The Interrelation between Private Label Brand Image and Store Image. A Systematic Literature Overview

Table of Contents

Table of Contents

List of Figures

List of Tables

List of Abbreviations

1 Chapter 1: Introduction
1.1 Introduction
1.2 Structure of Thesis

2 Chapter 2: Literature Review on Private Label Brand Image
2.1 Private Label Brand Image
2.2 Consumer Attitudes towards Private Label Brands
2.3 Moderators of Private Label Brand Image

3 Chapter 3: Literature Review on Store Image
3.1 Store Image
3.2 Dimensions of Store Image
3.3 Moderators of Store Image

4 Chapter 4: The Interrelationship between Private Label Brand Image and Store Image
4.1 The Impact of Private Label Brand Image on Store Image
4.2 The Impact of Store Image on Private Label Brand Image
4.3 Reflective Abstract of the Interrelation between Private Label Brand Image and Store Image

5 Chapter 5: Conclusion and Implications for Future Research
5.1 Conclusion
5.2 Implications for Future Research

6 References

Executive Summary

With the rising of competition in the past years, retailers have increasingly commenced to offer private label brands in addition to national brands as a way to differentiate from competition. Since PLBs are store-specific, they have a great potential to exert a positive effect on store traffic and loyalty, and ultimately contribute to a positive store image. To what extent the image of the private labels can affect the image of the store and inversely is to be clarified in the course of this thesis. The following sections provide an overview of numerous studies that have dealt with the interrelationship between private label brands and store image over the past decades. In order to create a foundation, the concepts brand image and store image were initially considered isolated from each other. With regard to private label brands, a theoretical framework was first provided, expounding the concept of private labels. Numerous influential factors that have been identified in the relevant literature were represented and a summary on the general attitude towards private labels was provided. In addition, a list of important moderator variables has been provided which also have an influence on consumers' perception process. Referring to store image the conceptualization of store image by Chowdhury et al (1998) has been adapted to identify attributes that have an influence on consumers perceptions of store image. The multidimensionality of store image has been clarified, and here, too, an overview of important moderator variables has been provided. Subsequently to this isolated consideration, a comprehensive overview of the findings on the interrelations between the two concepts was given. In the course of this, the influence of private label brand image on store image and then the influence of store image on private label brand image has been demonstrated. A review of the studied literature suggests a clear link between the two constructs. Since Private labels are products that can be directly assigned to a particular store, a variety of studies have been able to establish a direct association. Thus, the image of a store has a positive and negative effect on its private label brands and also inversely. However, the extent of this interrelation is controversial and has not been clearly identified.

List of Figures

Figure 1: Illustration of the Structure of the Thesis:

IV List of Tables

Table 1: List of Attributes used by Shoppers to evaluate Department/ Grocery Stores

