Managing In-Store Stimuli for Different Private Label Tiers

Managing In-Store Stimuli for Different Private Label Tiers

Álvaro Garrido-Morgado (University of Salamanca, Spain), Óscar González-Benito (University of Salamanca, Spain) and Mercedes Martos-Partal (University of Salamanca, Spain)
DOI: 10.4018/978-1-5225-0220-3.ch010
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Abstract

This chapter aims to be the starting point to encourage the study of how retailer may improve the private labels performance within the store. In this line, authors present an analysis of the use of the two more common in-store stimuli –price promotions and displays- by explaining the advantages and disadvantages that their use has on different private labels tiers (economy private labels and standard private labels) in comparison with national brands. Then, authors use data of eighteen product categories during a full year from one top ten retailer in the food sector to check if retailers follow the expected use of promotions and displays on private labels. Finally, recommendations and conclusions about how retailers may optimize the use of analyzed in-store stimuli are presented.
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Introduction

Nowadays, the economic situation and the proliferation of stores of grocery top retailers (AC Nielsen, 2013), causes increasingly more competition between these retailers. In this sense, retailers do not stop designing strategies in order to attract consumers to their stores. Retailers know that among all possible strategies and tools, management of their private labels (PLs) is key to attract more consumers who are very interested in to get economics savings. In fact, these brands have increased their share in the shopping basket, and currently they exceed market shares of 40% in several European countries such as Belgium, Germany, United Kingdom, Portugal, Switzerland or Spain (PLMA, 2015). This indicates PLs are purchased by a greater number of consumers and they are present in most of householders.

PLs are used by retailers to differentiate themselves from their competitors as consumers can just find a particular PL at stores of the retailer that offer it exclusively (Ailawadi et al., 2001; González-Benito & Martos-Partal, 2012). Thus, PL has become one of the major tools to attract consumers to retailer stores and even creating loyalty (Burton et al., 1998; Kumar & Steenkamp, 2007). However, retailers must offer a “cheap” product with a high quality to create the PL loyalty because consumers are increasingly demanding. Actually, right now, PLs more purchased are those that have a higher price-quality index instead of the cheapest ones.

Due to some customer segments demand more quality to PLs, retailers are offering PLs with higher quality in recent years and, consequently, they have also improved their product prices (Steenkamp et al., 2010). Therefore, the quality and price level gap between PLs and national brands (NBs) has decreased in last years. Indeed, in many occasions, PLs have a very similar quality level to NBs with a lower price, therefore, they present a higher price-quality index (Geyskens et al., 2010; Soberman & Parker, 2006).

Most of retailers have increased their PL assortment and they offer PLs with different quality and price tiers in order to attend different consumer segments: (i) the classic consumers segment which is more price-sensitive and (ii) the value consciousness consumers segment which demand a higher quality to switch from NBs to PLs (Geyskens et al., 2010; Kumar & Steenkamp, 2007; Martos-Partal et al., 2014). In fact, retailers usually offer an economy private label (EPL) and a standard private label (SPL), and even some of them, a premium private label (PPL) (Geyskens et al., 2010; Kumar & Steenkamp, 2007).

Some of these PL tiers may use very similar price or promotional strategies to NBs (Kumar & Steenkamp, 2007; Martos-Partal et. al, 2014). In fact, they may present similar promotional level within the store, to make known the new PL and stimulate the switch from NBs to PLs by triggering their unplanned purchases, which represents the most of total of purchases in recent years.

However, we do not find studies that analyze comparatively the use of in-store stimuli, promotions or displays, in order to trigger the PLs unplanned purchases by distinguishing between different PL tiers, despite these PL tiers must to be analyzed separately (Palmeira & Thomas, 2011). Because of these, this study aims to compare the frequency with which retailer uses the more common in-store commercial stimuli, promotions and displays, on two different PL tiers (economy and standard ones) with respect to NBs. Furthermore, it is going to expose about the issues that retailers must consider to perform their in-store stimuli plans. Finally, it is going to diagnose these commercial stimuli’s effectiveness on different PL tiers in comparison with NBs on eighteen Fast Moving Consumer Goods (FMCG) product categories in order to know what commercial stimuli may be more effective for each PL tier.

Key Terms in this Chapter

Standard Private Label: Brand that is owned by the retailer or the distributor and is sold only in its own outlets as same quality than national brands but with lower price.

Unplanned Purchase: Purchase that is decided at the election moment within the store, i.e., which consumer has not decided before entering into the store. It usually occurs as a result of exposure to commercial stimuli like promotions or displays.

Value Consciousness Consumers: Consumers that are concerned for paying low prices subject to some quality level.

Displays: Especial presentations of products within the store to attract attention and increase their sales. They highlight the product within the store by improving the product perception in order to increase the likelihood of it being acquired by the customer.

Economy Private Labels: Brand that is owned by the retailer or the distributor and is sold only in its own stores as cheapest priced products. Suffer for poor margin and provide a purchase option for extremely price-sensitive consumers.

Price-Sensitive Consumers: Consumers that search economic or functional benefits on their purchases. They are mainly concerned about saving money through a good deal.

Price Promotions: Temporary discounts which increase the product sales in short-term. They favor the product test and the brand switching at the moment, thus they may increase the stock rotation. They work better for more price-sensitive consumers.

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