Choice of National Brand vs. Private Label “Me-Too” New Products in a Multicultural Context: Understanding Consumer Innovativeness

Choice of National Brand vs. Private Label “Me-Too” New Products in a Multicultural Context: Understanding Consumer Innovativeness

Mónica Gómez-Suárez, Carmen Abril
Copyright: © 2020 |Pages: 27
DOI: 10.4018/978-1-5225-9282-2.ch013
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Abstract

Many national brands adopt innovation strategies based on frequent launches of new products to defend and grow market shares against private labels. However, retailers imitate the novelties of national brand new products very fast. One of the key questions to assess the effectiveness of national brands' product innovation is to get a deeper understanding of how consumers react in terms of choice when faced with a national brand new product and a me-too private label product. In particular this research explores the effects of consumer innovativeness and risk aversion on this choice in five European countries and the United States. Results show that consumers with higher innovativeness prefer national brands. However, there are significant differences among countries depending on their uncertainty avoidance and risk aversion.
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Background

A number of articles have analyzed the impact of national brand innovation on private label consumption. For example, Sriram et al. (2007) showed that the introduction of new products by CPG manufacturers positively influences their brand equity, which reduces their vulnerability to the entry of private labels. Pauwels and Srinivasan (2004) also found that when private labels enter a category, national brands adopt a defensive strategy of investing in product innovation that can enhance their competitive advantage and enable a sustainable price premium over the private labels (Abril & Martos-Partal, 2013).

Additional findings reveal that national brands’ innovation intensity in a category negatively correlates to private label share (Anselmsson & Johansson, 2009; Martos-Partal, 2012; Rubio & Yagüe, 2009; Steenkamp & Gielens, 2003). As the number of new product launches in an industry increases, the private label category share decreases (Kumar & Steenkamp, 2007). However, depending on retailer power and retailer interest, product innovation effectiveness may vary (Abril & Martos-Partal, 2013). These empirical results confirm that product innovation is an effective strategy for halting the entry of new private labels on the market and for preventing the growth of existing private-label market share (Kumar & Steenkamp, 2007; Steiner, 2004; Verhoef et al., 2002).

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