List of Abbreviations

PLBs Private Label Brands

NBs National Brands

1 Chapter 1: Introduction

1.1 Introduction

Private label brands (PLBs) have gained tremendously in significance over the past decades. While at their first appearance in the market place in 1920 they only had to face little competition (Rothe and Lamont 1973), by now numerous large wholesalers (e.g. Wal-Mart, Carrefour, Costco) offer private labels in a large number of product categories. Since competition has intensified retailers have become more engaged in developing an efficient differentiation strategy (Frank 1967). In this context it has been found that the implementation of a private label program can contribute to a number of benefits for retailers as well as for consumers (e.g. Frank 1967). Alongside an improved bargaining power vis-a-vis manufacturers resulting in lower wholesale prices for national brands (NBs) (e.g. Mills 1995; Narasimhan and Wilcox 1998; Sethuraman 2009), private label brands can account for higher margins compared to NBs (Ailawadi and Harlam 2004) and they furthermore have the potential to serve as a significant determinant for store differentiation (e.g. Collins-Dodd and Lindley 2003) by expanding a retailers' merchandise (Mason 1990) with a unique alternative that is store specific and thus can contribute to increased store traffic (e.g. Pauwels and Srinivasan 2004) and ultimately to more customers being loyal towards a certain store (e.g. Ailawadi et al. 2001; Corstjens and Lai 2000; Laaksonen and Reynolds 1994). In turn, as PLBs are only available at the responsive store succeeding in differentiation from competing stores can lead to customers having a more favourable attitude towards the store which will ultimately lead to a better image of the store (e.g. Mazursky and Jacoby 1986). According to Ailawadi and Keller (2004) the variety of choice a retailer offers to its customers in terms of a broad assortment has a significance impact on a stores' image. Thus, by introducing PLBs consumer choice will be expanded by a brand offering a lower price compared to NBs but still a reasonable quality to customers which may attract more price conscious consumer to the store which can lead to these customers having a more favourable perception of the store (e.g. Hoch and Banerji 1993; Chintagunta, Bonfrer and Song 2002; Mason 1990;). However, the relationship between PLBs and store image is not unidirectional but rather an interrelationship can be identified between the two variables. Consequently, the image of a store can likewise have a significant impact on the image of the private labels carried within the store. In this context the environment of a store can provide a set of stimuli that can influence customers perception of the store and since private labels can be interpreted as an extension of store image these perceptions can be transferable to the respective PLBs (Collins-Dodd and Lindley 2003). Furthermore, store loyalty that results from favourable perceptions of a store can contribute to customers becoming familiar with a stores PLBs and thus develop a positive attitude towards them as well (e.g. Bettman 1974; Gonzalez-Benito; Mortos-Portal 2012). The aim of this thesis is to provide a systematic overview of existing literature, dealing with the concept of private label brand Image and store image and about the studies that have dealt with the interrelation between the two variables.

1.2 Structure of Thesis

The following illustration serves as an overview of the structure of this thesis and comprises the sub questions which are to be examined in the course of this paper.

Figure 1: Illustration of the Structure of the Thesis

Abbildung in dieser Leseprobe nicht enthalten

Source: Author's own Illustration

2 Chapter 2: Literature Review on Private Label Brand Image

2.1 Private Label Brand Image

Private label brands are created, owned, controlled and marketed exclusively by a certain retailer (e.g. Raju, Sethuraman and Dhar 1995; Sethuraman 2009) whereas on the contrary national brands are within the area of responsibility of a company mainly focused on production and manufacturing of these brands (McEnally and Hawes 1984). In the case of PLBs the retailer bears the exclusive responsibility for the products (Pauwels and Srinivasan 2004). Besides the standard PLBs that are positioned more or less similar to NBs and are priced slightly below them two further types of private label brands can be distinguished - the generics and the premium PLBs. Generic brands (i.e. no-name brands) usually do not have a conventional brand name on their label but rather make use of plain black-and-white labels indicating what the product is about (Bushman 1993; McEnally and Hawes 1984). These products are commonly of inferior quality and are offered at a lower price level than NBs and 'classical' PLBs (e.g. Bellizzi et al. 1981; Bushman 1993; Rosen 1984). Premium PLBs on the contrary are of equal and in some instances even of better quality that NBs and are usually priced slightly below NBs (Kumar and Steenkamp 2007; Quelch and Harding 1996). [The following discussion mainly refers to the 'standard' PLBs and thus the term private label brand will be used for the sake of simplicity]. PLBs can further be classified with reference to the name under which a product is sold. Private labels can either be sold under an exclusive trademark or bear the name of the store. In the latter case the private labels are usually called store brands and thus may be directly associated with the store that carries them. Despite the fact that private label products often bear the name of the store they are however often produced by brand manufacturers (e.g. the automobile tires that Sears sells under its own label are actually produced by well-known manufacturers such as Michelin) (Wolinsky 1987). The concept of PLBs can be interpreted as an extension of the traditional branding concept. In a general context brand image can be defined as the sum of associations linked to a particular brand held in consumer's memory that lead to perceptions about that brand (Keller 1993). A Recent study by Ailawadi, Pauwels and Steenkamp (2008) has come to a similar conclusion namely that customers select products by retrieving experiences they have made with this specific product which have been established in their mind. Hence, if customer miss these experiences as they have never bought or either tried a product before customer have to make use of other factors that are somehow related to the product to infer for instance the quality of a product (Ailawadi, Pauwels and Steenkamp 2008). In their early study Olson and Jacoby (1972) have followed up with brand image and have provided a first indication that brand image is a multidimensional phenomenon and is formed by a variety of different cues that customers use to make assumptions on a product (e.g. on product quality). Following their study cues can be distinguished in being either 'extrinsic' or 'intrinsic' to a certain product. Extrinsic cues are attributes that are not part of the core product (e.g. price, brand name) whereas intrinsic are such attributes that cannot be changed without also changing the characteristics of the physical product (ingredients, taste) (Olson and Jacoby 1972; Richardson, Dick and Jain 1994). Consistently numerous studies have found that consumers tend to rely more on extrinsic cues in particular on price and brand name to make assumptions about a product than on harder to derive intrinsic characteristics (Allison and Uhl 1964; Dawar and Parker 1994). Furthermore literature has demonstrated that when consumer experience with a product are absent they are likely to perceive the product as a risky option (Richardson and Jain 1996) and thus make use of different cues trying to reduce the perceived risk they associate with the purchase (e.g. Hoch and Banerji 1993; Jacoby, Olson and Haddock 1971).

