School of Continuing and Professional Education
City University of Hong Kong
BA / BA (Hons) Marketing Management, Edinburgh Napier University Part-time (143-29180)
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MKT10932 Dissertation
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Chan Ka Hang
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To explore the critical factors of supermarket own branded products to successfully build customer loyalty – case study of supermarket Wal-Mart
Background to the study
Nowadays, retailers are seeking the ways to differentiating with competitors; for example, develop own-brands in order to change the customer behavior and to achieve high level loyalty. According to the Wal-Mart’s website, they have around 40 own-brands in their store. Wal-Mart as a biggest supermarket in the world, and they developed and acquired many own-brands to compete with rivalry and gain the loyalty from customers.
As one British retailer manager put: “customer loyalty is a fundamental reason for having own-brands” (Steenkamp and Dekimpe, 1997). In the context of a retailer own-brand, customer loyalty encompasses two associated loyalties – brand and store loyalties.
According to the Steenkamp and Dekimpe study, brand loyalty of own-brand is only possible if the own-brand possesses a favorable image (Steenkamp and Dekimpe, 1997). On the other hand, by Binninger, consumer satisfaction and store loyalty are determined by high-quality products (Binninger, 2008), for example, Wal-Mart developed their own branded products in the market such as Sam’s Choice in order to get more benefits and achieve further development. Building a strong brand in the supermarket is the goal of many organizations because it provides many benefits to a firm, for example, reduce the rivalry because supermarket’s own branded products can substitutes for others. Also, own branded products can bring more margins for the supermarket due to the larger product portfolio. Moreover, based on previous studies, the retailer own-brands can be a tool to achieve customer loyalty and market growth (Corstjens and Corstjens, 1995).
Although there are many benefits for supermarket to develop their own branded products, they faced different problems in the initial stage because the new brand is difficult to compete with some international brand. Therefore, I would like to study what critical factors lead supermarket own branded products to be success, how their products are changing customer behavior, and build loyalty.
Overall research aim
To understand what variable critical factors of American multinational retail supermarket Wal-Mart develops own branded product.
Research objectives
Identify the critical factors make own branded products success and create the loyalty
To analyze how organization’s own branded products compete with international branded product in the existing market, for example, marketing strategies like positioning, marketing mix, customer relationship management (CRM) and etc
Conduct a survey to identify the successful factors of Wal-Mart
Identify the limitations of the own branded products and process of building loyalty
Provide recommendations on further development of the own branded products and to create the loyalty
Initial Review of Relevant Literature
Definition of retailer own-brands
For the definition of retailer own-brands are traditionally referred to as retailer’s own products with private labels, own-labels, retailer brands or store brands. According to Morris, own-brands defined as the products that are produced by or on behalf of distributors and sold under the distributor’s own name or trademark through the distributors’ own outlets (Morris, 1979).
There are 5 types positioning of own-brand product as below:
Figure 1. Positioning of retailer own-brands
Figure 1. Positioning of retailer own-brands (Huddleston, P., 2009)
The first type, generics, is consistent with (de Chernatony, 1988). Based on Corstjens and Corstjens, “generics” is providing consumers with the lowest price without costs of advertising, packaging, and marketing (Corstjens and Corstjens, 1995). Generics adopt a “commodity-style presentation” with “minimalist white packs and black print stating the contents” (Corstjens and Corstjens, 1995, p. 142).
The second type, Mimic brands, included quasi-brands and me-too products (Wileman and Jary’s, 1997). Mimic brands aim to takes a “value for money” approach which means that they are acceptable quality with a reasonable price and similar packaging, targeted to offer a substitute for higher priced national brands (Burt and Davis, 1999).
The third type, retailer own-brands was defined by Laaksonen and Reynolds’s (1994). As mentioned, retailer own-brands were defined by private labels, own-labels, retailer brands or store brands (Wileman and Jary’s, 1997).Premium own-brands is extended own-brands (Wileman and Jary’s, 1997) leadership brands. Premium own-brand aims to provide a high value-added product with an innovative design, or even provide higher quality than national brands (Wileman and Jary’s, 1997)
Critical factors of retailer own-brand products
According to Montoya-Weiss and Calantone , product advantage is defined as the customer’s perception of product superiority with respect to alternatives (Montoya-Weiss and Calantone, 1994). Product superiority usually refers to differences between alternatives on important attributes (Day and Wensley, 1988) such as price advantage. Although retailer own-brands products have price advantage, there are some reports from early studies indicate that consumers are still purchase national brands but not retailer’s own-brands(Richardson et al., 1994).
More recently, retailers believe that there is not only price but another critical factor can make them success so that they are moving away from produce “me too” products because they think the retail image is more important, and it can through developing high quality and unique own-brand products. (Burt, 2000; Choi and Coughlan, 2006; Corstjens and Corstjens, 1995).
Moreover, in marketing communication aspect, supermarket as a front-line to directly interact with consumers so that they have a better position to communicate with and discover new consumer value, and develop high value-added products to satisfy consumer needs (Corstjens and Corstjens, 1995).
Definition of loyalty
According to Oliver, customer loyalty is defined as a multidimensional consisting of four dimensions: cognitive, affective, and action loyalties (Oliver, 1997). By achieving the high level of loyalty, consumer will repeat purchase with the retailer. According to Steenkamp and Dekimpe, “Customer loyalty is a fundamental reason for having own-brands” (cited in Steenkamp and Dekimpe, 1997, p. 919). Loyalty was divided into brand and store loyalty.
