Brand image and customers' willingness to pay a price premium for food brands

DOIhttps://doi.org/10.1108/JPBM-10-2013-0414
Pages90-102
Published date14 April 2014
Date14 April 2014
AuthorJohan Anselmsson,Niklas Vestman Bondesson,Ulf Johansson
Subject MatterMarketing,Product management,Brand management/equity
Brand image and customers’ willingness to pay
a price premium for food brands
Johan Anselmsson, Niklas Vestman Bondesson and Ulf Johansson
School of Economics and Management, Lund University, Lund, Sweden
Abstract
Purpose – The aim is to understand customers’ willingness, or unwillingness, to pay a price premium in the market for consumer packaged food and
what kind of images brands can use in order to achieve a price premium.
Design/methodology/approach – The study is based on a quantitative survey of brand images found in food and branding literature and their impact
on loyalty as well as customers’ willingness to pay a price premium for consumer packaged food.
Findings – The survey shows that quality is a significant determinant of price premium, but adding other image dimensions doubles the predictability
and understanding about price premium. The strongest determinants of price premium are social image, uniqueness and home country origin. Other
significant determinants are corporate social responsibility (CSR) and awareness.
Practical implications The results help brand managers to recognise the importance of incorporating price premium and to develop a better
understanding of what drives price premium in addition to more traditional dimensions as quality and loyalty.
Originality/value – In grocery retailing, the competition for customers, margins and price premiums between manufacturer and private labels is fierce.
Traditionally,the literature on this competition has focused on quality and product improvements as the main tool for creating distance to low priced
competition. This study looks into other more branding related dimensions to distance from price competition.
Keywords Brand equity, Price premium, Brand image, Brand loyalty, Food product, Private labels
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this issue.
Introduction
In several consumer product markets, traditional
manufacturer brands are facing intense price competition.
One such market is consumer packaged food, in which a
major reason behind the price competition has been that
retailers, with increasing power, have developed and marketed
their own store brands, or private labels (e.g. Verhoef et al.,
2002). Initially, these brands were mainly low-cost
alternatives, but they have grown more sophisticated over
time (Laaksonen and Reynolds, 1994). Although negative
effects can occur for retailers if the store brand penetration
reaches a certain level (Pepe et al., 2011), the fight between
manufacturer branded products and store branded products
relating to margins and prices is currently fierce.
Traditionally, the literature on the competitive situation
between private and manufacturer labels in the retail sector
has primarily focused on the product quality as the solution
for consumer packaged food brands that want to avoid a price
war (see Bronnenberg and Wathieu, 1996; Hoch, 1996;
Ghose and Lowengart, 2001; Steenkamp et al., 2010). The
idea has been that by increasing the objective or perceived
product quality, a brand can create a differentiated position
that motivates consumers to pay more. Also brand managers
within the food industry seem to prioritise a quality image in
their efforts to build strong brands (Anselmsson and
Bondesson, 2013; Davc
ˇik and Rundquist, 2012.). There
are, however, reasons to believe that the product quality is
losing its strength as a competitive tool (Gerzema and Lebar,
2008). Imitation, for example, has become a popular route for
many companies (Verhoef et al., 2002) and the market leading
brands are in many cases producing for the competing private
label, which principally means that the brand name is the only
difference between a manufacturer label and its private label
competitor. Some writers have even argued that the quality
provided to consumers has been gradually eroded for years, as
leading brands have reduced the objective quality of their
products to meet low-cost competition (Silverstein, 2006;
Ettlinger, 2008). Taken together, these developments suggest
that it might be difficult to sustain a competitive advantage
based solely on product quality, an interpretation that finds
support in empirical studies showing that product quality
perceptions alone can explain only a small share of the price
consumers are willing to pay for different packaged food
products (Sethuraman, 2000, 2003). This is precisely where
the present study takes its starting point, attempting to
understand which non-product quality-related customer
perceptions explain why customers are willing to pay more
or less for different consumer packaged food product brands.
We argue that this can be achieved by utilising theories on
customer-based brand equity, which have an explicit interest
in non-product-related customer perceptions that add value
to a product or service often resulting in the ability to charge a
price premium (Farquhar, 1989; Keller, 1993). By treating
consumer packaged food products as brands, we hope to
understand the price dimension in the competition between
manufacturer la bels and private la bels better. From a
managerial point-of-view, better understanding of alternative
ways to increase the distance to private labels could have
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
23/2 (2014) 90–102
qEmerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/JPBM-10-2013-0414]
90

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