2.2 Consumer Attitudes towards Private Label Brands

Following a study by Faircloth et al. (2001) consumers attitude towards a brand is directly related to brand image. Hence, it is important to understand what are the general attitudes consumers have towards PLBs and to identify the main drivers that can have an influence on consumers attitudes towards these products. There are several reason why consumer have a positive attitude towards PLBs. One is the price advantage they have over NBs (Batra and Sinha 2000). Hoch and Banerji (1993) however, found that high quality seems to be of greater significance than low prices when defining private label brand success. This finding has gained support by a number of further studies which agree with quality being a key parameter of PLB prosperity (e.g. Hoch and Banerji 1993; Richardson, Dick and Jain 1994) The issue, however, is that consumers still perceive that PLBS are of inferior quality to NBs (e.g. Bellizzi et al. 1981; Bushman 1993; Richardson et al. 1994; Rosen 1984) which can be repatriated inter alia to the price difference between the two brands (e.g. Hansen, Singh and Chintagunta 2006; Lichtenstein, Ridgway and Netemeyer 1993). Since PLBs are generally priced 15%-37% lower than NBs customer who rely on price as a reference for quality may perceive low prices as a further exacerbation contributing to unfavourable perceptions of merchandise quality (Richardson, Dick and Jain 1994). Especially in categories in which the price differential between PLBs and NBs is big the likelihood of customers to buy PLBs is rather small compared to categories in which the price differential between the two brands is slight (e.g. Raju, Sethuraman and Dhar 1995). In fact PLBs have experienced substantial improvements in quality in the past years (e.g. Burt and Davies 2010; Quelch and Harding 1996) and by now commonly provide quality levels that are however in many instances not far below those of NBs (e.g. Pauwels and Srinivasan 2004). As mentioned beforehand when making purchase decisions customers try to reduce the risk that they perceive with the purchase of most products (e.g. Jacoby, Olson and Haddock 1971). In this context previous studies have demonstrated that consumers have a tendency to buy higher-priced products particularly in circumstances where is uncertainty (Gardner 1970). Many customers continue to prefer NBs over PLBs because they attach a lower risk when purchasing them because they are perceived to have less variability in product quality (e.g. Hoch and Banerji 1993; Narasimhan and Wilcox 1998). Moreover, according to Erdem and Swait (1998) perceived risks differ across product categories depending on the characteristics that are attached to the respective category. Following their study it can be distinguished between 'search' and 'experience' characteristics. Erdem and Swait (1998) found that customers are less likely to buy PLBs in product categories that are of the 'experience' type (e.g. a dress you have to try on to see if it fits) compared to categories that are associated with 'search' characteristics (e.g. fat content of a yoghurt) since product awareness of NBs is perceived to reduce risk. These findings have gained support by a more recent study by Batra and Sinha (2000) which found that consumers are less likely to buy PLBs in categories that require actual experience compared to categories that allow for searching information through package. In their study Richardson and Jain (1996) have further pointed that also the absence of certain extrinsic cues may result in a higher perceived risk consumers associated with choosing PLBs. Hence, insufficient advertising or lack of a known brand name may strengthen uncertainty and low prices may signal ingredients or materials that are of inferior quality compared to NBs (Richardson and Jain 1996). A further aspect consumers may perceive as a benefit that arise from PLBs is that these products can be perceived as an extension in brand choice in certain categories (Mason 1990) and thus can offer an attractive alternative to NBs which are similar in terms of numerous characteristic across retailers.

