Tuesday, March 18, 2014

Impact of Store Brands on Store Loyalty

Why and when would I be likely to choose a store brand?

A recent article in the Journal of Marketing analyzed the relationship between the amount of money a consumer spends on private label brands and her loyalty to the retailer.  Store brands now represent 15% of global retail revenue according to AC Nielsen.  The idea that as I add more store brands to my basket (larger share of wallet) the higher my store loyalty will be is not a new one.

But as with all aspects of marketing, different segments and different categories work differently.  The relationship between private labels and loyalty is a bit more complex than 'the more the better.'

The research identified several factors that impact the relationship between the two consumer metrics: Private label share and Store loyalty.  In order of importance:
  1. Low price seekers exhibit a stronger relationship between store brand share and store loyalty.  This is in part due to the tendency that I think of private label brands as less expensive to begin with.
  2. When a retailer occupies a lower overall price positioning in my mind then as store brand share raises so does loyalty.  A collection of store brands from a low-price retailer makes it easier for me to decide.
  3. Categories with high-involvement, or information seeking, are areas where the relationship between the two is also stronger. This suggests that unique content development should focus on categories where I need to find out things.
  4. Highly commoditized categories, i.e., lots of acceptable alternatives available, mitigate the relationship between share and loyalty.  Basically, if all things are equal I might as well just pick one.

Thus, when it comes to distributing promotional content both the audience and the offer matter. 

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