Academic journal article International Journal of Marketing Studies

The Perceived Quality of Store Brands: The Effect of Price Promotion and Quality Guarantees

Academic journal article International Journal of Marketing Studies

The Perceived Quality of Store Brands: The Effect of Price Promotion and Quality Guarantees

Article excerpt

Abstract

This research examines the effect of price promotion on the quality of store brands and national brands. It also examines the effect of a quality guarantee on the perceived quality of store brands. These findings suggest that store brands, but not national brands, are negatively affected by price promotion. However, a quality guarantee can counterbalance the negative effect of price promotion. Finally, the research results show that purchase intention is positively affected by perceived quality.

Keywords: product quality perception, price promotion, store brand quality guarantee

1. Introduction

Store brands, also known as private labels, have been major players in the retail market. With a market share of 24 % of U.S. supermarkets (Marketing Daily, April 6th, 2010), store brands continue to win consumer choice. Retailers offer their own brands either to increase their profits or gain greater customer loyalty. Consumers today continue to adopt store brands in many product categories, such as fresh and canned foods, cleaning products, and pain relief products. Retailers often offer the same products as national brands, but at lower prices. Lowering the cost of packaging and advertising allows retailers to lower the prices of their own brands (Cunningham, Hardy, & Imperia, 1982). Although store brands have been studied to a great extent in the current literature, the effect of promotion on store brand quality has not received as much attention. Since product quality is important for the success of store brands (Erdem et al., 2004; Choi & Coughlan, 2006; Wulf, 2005), understanding the effect of different marketing practices on the perceived quality of store brands needs to be further considered.

Among those practices are promotional decisions taken by managers to increase sales. Since price promotion is common for sellers of store brands, it is important to investigate the effect of such a practice on consumer behavior. Although retailers do compete by positioning their products at different levels of perceived quality, understanding the effect of promotion on the perceived quality of store brands is also important. Lowering product perceived quality can be a negative effect of different types of promotions (Dodson, Tybout, & Sternthal, 1978; Doob et al., 1969). Indeed, the current literature offers no research on the direct examination of the effect of price promotion on the perceived quality of store brands.

This study aims to fill this gap by examining the effect of product type, national vs. store brand, on the relationship between price promotion and perceived quality. It also examines how a quality guarantee may moderate the effect of that promotion on store brand perceived quality. We argue that promotion has a negative effect on perceived quality in the case of store brands, but not in the case of national brands. Consumers tend to have a greater concern about the quality of store brands than they do about national brands. In addition, we expect quality guarantees to lessen the effect of the promotion on the perceived quality of store brands.

Current research has implications for both theory and practice. Theoretically, this research adds to our understanding of the differences between store brands and national brands in terms of the effects of promotion on perceived quality and also sheds further light on the benefits of offering a quality guarantee on their store brands in terms of consumer perception of the actual quality of store brands. Understanding the effect of price promotion and quality guarantee on consumer perception of quality is important for retailers, as they attempt to win the choices of their consumers.

2. Theoretical Background

2.1 Effect of Promotion on Perceived Quality

Promotions are used by managers to enhance sales. However, promotions are not without certain negative consequences. Lower perceived quality is one of the negative consequences of promotions. …

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