2.3 Moderators of Private Label Brand Image

A number of studies have been concerned with the generalization of the latter demonstrated findings on private label brand image. In the course of these studies some moderator variables (e.g. demographic or psychographic factors) have been identified which can influence and alter the outcome of certain attributes that have an impact on image creation and which have been excluded in many trials. To begin with there is some disparity with respect to the manner in which consumers make references between price and quality. To the degree consumers make price-quality inferences (i.e. price-quality schema) they are likely to accept higher prices (e.g. John, Scott and Bettman 1986) since they believe that higher prices are related to a better overall quality (e.g. better materials) (e.g. John, Scott and Bettman 1986; Lichtenstein, Bloch and Black 1988; Lichtenstein, Ridgway and Netemeyer 1993). Vice versa to the degree consumers do not make price-quality inferences high prices are rather seen adversely as it only reflects a higher monetary expense that is not relational to the quality receive. These consumers are therefore likely to accept lower prices and can be characterized as being 'price conscious' (Lichtenstein, Bloch and Black 1988). Since private label products tend to be priced below NBs (Hansen, Singh and Chintagunta 2006) consumers that are price-conscious tend to have a more favourable attitude towards them (e.g. Burton et al. 1998; Hansen, Singh and Chintagunta 2006) and are moreover willing to accept them as an adequate alternative to NBs. In addition, income has been found to have an impact on private label brand attitude. According to Hoch (1996) customers who buy PLBs frequently tend to have a lower disposable income. Moreover this study found that also age, educational level, family size and number of working women have an impact on how frequently PLBs are bought in a certain area. According to Frank and Boyd (1965) the reason for lower income households to have a more favourable attitude towards PLBS is because they suffer from a greater financial pressure compared to households having a higher disposable income. Since demographic factors may vary across different areas private label brand success may vary as well. According to Dhar and Hoch (1997) since elder people have a more favourable attitude towards PLBs in areas where population is elderly private label brands are more likely to succeed. Myers (1967) identified women's working status to be closely related to private label brand attitude. Following this study housewives have a more favourable attitude towards PLBs compared to working women. As an explanation for this Myers (1967) stated that working women generally spend less time on shopping since they have less time to spend on shopping and thus do not put much effort in concerning differences among brands which results in buying well-known national brands. Moreover consumers emotional state can play a major role when evaluating PLBs (e.g. Donovan and Rossiter 1982). According to Kahn and Wansink (2004) and a previous study by Westbrook (1980) people generally evaluate more favourably when being in a good mood. Consequently, consumers perceptions of PLBs may turn out more favourably as well when being in a positive state of mind. According to Bettman (1974) a stereotype private label brand buyer can be differentiated from a national brand buyer in terms of perceived merchandise quality, perceived risk association associated with private label brand purchase and the familiarity with PLBs.

