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Raj Sethuraman

Traditional belief holds that store brands are simply low-priced alternatives offered to consumers with the sole and explicit purpose of switching them from national brands to the retailer’s store brand. In reality, store brands play several fairly distinct roles depending on the nature of consumers in the market. Associated with these roles is a set of strategies that retailers can adopt with respect to their brands. A formal understanding of the various roles, conditions, and the related strategies will enable retailers to appropriately implement their private label programs and national brand managers to better manage their brands in response to the strategies adopted by the store brands. In this chapter, a framework is developed for classifying consumers into four segments based on their preferences for national brands and store brands. This framework simultaneously takes into account supply and demand conditions for national brands and store brands. It gives rise to 15 consumer preference distributions, which describe the consumer markets that retailers can potentially face. For each consumer market, the author discusses feasible store-brand strategies based on three criteria: (i) whether the store brand(s) deployed is standard, economy, premium, or niche private label, or a combination; (ii) whether the intended role of the store brand vis-à-vis national brands is no switching, low switching, high switching, or total switching; and (iii) whether the intended role of the store brand from a category perspective is no expansion, low expansion, or high expansion.

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Raj Sethuraman and Jagmohan S. Raju