British grocers' brand extension in financial services
| DOI | https://doi.org/10.1108/10610420710739964 |
| Pages | 82-97 |
| Date | 24 April 2007 |
| Published date | 24 April 2007 |
| Author | Sylvie Laforet |
| Subject Matter | Marketing |
British grocers’ brand extension in
financial services
Sylvie Laforet
Management School, The University of Sheffield, Sheffield, UK
Abstract
Purpose – This study aims to examine consumer fit perception, risks and brand trust in retail brand extension in financial services.
Design/methodology/approach – A total of 324 respondents living in Sheffield, UK were involved in the survey. The survey was conducted on three
major British supermarkets. Mean scores for each supermarket were compared between four groups of respondents: store loyal vs non-loyal, users vs
non-users of the store’s financial services, aware vs non-aware and intend-to-buy vs no-intention-to-buy groups on fit, risks, trust dimensions. A factor
analysis was performed on the dimensions’ items. Discriminant analysis was used to determine the dimension(s) distinguishing the retailers.
Findings – The study found that retailers A and B were perceived as trusted brands with respect to financial services. Retailer A was perceived as a
trusted brand regardless of the product category. Retailer B was seen as a trusted brand when product performance and financial risks were low. In
contrast, retailer C was perceived unfit and risky by the non-users and no-intention-to-buy groups. Age, gender, income influenced fit, risks and trust
perception. Existing customers, including those aware and intending to buy the store’s financial services, tended to trust the store; whereas those new
to the store and its products perceived no fit and lacked confidence in the store’s expertise in their brand extensions.
Practical implications – The article assists retailers and the like in their brand extension decision making and implementations.
Originality/value – The article contributes to retail/brand extension/corporate branding literature, brand extension in high/low-involvement product,
perceived fit, risks and trust relationship in brand extension.
Keywords Retailing, Brand extensions, Financial services, Risk analysis, Trust, United Kingdom
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this article.
Introduction
Store brands have become more significant than ever (Quelch
and Harding, 1996) their role and importance have changed
dramatically over the past decades (Semeijn et al., 2004). By
consistently being better in quality, prices and variety not only
have store brands narrowed the gap between them and
national brands (Quelch and Harding, 1996; Burt, 2000), but
also they have been a real threat to the latter (DelVecchio,
2001).
The 1980s were the inaugural decade for store brands in the
UK. Retailers started implementing differentiation and
repositioning strategies in an attempt to promote themselves
across a wider range of product categories as higher quality
products offering competitive prices (Burt, 2000; Veloutsou
et al., 2002). By the mid-1990s these had taken on a higher
level of success. They contributed to more than half of Tesco’s
total sales (the current market leader) and two-thirds that of
Sainsbury’s, which was the leader in store branded products.
Retailers adopted more product lin es, with Sainsbury’s
offering 8,000 store brand lines (Veloutsou et al. 2002, p. 2).
Today, this journey has led to the adoption of numerous
unexpected product categories (Burt, 2000).
More specifically, the British retail finance industry has
been a target of large grocer y retailers. Although this
expansion is not a new phenomenon (Alexander and
Pollard, 2000; Colgate and Alexander, 2002) there were
fewer providers (Colgate and Alexander, 2002) in the past
(Alexander and Pollard, 2000) and grocery retailers used to
offer basic financial ser vices (product based cr edit) to
stimulate their sales and customer loyalty (Colgate and
Alexander, 2002). However, recently “the complexity of
financial services being offered has increased making the
retailers a strategic concern to traditional banks” (Colgate and
Alexander, 2002). This expansion is seen as a result of the
structural changes of both the retail financial market and the
grocery retail industry in the UK during the 1990s. An era
marked by increased strategic risks from the revitalised
discount sector and, increased government intervention and
regulation (Alexander and Pollard, 2000) as well as saturation
of the domestic markets (Colgate and Alexander, 2002). As a
result, growth opportunities in the domestic market became
increasingly limited, encouraging larg e food retailers to
pursue product diversification strategies domestically
(Colgate and Alexander, 2002).
It is that restructuring of the industry that encouraged such
expansion and development strategies such as entering the
retail financial markets (Alexander and Pollard, 2000). In
general, the high margin, non-food categories were seen as a
particularly attractive opportunity for diversification such as
cosmetics and pharm aceuticals (Alexander and Pollard,
2000). Furthermore, the retail financial markets have been
especially promising given their high returns on capital since
the 1960s (Alexander and Pollard, 2000).
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
16/2 (2007) 82–97
qEmerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610420710739964]
82
As highlighted above, product and service extension have
become a strategic issue of retail operations, it is surprising
however, that retail brand extension has been rarely examined
in the literature and little research conducted in highlighting
its benefits and risks. Few have focused on consumers’
responses. The aim of this paper is to examine consumer fit
perception, risks and brand trust in retail brand extension in
financial services.
First, a review of the literature is presented by focusing on
relevant aspects to the study, revolving around consumer
perceptions and attitudes to store brands, product categories
and their characteristics, brand image, brand extensions, risk,
fit perception and brand trust. An outline of the methodology
adopted, results, discussion and conclusion are then
presented.
