.489F2 +.393F3 +.149F4 +.484F5 - to improve quality perceptions of private
.062F6 +.092F7 +.565F8 +.281F9 labels might be accomplished by
(Where F1: Exclusivity, F2: Image, F3: upgrading the tangible quality of the
Packaging, F4: Durability, F5: Price, F6: product, improving the packaging,
Experience, F7: Convenience, F8: innovation, and educating consumers
Promotion and F9: Variety) about the how quality is built into the
Any customer's perceptions can be product.
measured on the 9 independent variables For critical success, retail marketers
on a 1 to 5 scale and input in the have to learn more about customer needs
Discriminant Function equation. If the Z and desires and study their perceptions
score comes less than -0.059, the of quality. This research shows that even
customer is likely to prefer private labels in an emerging market like India, where
while for Z score higher than -0.059, the perceptions towards PLs have taken
customer is likely to prefer national more time to be established, NBs are
brands. definitely considered to be superior vis-
à-vis PLs. The success of PLs is
Managerial Implications important to retailers and could be a
The findings of the study can be useful to critical part of their strategy in terms of
in developing stronger store/PLs and in competition, sourcing, supply chain
increasing their presence and acceptance management, positioning, profitability
amongst customers. A key finding is that and expansion. Development of
value-conscious consumers are less acceptable- and sought after- PLs will
take time, effort and strategic vision on Gedenk, K. (2001). Pursuing the Value
the part of retailers. Conscious Consumer: Store Brands
Versus National Brand Promotions.
Limitations And Directions For Journal of Marketing. Vol. 65 (1).
Further Research 4. Ajzen, I. & Fishbein, M.
Ÿ First our analysis is restricted (1980). Understanding attitudes and
to one category - men's apparels. p r e d i c t i n g s o c i a l b e h a v i o u r.
Future research should investigate the Englewood Cliffs. New Jersey:
relationships across different Prentice-Hall.
categories to assess the 5. Akbay, C., Jones E. 2005. Food
generalizability of our results. consumption behavior of
Ÿ The scope of this study is socioeconomic groups for private
limited to DELHI and NCR. Inclusion labels and national brands. Food
of more stores and private labels, in Quality and Preference 16 (7), 621-
varying geographic locations, would 631.
enable the study of the relationship 6. Anselmsson, J. & Johansson,
between store image and private label U. 2007. 'Corporate social
attitude to take account of a wider responsibility and the positioning of
range of retailer brand architectures. grocery brands.' International Journal
of Retail and Distribution
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