3 Chapter 3: Literature Review on Store Image

3.1 Store Image

One of the first definitions of store image was provided by Martineau (1958) in his early study about the personality of the retail store. According to him, store image is "the way in which the store is defined in the shopper's mind party by its functional qualities and partly by an aura of psychological attribute" (Martineau 1958 p.47). This approach was followed by a multitude of further definitions by a vial number of authors which are, on the whole, in agreement with the understanding of the concept of store image. Following an extensive review of literature, store image can be defined as the overall impression a customer has regarding a particular store (Keaveney and Hunt 1992) that results from the evaluation of a set of attributes(e.g. James, Durand, and Dreves 1976; Nevin and Houston 1980) which are perceived and weighted individually in the customers' mind (Doyle and Fenwick 1974). A stores image is therefore a 'multidimensional phenomenon' (Nevin and Houston 1980) that is at least partially influenced by certain factors that are under the control of a stores' management. (Doyle and Fenwick 1974, Vahie and Paswan 2006).

3.2 Dimensions of Store Image

In contrast to the unanimity that prevails among the authors concerning the definition of store image, there exist, however some differences with reference to the conceptualization. Hence, the relevant literature lists a large number of studies aimed at the identification of the dimensions that are significant for the formation of an unique store image (e.g. Bearden 1977; Doyle and Fenwick 1974; Lindquist 1974; Nevin and Houston 1980). [See Appendix 7.1 for an overview of a number of different conceptualizations of Store Image]. In the course of a comprehensive literature research on store image, Chowdhury et al. (1998) identified six dimension that seem to capture the most eminent elements across the diverse conceptualizations of store image - employee service, product quality, product selection, atmosphere, convenience and prices/value. In the course of the following section the latter dimensions are taken into account which will be furthermore explained briefly.

The dimension employee service has received a lot attention in the context of store image literature and is linked to features such as friendliness and helpfulness of sales personnel, the number of present personnel in the various departments and at the checkout, the return policy for merchandise and the policies for credit and charge account provided by the particular store (e.g. Mazursky and Jacoby 1986; Stephenson 1969, Westbrook 1981).

According to Vahie and Paswan (2006) product quality is how customers of a store perceive the quality of the merchandise sold by a retailer. In the relevant literature the quality of merchandise is treated to be one of the key determinants that has a significant influence on store image (e.g. Ailawadi, and Keller 2004; Hildebrandt 1988; Mazursky and Jacoby 1986; Vahie and Paswan 2006) whereas store image however, only has a negligible impact on perceived merchandise quality (Dawar and Parker 1994). The product selection, or assortment refers to the number of brands in stock and the breath and variety of merchandise a store offers to its customers(e.g. Stephenson 1969). According to Ailawadi and Keller (2004) a consumers' perception of the breadth of merchandise has a significant influence on the image on the respective store. In his study on the meaning of image Lindquist (1974 p. 32) defines store atmosphere as "a customer's feeling of warmth, acceptance or ease". It is linked to features such as music, colour, scent, temperature, lightning, crowding, cleanliness as well as the type of clientele that shops at the store and the ease of mobility within a store (e.g. Baker, Parasuraman, Grewal and Voss 2002; Bearden 1977; Kotler 1973). It has been found that a pleasant and appealing atmosphere has a significant influence on a customer's preference for a store (Donovan and Rossiter 1982; Westbrook and Black 1985) and that attributes such as colours, background music and crowding can stimulate customers purchase intentions as well as the perceived and actual time they spent in a particular store, (e.g. Baker, Grewal and Levy 1992; Bellizzi, Crowley and Hasty 1983; Eroglu and Machleit 1990; Grewal, Baker, Levy and Voss 2003; Milliman 1982 ).