Consumer perception of store brands
Marketers studied consumer perceptions of store brands
relative to national brands using a variety of dependent
variables. These studies invariably concluded that consumers
perceived store brands to be inferior to national brands with
respect to attributes such as overall quality and reliability
(Richardson et al., 1996). Several other authors also
concluded in agreement that consumers perceived store
brands to be inferior (of lower quality) to national brands
(Richardson et al., 1996; Narasimhan and Wilcox, 1998;
DelVecchio, 2001; Sayman et al., 2002; Collins-Dodd and
Lindley, 2003). However, Burt (2000) who stated that
retailers have been able to reposition their store brands in the
UK markets and, consumers perceived them as offering
alternatives with the same quality assurance and product
innovation as leading brand manufacturers. His assessment of
the British grocery retailing was confir med by another
consumer perceptions’ study from Belgium by De Wulf
(2005) These authors empirically showed that private labels
offer the same or even better quality than national brands, but
at a lower price.
Category characteristics
Because of the additional benefits it offers (DelVecchio, 2001)
British grocery retailers have been pursuing brand extension
into traditional and non-traditional product categories,
offering ranges in virtually every product class (Burt, 2000).
Store brands offer higher margins to start with, in addition to
the gaining of leverage in trade channels. The broader the
product categories offered, the wider array of consumers are
served the greater the total turnover contributes to retailer
growth (DelVecchio, 2001). Also, when faced with increased
competition within a certain categor y, retailers may expand
their category expenditure instead of trying to steal market
share from the competing national brand (Narasimhan and
Wilcox, 1996). However, as there is an issue as to what extent
can retailers expand into new product categories under their
store brand (Burt, 2000). The topic of across category success
and demand variation has been researched by a number of
academics (e.g. Narasimhan and Wilcox, 1998; Batra and
Sinha, 2000; Dhar et al., 2001; DelVecchio, 2001).
DelVecchio (2001) suggested five category characteristics
by which he later examined their role as determinants of the
success of new categori es. The first character istic was
category complexity, defined as the consumer perceptions of
the difficulty to manufacture a product in a category. The
second was quality variance, which reflects consumer
perceptions and the extent to which the brands competing
in a category differed in terms of quality. Third, was inter-
purchase time indicating the frequency of product usage.
Fourth, was the extent to which the product was used/
consumed in a public/private situation and finally, the price
level of the category which is the general perception of the
price level of the category in terms of cheap vs expensive.
Some of DelVecchio’s(2001) tested category characteristics
were a key factor in several studies such as the categor y
quality variance (Bettman, 1974; Narasimhan and Wilcox,
1996), the social context (Lives ey and Lennon, 1978;
Wakefield and Inman, 2003) and purchase frequency
(Narasimhan and Wilcox, 1996). Furthermore, there were
several more category characteristics suggested in the
literature, such as the number of brands operating in the
category (Narasimhan and Wilcox, 1996) and the retail outlet
through which the category was sold (DelVecchio, 2001) but,
the suggested five characteristics were not sufficient and
relatively comprehensive for the purpose of the study.
Brand image – store image
The primary concern of the research and the researchers
involved in the issue of store brand choice and their success
was to define store brand consumers, their attitudes and
behaviour (Collins-Dodd and Lindley, 2003) and other
factors affecting consumers’ purchase decisions. Not much
emphasis was placed on the importance of the branding of
store brands and the effectiveness and value of the brand
name, (company name: Tesco, Asda or Sainsbury’s). Most of
the literature describes and deals with store brands in generic
terms. Studie s repeatedly exam ined the impor tance of
consumer characteristics, perceptions of risk, price, quality,
value factor but not grocery store brands as brands.
Furthermore, they did not incorporate the influence of the
company name (which appears on the package) in the
consumer’s decision to purchase a brand (Chen and
Paliwoda, 2004). Although this has been the focus of store
brands possess similar opportunities and characteristics as
other brands attached to them. Increasingly, retailers and
consumers alike are coming to believe that a store brand is a
brand like any other in the market place (Collins-Dodd and
Lindley, 2003, p. 345). Dhar and Hoch (1997, p. 209) also
concluded that “Store brands behave much the same as any
other brand” and therefore grocery retailers are liable to
certain branding activities in order to sur vive and succeed in
the marketplace just like national brands do. For retailers,
store brands represent an opportunity to build store image
and differentiate their stores (Private Label Manufacturers’
Association, 1999 cited by Collins-Dodd and Lindley, 2003).
Academics working with the cue utilisation theory (which
consists of extrinsic and intrinsic cues) (Collins-Dodd and
Lindley, 2003) concluded that the brand name was one of the
important factors (within extrinsic cues) that affected
consumer perceptions of product quality (Dawar and
Parker, 1994; Richardson et al., 1994). Thus the results of a
study by Collins-Dodd and Lindley (2003) confirmed that
store image (e.g. that of Sainsbury’s) influenced the
evaluation of store brand (i.e. the Sainsbury’s brand).
Furthermore, Chen and Paliwoda (2004) argued that the
British grocers’ brand extension in financial services
Sylvie Laforet
Journal of Product & Brand Management
Volume 16 · Number 2 · 2007 · 82– 97
83
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