Consumers’ Reactions to Price Imitations by Private Labels with Sub-branding Strategy

Abstract

The influence of price similarity and dissimilarity between a private label (using a sub-brand strategy) and a national brand on consumers’ judgments of the private label’s quality and purchase intention is studied using a controlled experiment with a sample of 238 respondents. The results of this study are rather interesting in the sense that price imitation of a national brand by a private label enhances the buyers’ perception about the private label’s product quality. Inversely, price dissimilarity (higher price differences, wherein the private labels are cheaper than national brands) to a national brand enhances the purchase intention of private labels. The results are significant for two products in the consumer packaged goods category (biscuits and potato chips). Consumers’ reactions would help private label retailers arbitrate and adopt optimum price difference between national brands and private labels.