Master Thesis Marketing

Master Thesis Marketing The Influence of Introducing a Generic Private Label on Consumer Choice Author: André Dietz Student number 1481444 Date: 03-07-2009 Master Thesis Marketing The Influence of Introducing a Generic Private Label on Consumer Choice July, 2009 Master Thesis MSc Business Administration Marketing Management Faculty of Economics and Business University of Groningen, the Netherlands _____________________________________________________________________ Author: André Dietz Student number: 1481444 Address: Leeuwarderstraat 4, 9718 HX Groningen Phone number: 0031 6149 77 465 E-mail: [email protected] University supervisors: Dr. J.A. Voerman Dr. M.A. Tuk Company Supervisors: Alexander Hendriks John Dankers Company: Albert Heijn Provincialeweg 11 1506 MA Zaandam “The author is responsible for the content of the thesis. The copyright of the thesis rests with the author.” André Dietz, University of Groningen Page 2 Management Summary The second most important key motive for consumers to decide their supermarket choice, is valuable. The choice criteria for valuable are low prices, attractive promotions and good offer of low priced products (generics). By having a well balanced assortment of low priced products (generics), full service supermarkets can demonstrate that they have a basket that is price competitive against discounters. However, few research exist of the effect of adding a generic PL to the choice set of a supermarket assortment. Therefore, the purposes of this research were aimed at the effect of adding a generic PL to a current two alternatives choice set (manufacturer brand and copycat PL) resulting in a three alternatives choice set (manufacturer brand, copycat PL and generic PL) on consumer choice and on identifying the factors that influence consumer choice. An extensive literature study has revealed the role generics play in retail assortment and identified the main factors that are expected to influence consumer choice and/or the relation between introducing a generic PL and consumer choice. These factors are: compromise effect, decision uncertainty, product familiarity, quality perceptions, decision involvement, product risks and brand experience. To analyze the influence of the above factors, data was obtained by means of an online questionnaire. Albert Heijn customers over 18 years old, who were responsible for the groceries within their household and were reachable by mail were targeted. To allow for comparison on quality perceptions of the copycat PL and consumer choice, two groups of respondents were involved in the research. Group A (n=152) were asked questions concerning the three alternatives choice set and the questionnaire of group B (n=156) contained questions concerning a two alternatives choice set. After analysing the data, the results of this study show that the expected compromise effect was not applicable. When a third alternative is added to the choice set the market share of the compromise option (i.e. copycat PL) did not increase. Although the market share did not increase of the copycat PL, results in this study also show that quality perceptions of the copycat PL do increase when a generic PL is added to the choice set. Besides testing the compromise effect, another objective of this study was to identify and test the main factors expected to influence consumer choice. Results show that decision involvement, product risk and brand experience influence consumer choice. Consumers high André Dietz, University of Groningen Page 3 involved are less likely to choose the generic PL. For product groups with high financial or social risk, respondents are less likely to buy the generic PL. For product groups with high financial and functional risk, respondents are more likely to buy the manufacturer brand. And when consumers have high manufacturer brand- or generic PL experience they are more likely to choose the manufacturer, respectively the generic PL in the choice set. From a manager’s point of view, having insight in the role a generic PL plays in retail assortment and knowing about which factors, to what extent influence consumer choice when a generic PL is added to the choice set, can be very beneficial. Category managers could introduce a generic PL when they want to increase the quality perception of the copycat PL. When increasing the generic PL assortment, it can be expected that consumers who score low on decision involvement and high on generic PL experience will be more likely to choose the new generic PLs. Finally, to decide if a new considered generic PL would be of interest to the consumer, associated risks to the product are a good indication. André Dietz, University of Groningen Page 4 Preface By writing this master thesis during an internship at Albert Heijn I was writing an end to my master Marketing Management and my life as a student. I enjoyed being a student in the lovely city Groningen. From the very beginning I was satisfied with my study choice. I have experienced and learned about a diverse spectrum of business knowledge fields (Economics, Marketing, Accounting, HRM, Operations and IT). During my bachelor I learned I like to entrepreneur and be creative on a fact-based manor. The Master Marketing, in Groningen, one of the best in the Netherlands, was a good match with my capacities and needs. Besides studying, my student life meant much more to me. From year one, I have lived in Groningen. In my student life I have met and get to know a lot of interesting people. Not only during my study but also by being a member of the student Society Dizkartes. An other important part of my life as a student was starting my own company in 2006, called Promo Bears. We offer a creative way of doing marketing; we create brand characters and bring them a life by making custom made mascots and plush toys. Promo Bears offered me the perfect opportunity to put knowledge in practice and to learn facets, which I believe can only be learned in the “real world”. I would like to take this opportunity to thank some persons who supported me during my research. First of all I would like to thank Alexander Hendriks and John Dankers for their support during my internship. I am very grateful for all the knowledge they have shared with me. Next, I would like to thank Petra Janssens for the interesting and funny conversations during lunch breaks in the beautiful city of Zaandam. Furthermore I would like to thank the entire team of Price Management for their support, they were the reason I enjoyed every day of my internship. Finally a special thanks for Joost Poelgeest a fellow intern at Albert Heijn for his help, table soccer qualities and pleasant coffee breaks during my research. I specially want to thank my supervisor Liane Voerman for here advise and helping me during the various phases of this thesis. With her advice and feedback she made sure I maintained an academic focus during the research. Last but not least I would like to thank my family and friends for their support and interest in my final Master Thesis and for their support during my entire study in Groningen. I specially want to thank my parents Peter and Petra, sister Jessica, business partner Edwin and my roommates Barend from Haarlem and Johan from Groningen. André Dietz, Groningen, June 30th 2009 André Dietz, University of Groningen Page 5 Index 1. Introduction & Problem statement................................................................................ 8 1.1 Background problem.............................................................................................................................. 8 1.2 Problem statement and research questions ..................................................................................... 11 1.3 Theoretical and social relevance ........................................................................................................ 12 2. Theoretical framework................................................................................................. 13 2.1 Assortment ............................................................................................................................................ 13 2.1.1 Assortment width........................................................................................................................ 14 2.1.2 Assortment depth........................................................................................................................ 15 2.2 Brand architecture................................................................................................................................ 16 2.2.1 Manufacturer brands .................................................................................................................. 16 2.2.2 Private labels ............................................................................................................................... 17 2.3 Factors influencing consumer choice................................................................................................. 20 2.3.1 Compromise and attractiveness effect..................................................................................... 21 2.3.2 Private labels versus manufacturer brands ............................................................................. 24 3. Research design ........................................................................................................... 27 3.1 The Dutch supermarket industry and company..............................................................................

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