How The Influence of Multi-Tiered Private Label Brand Architecture Varies Across Retailers

Starting from Europe, many retailers now provide more than one quality tier (e.g. premium, standard, and economy) private labels in a specific category. To distinguish different quality tier products, retailers usually use different brand architecture. The examples below show that the actual branding architecture choice in the toilet paper private labels by three supermarket chains in Los Angeles.  

Retailers have many choices in the private label branding architecture. As an example, retailer banners (e.g. Vons) can be combined with modifiers (e.g. premium, standard, and economy) in the "endorsed banner brand architecture." Retailers can choose not to use the retailer banner, but still use a common group brand (e.g. Home Life) with modifiers in the "group brand architecture". Finally, different names can be assigned for each quality tier in the "stand-alone brand architecture." Some combinations of these approaches are also possible. The natural question that arises is "what is the optimal brand architecture when retailers manage multiple quality tier store brand portfolio?" This is the question that I am investigating together with Prof. Claudia Townsend (University of Miami) by using both secondary and experimental data. We are especially interested in the impact of multi-tiered private label brand architecture on consumer choices. 

Using descriptive regression analyses and controlled lab experiments, we find that the perception of retailer quality influences the perception and choice of private label brands. While in a high-end retailer with endorsed banner brand architecture, consumers are more likely to purchase a value store brand rather than a premium store brand, in a low-end retailer with endorsed banner brand architecture, the opposite is true. In addition, we find that perceptions of retailer quality interact with private label brand architecture to influence choice. For standard and value store brands in the case of high-end and medium-end retailers, banner endorsed brand architecture results in the greatest overall choice of private label choices, followed by endorsed group brand architecture, and stand-alone brand architecture. This is not the case for low-end retailers where we find that consumers’ private label choices are not affected by private label brand architecture. We discuss the implications of our findings for academics and retailer managers.