While private-label brands offer good value, the market share of such brands has remained low in most countries. So why is it that some consumers prefer national or global brands over less pricey private-label equivalents?
According to a new paper co-written by University of Illinois expert in consumer behavior, Carlos Torelli, consumer attitudes toward store brands could be driven by a consumer’s social status and beliefs about societal hierarchy.
“Private-label brands have been around for many years, but they’ve been undergoing an evolution lately,” said Torelli. “In the past, they were considered and branded as generic products – laundry detergent or dish soap that didn’t have a name on the label other than what it was. Just a container with the product inside. Now we have store brands that mimic the elements, attributes and packaging of their big-name competitors but cost less.”
Torelli and the rest of his research team examined the interactive effect of power distance belief (PDB) – the acceptance and expectation of hierarchies and inequalities in society – and consumers’ status on their preference for private-label (vs. national) brands.
The researchers found that low-status consumers in countries high in PDB (such as China and Mexico) preferred national brands when buying low-status-symbol products such as laundry detergent, even though the national brands were more expensive. The reason for this is that it fulfilled their need of “heightened status”.
High-status consumers, on the other hand, preferred private-label brands for everyday products.
“You would assume that it would be the other way around – that low-status consumers would buy the cheaper private-label brand because they have less disposable income, but that’s not what we found,” Torelli said.
Torelli says the research has implications for how private-label marketers penetrate the developing markets of countries where people accept and endorse hierarchy.
“There’s an opening for the national brand to target low-status consumers who are not traditionally thought of as part of their consumer demographic,” he said. “If national brands manage the size and certain other parameters to make the product slightly more affordable, then there is a market for premium brands in that demographic – as long as they don’t cheapen or water down the quality of the product itself to make it more price competitive with the store brand.”
“If you’re a private-label brand, the one thing you could possibly do is burnish your image by ‘branding up,’ much like what Target did, and create a higher-end private label to sell exclusively in your stores,” Torelli said.
“That’s a trend we’re seeing – a movement among retailers to do their own branding. Our research would suggest that just because it’s a private-label brand doesn’t mean it’s destined to be low status.
“If you do a good enough job branding it, you spin it off into its own brand, much like how The Limited spun off Victoria’s Secret, which was originally a private-label brand. We don’t think of Victoria’s Secret as a private label now, but that’s how it started. In order to do that, the parent company really has to be invested in the brand – invested in the packaging, the advertising, the signage, everything.”
“The interactive effect of power distance belief and consumers’ status on preference for national (vs. private-label) brands”
Jessie J.Wang Carlos J.Torelli Ashok K.Lalwani
Journal of Business Research
Volume 107, February 2020, Pages 1-12