According to Stephenson (1969) convenience comprises factors such as short driving distance, overall time required to reach the location and the ease of driving towards it. A further attribute which has repeatedly been identified as important for consumers in this context it the availability of sufficient parking spaces, (e.g. Lindquist 1974 ). According to the authors in a nutshell it can be said factors that ensure an easy access to the store favourably influence perceptions of the store. However, this finding has at least party been refuted by findings from Bell, Ho and Tang (1998) in their more recent study on shopping costs. They argue that the location of a store and the distance that has to be covered are no longer key variables in store choice decision. Empirical support for this statement is provided by a study by Craig, Gosh and McLafferty (1984). They found out that that consumers tend to neglect the nearest alternative if the additional effort is compensated by for example lower prices, a wider assortment, better merchandise quality or ultimately a better overall image. Likewise, Stanley and Sewall (1976) have stated that stores having a favourable image can attract customers from farer distances, and thus alleviate potential locational inconveniences. Price/value refers to the value the customer receives in return for the money paid (Thang and Tan 2003). Following Zeithaml (1988) the term 'value' is defined diversely by consumers (e.g. "low price", "quality received for money paid" etc.). According to Lichtenstein et al. (1990 p. 56), perceived value can be defined as "a concern for paying low prices, subject to some quality constraint". The price/value proposition has further been linked to attributes such as the overall price level and the perceived fairness of the store. (Chowdhury et al. 1998; Stephenson 1969). In their study, Rao and Monroe (1989) point out that the positive relationship between price and perceptions of merchandise quality applies particularly within certain product categories and price ranges.

3.3 Moderators of Store Image

Also in case of the latter findings on store image a variety of moderator variables have been identified that can have an impact on how consumers perceive the image of a store. To begin with, it can be ascertained that the attributes that have been identified as important to customers to evaluate the image of a store slightly differ with respect to the different types of stores. For example Hansen and Deutscher (1977) found that there exist some differences between department stores and grocery stores. Table 1 opposes the ten most important attributes subjects used to evaluate department stores and grocery stores. The discrepancies can be explained by the intentions consumers have when visiting the two different stores and the manner in which the respective items are bought (Hansen and Deutscher 1977). For instance Ailawadi and Keller (2004) have mentioned that when consumers solely do small purchases or require something particular they tend to avoid locations that are far off and difficult to reach for them. Furthermore, is has turned out that consumers perceptions of the miscellaneous attributes vary across people and that they can be of different significance to different groups of people (e.g. James, Durand and Dreves 1986; Steenkamp and Wedel 1991). For example in his study on atmospherics in clothing stores Kotler (1973) suggests that the perceptions of in-store atmosphere may vary for different customer segments. His findings indicate that customers that belong to the upper-class put more emphasis on the fact that a store is designed very spaciously and is not cluttered with merchandise whereas the younger clientele can be attracted by music, bright colours and light effects within the store. Kotler (1973) furthermore emphasizes the complexity that is attached to decisions on atmospheric elements when the intended audience is broadly diversified. The implication of Kotler (1973) has gained support by a number of further studies dealing with the same issue. A study by French et al. (1972) for example has pointed out that the income level has an influence on buying decisions as well as on the assessment of merchandise quality. However, regarding the latter assertion Wheatley, Chiu and John (1977) argue that demographic factors such as educational level an income level merely play a subordinate role in consumers assessment of quality. In fact according to them variables such as price and the product itself appear to be of greater significance and are in addition at least to some extent under the control of the management of a store. Moreover, it can be distinguished between two different types of shoppers: the recreational shopper who enjoys shopping and spends a lot of time on shopping and the convenience shopper who in contrast does not actually enjoy shopping but rather look at it from an economic perspective (e.g. Bellenger, Robertson and Greenberg 1977; Hansen and Deutscher 1977). The latter therefore puts more emphasis on convenience elements such as a rapid checkout and short driving distances whereas the former emphasizes low prices and the quality of in-store personnel (Hansen and Deutscher 1997). A further determinant that is crucial for the evaluation process of a stores' environment is a consumers' emotional state (e.g. Donovan and Rossiter 1982). Since people apparently evaluate more favourably when being in a good mood (Kahn and Wansink 2004) this can ultimately also contribute to a higher perceived store image. However, the prerequisite therefore is that a stores' environment has to actively contribute to that state. There are a multitude of additional factors that can act as moderators in the formation process of a stores image such as age (e.g. Hansen and Deutscher 1977), the customers self-image (e.g. Bearden 1977; Doyle and Fenwick 1974), the educational level (e.g. Enis and Paul 1970), the family lifecycle (e.g. Lazer and Wyckham 1969) and the occupation (e.g. French, Williams and Chance 1972) which will not be further discussed in this thesis.

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