Store Brand -Purchase Behaviour

7/29/2019 Store Brand -Purchase Behaviour

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Group Members-Aakriti Chauhan(present)

Aanchal Sharma(present)

Ayushi Sharma(present)

Eshan Arora(present)

Neha Gandhi(present)9/19/2013 1



Neha Introduction Key Issues Methodology Questions answered in this paper

Eshan Data collection Limitations of data collection Model formulation Summary statistics for the ten categories used for estimation DescriptionsAyushi

Applications Drivers of store brand choiceAakriti Conclusion Managerial implications

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• Store brands/ Private labels are particularly important to retailers.

• According to the Private-Label Manufacturers Association(PLMA).

A well developed private-label program provides

profitability to retailers

better bargaining power with the manufacturer

And build store loyalty

• Even the largest manufacturers do not come close to the private

label in terms of store wide coverage.

•

Private labels are almost always the cheapest brand in a productcategory.

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The tendency to buy store brand is

category specific, or an enduring

consumer trait? “Store-brand- prone” households or

“Budget- prone” households?

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• Multi category brand-choice model was formed with a

factor-analytic structure on the covariance matrix of the

coefficients.

• The methodology allows to understand the tendency for ahousehold to buy store brands, while controlling for other

causes such as price sensitivity.

• The model is applied to a set of ten food and non food

product categories.

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Are household preferences for store brands and other

marketing-mix variables correlated across product categories?

Does preference for store brand differ across broad groups of

categories such as food versus nonfood?• To what extent are these preferences driven by observed

household characteristics versus unobserved household

“traits?” How useful are the two components in identifying

the store-brand segment and in predicting demand for store

brands in new categories?

Are store-brand households more or less price sensitive? Are

the store brands for the retailer in question better positioned in

certain categories?

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• The model is estimated using data from product categories that include a wide range of food as well as non food products.

• The data comes from a frequent-shopper database from a large retail chain on the EastCoast.

•

Data from a single store that is located in asmall sub-urban town.• Period of 20 months from November 1999 to

June 2001.

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Due to privacy concerns, very little

demographic information on the households.

Households’ purchases are observed only atthe store in question.

Studies of private-label shopping behavior

using typical scanner panel data could lead to

findings that are severely biased

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• Estimation of the joint distribution of preferencesand in estimating the degree of correlation in preferences across categories

•

Each category is composed of three brands: astore brand, and two national brands.• The model can easily incorporate a varying

number of brands across categories.• The model allows to measure the extent to which

store-brand preference and marketing-mixsensitivities are correlated across categoriesand — if so — which components are driving thesecorrelations.

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Table 2 presents the household-specific demographics and purchase-related variables used in the study.

We use card member addresses to obtain block-leveldemographic information.

The description of the household specific variables is asfollows: bask(average basket size of the card member), morning (% of shopping trips between 9 and 5 on weekdays), weekday (% of total trips on weekdays), income (average income),baby(dummy for presence of baby), pet (dummy for pet),milk(monthly milk expenditure — a proxy for household size),and HMR (monthly expenditure on home meal replacement — a measure of lifestyle).

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Interpreting the Factors -The factors are asfollows:

a) Store Brand Preference b) Price Sensitivity

• The naming of the factors simply refers to findingthat the first factor explains a substantial amountof variation in store brand preferences.

• While the second factor explains substantialvariation in price sensitivity — consistently acrosscategories.

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Using Factor Scores for Market Segmentation

• If the retailer is interested in segmenting

customers based on their price sensitivity or store-brand preference it can be done by using

factor scores.

• It can be done by assigning the households

scores in the sample into quartiles based on

the factor scores.

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Drivers of Store-Brand Choice Across

Categories

In categories where some households perceivethe store brand to be of high quality, price

considerations may be a less important driver

than in categories where the store brand is

perceived to be of poor quality.

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• store-brand buyers are still found to be more pricesensitive than national brand buyers.

• Results from 10 product categories indicate thathouseholds do display similarities in their

preference for store brands.

• Demographics are not useful in identifying thestore-brand buyers.

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• Store brands are better positioned in certaincategories, as they attract buyers primarilydue to strong preferences rather than priceconcerns.

• There exist cross-category price-sensitivehouseholds who buy the cheapest (i.e., store)

brand.• There is significant correlation in households’

preference for store brands and their pricesensitivity across categories.

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• If store-brand purchases are being made mainly dueto store-brand preferences then the retailer couldpotentially increase category profits by narrowing

the price gap between the store brand and thenational brands.

• Household-specific factor estimates can be used fortargeting purposes and to predict demand for store

brands in new product categories.• Finding strong correlations for preference for store

brands across categories indicates opportunities forthe retailer to enhance their umbrella brand.

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• By devising strategies such as manufacturersponsored in-store coupons, the retailer couldpotentially not only increase profits, but also

enhance store loyalty.• Households are more likely to exhibit a consistently

strong preference for store brand across nonfoodcategories as compared to food categories.

•

Categories that attract store-brand buyers mainlydue to stronger preferences could be used asflagship categories for carrying the store “brand name.”

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THANK YOU

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Store Brand -Purchase Behaviour

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