Asymmetric price competition and store vs national brand choice
| Date | 01 June 1998 |
| Published date | 01 June 1998 |
| Pages | 244-253 |
| DOI | https://doi.org/10.1108/10610429810222877 |
| Author | Praveen Aggarwal,Taihoon Cha |
| Subject Matter | Marketing |
The last decade has witnessed significant gains in the market shares of store
brands of grocery products. Supermarket unit sales for store brands have
grown by almost 25 percent over the period 1988-93 (Rubel, 1995). More
recently, unit shares of store brand goods were in the top three ranks for 177
of 250 product categories in the US markets (Quelch and Harding, 1996).
The recent upsurge in store brand sales is not a chance phenomenon and is
expected to continue (Reda, 1995).
Store versus national brand preferences have been researched extensively.
One stream of research has focused on the characteristics of store brand
buyers, such as their socio-psychographics (Myers, 1967), demographics
(Murphy and Laczniak, 1979), perceptual differences (Bellizzi et al., 1981),
etc. Lately, there has been another stream of research which focusses on the
competition between national and store brands (e.g., Sethuraman, 1995,
Dick et al., 1997).
One of the key aspects of competition between the national and store brands
is the asymmetric pattern of price competition between them. The
asymmetry surfaces when national and store brands engage in price
promotions. National brands steal significant share from store brands when
they reduce prices whereas the share gains from price promotion for store
brands are rather insignificant (Blattberg and Wisniewski, 1989). Raju et al.
(1995) have examined the effect of inclusion of store brands on the retailer’s
profitability for a given product category. They have shown that the retailer’s
profitability is a function of cross-price sensitivities among national brands
and between store and national brands.
The phenomenon of asymmetric price competition has not been studied for
different market segments (a significant exception being Grover and
Srinivasan (1992) who studied the asymmetric effect of retail promotions on
brand loyal and brand switching segments). One segment for which the
effect of price promotions is likely to be significant is the segment of store
brand buyers. Store brand buyers have been shown to be more price
sensitive than the national brand buyers (Kim, 1995). Also, Bellizzi et al.
(1981) have suggested that store brand buyers can differ significantly from
national brand buyers on some important behavioral dimensions. In this
paper, we study the phenomenon of asymmetry of price competition as it
applies to store brand buyers. Specifically, we examine the effect of price
promotions on purchase decisions of store brand buyers. We restrict our
analysis to households that have exhibited switching behavior between store
and national brands. We analyze the factors that cause this “class-level”
244 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 7 NO. 3 1998 pp. 244-253 © MCB UNIVERSITY PRESS, 1061-0421
Asymmetric price competition
and store vs national brand
choice
Praveen Aggarwal
Teaching Associate, Department of Marketing, School of Management,
Syracuse University, Syracuse, New York, USA
Taihoon Cha
Instructor, Department of Marketing, School of Management, Syracuse
University, Syracuse, New York, USA
PRICING STRATEGY & PRACTICE
A rise in sales for store
brands
Price competition
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