The notion of a distributor’s brand is therefore heterogeneous, offering the store a range of possibilities for getting its overall offer across . Research has analyses how each type of distributor’s brand was able to increase its market share to the detriment of the leading brands of the segment, and also to reduce the price differential between the two, there by boosting profitability (Levy and Caperers, 1998). More than 500 mothers, in a simulated store, were presented with a choice between the leader in chocolate biscuits (Pep ito bleu/Da none group) and a distributor’s brand.
This choice varied from one customer to the next according to four criteria:
- presence or absence of the store name its elfin the brand name (DOB or private label);
- whether there was a ‘copycat’ of the PepsiCo, or clearly differentiated packaging;
- objective quality of the distributor biscuit(established through blind tests): identical or markedly inferior to Pep ito;
- level of price difference with Pep ito: index50, 65 and 80.
The combination of these variables makes it possible to reproduce any form of distributor’s brand currently active on this market. The key findings of this research were:
- The quality of the distributor product has astron and positive impact on the intention to purchase the distributor product. It increases from 16 per cent when the product tasted is inferior to Pep ito, to34 per cent when it is equal.
- The store’s reputation also has a bearing on the intention to purchase. When the store name is masked (private label strategy), the average intention to purchase is only 20 percent. It increases to 30 per cent once the name is known. It is the interactions, however, that prove most interesting in practice, as Table below demonstrates. Each line refers to a different form of distributor’s brand:
- The first line concerns a DOB that carries the store name, therefore bringing its reputation into play, and packaging that is not copy of Pepito’s. It is acting like a true brand (reputation and differentiation and quality). What do we observe? This is where the demand for the distributor product is strongest (38 per cent). Furthermore, it is the strongest even though the price difference is less (20 percent cheaper): therefore the profitability is maximal. Interestingly, the demand doe snot increase when the price is lowered (35per cent cheaper); on the contrary, it decreases to 28 per cent when the price is lowered still further (50 per cent cheaper), probably as a result of the anxiety that this price arouses in mothers (this is a product for children, after all). The moral is that the DOB is most dangerous to national brands, and also most profitable, when it behaves most like a true brand.
- The second line shows a store brand copy:this is the most common form of distributor’s brand in the food departments of superstores. Here the demand only increases if the price decreases. Although it also reaches 38 per cent of pure demand, this time it is only at a rock-bottom price(50 per cent cheaper): profitability is therefore not as good as with the previous line.
- The third line is what is known as a ‘counter brand’:the store name is absent, and the product is marked by an unknown brand(that is, a private label). Furthermore, it sonly option is to slavishly copy the packaging of the leader, in order to create confusion and allow clients to think that there is a similarity between the products, since the packaging is so alike. Demand follows an inverted U-shaped curve, with the best intention to purchase scores for the distributor product (31 per cent of intentions) at the intermediate price level(35 per cent cheaper).
- In the fourth line the store is unknown but the packaging is different from the leader’s. Here the distributor’s brand resembles as mall, unknown brand, and the client has no point of reference for evaluating it.
It is therefore not surprising that price is the only motivator: demand grows as the pr icefalls. This is typically the case for lowest, created to counter the products on the hard-discount circuit.
What can we draw from this analysis? When the distributor’s brand behaves like a true big brand, it reaps the benefits (market share and profitability): however, it must have the will and the means to do so. Not everyone can be Decathlon or Tosco.