The first type, brand loyalty, retailer own-brand will only success if the own-brand possesses a favorable image (Steenkamp and Dekimpe, 1997). Retailer can build the favorable image through offering relatively cheaper price with the same quality products or high quality products in order to get customer satisfaction.
The second type, store loyalty, define as the biased behavioural response such as customers will revisiting the store by respecting to one store out of a set of stores and this is resulting in store commitment (Jacoby and Chestnut, 1978). For the definition of store commitment, is pledging or binding of an individual to his/her store choice (cf. Kiesler, 1968; Lastovicka and Gardner, 1977). We supposed that it is a necessary condition for store loyalty to occur. As a result of store commitment, consumers who will become committed to the store during the decision-making process, therefore, who will becomes store loyal.
The relationship of critical successful factors of Wal-Mart own-brand and loyalty can explain why they need to develop their own-brands such as Sam’ Choice and etc.. Wal-Mart can achieve different competitive advantages such as own-brand performance, store satisfaction and store image if they well control the critical successful factors like price and quality of products.
First of all, price as a critical successful factor of Wal-Mart. In this aspect, they can get advantage, for example, own-brand performance. According to Aaker, own-brand performance refers to the financial benefits own-brand products bring to retailers, such as profitability and market share (Aaker, 2004). According to the studies of NDP, it shows that own-brand products lead superior financial performance (Song and Parry, 1997). The retailer own-brands can increase gross margin 20%-50% higher than national brands (Keller, 1993). Therefore, Wal-Mart can use this 20%-50% margin for reinvest in their products; for example, increase the quality of products or lower price. The profitability is a main reason for Wal-Mart to develop their own-brand. As the own-branded products are manufactured by Wal-Mart, therefore, they can control the degree of packaging, quality and price of the products. They can develop different brands for target different customers. Based on the research from Richardson et al, retailer’s sustainable competitive advantage can refers to high quality of store brands, while low-price (implying low-quality) or a value for money approach reflects a suboptimal strategy in attracting consumers (Richardson et al., 1994). To different customers, they will be satisfied if who can find the suitable things, for example, high-quality or relatively lower price products in Wal-Mart. Therefore, the own-brand performance is attributing to loyalty.
As mentioned, the quality of own-brand is also a successful factor for Wal-Mart. In general, the higher the quality Wal-Mart provide, the higher the satisfaction consumer perceive. According to Engel et al, satisfaction is defined as the outcome of the subjective evaluation that the chosen alternative meets or exceeds expectations (Engel et al., 1990). The satisfaction occurs when customers are matching of expectations and perceived performance. As Wal-Mart can control the quality of own-branded products, they can offer the same quality with lower price products for compete with national brand, for example, Waitrose Essential is a own-brand of Wal-Mart’s that providing the same quality with lower price canned food. So consumer will be satisfied because they can enjoy the same quality canned food but lower price.
Relationship between critical successful factors of Wal-Mart’s loyalty
In context, mentioned “customer loyalty is a fundamental reason for have own-brands” ( Steenkamp and Dekimpe, 1997). There are some factors related to the Wal-Mart’s loyalty. I think that these factors are positively related to the Wal-mart.
H1: Price has direct impact on loyalty
This hypothesis is based on Bolton et al., (2003), the concept of “price fairness” is described as a decision hereof if an expected result and/or process, necessary to achieve the aim, is reasoned, acceptable or fair. Wal-Mart can build the favorable image through offering relatively cheaper price with the same quality products or high quality products in order to get customer satisfaction and build loyalty accordingly. On the other hand, customers will remind Wal-Mart when they want to buy something because of the price advantages. Therefore, they will loyal Wal-Mart and have a store commitment.
H2: Product advantages have direct impact on loyalty
In context, mentioned about there is not only price impacting customer loyalty but product advantages. Retailers can move away from offering “me too” products by developing high quality and unique own-brand products (Burt, 2000; Choi and Coughlan, 2006; Corstjens and Corstjens, 1995). According to Binninger, high-quality products are playing a critical role in determining customer satisfaction and store loyalty (Binninger, 2008). The retailer own-brands are assisting in building store loyalty, and decreases store-switching behavior because store brands are store specific (Corstjens and Corstjens, 1995). Therefore, Wal-Mart can build loyalty through product advantages, for example, offering exclusive products.
H3: Marketing communication has direct impact on loyalty
According to Corstjens and Corstjens, direct in-store contact with customer and access to information, retailer in better position to discover new customer values, and develop high value-added customer products to meets their needs (Corstjens and Corstjens, 1995). Wal-Mart can promote their own-brands products at liberty. And they can create control their in-store displays for attract customer, for example, they can put their own-brand products on eye-level position in order to make customers easily to choose, and isolate other brands.
Research Methods: Justification and Description
Research will be included primary and secondary data collection. Secondary data will be analyzed by some academic journals or articles, and some theoretical models about the loyalty.
Primary data will be collected by the survey, and it will be conducted by around 100 interviewees. For the purpose of survey, it is mainly collecting opinions and feelings of customers’ perspectives about the critical factors and their feelings of supermarkets’ own-brands. The survey will be conducted by two types of questions, structured and unstructured. The survey will set some structured questions like “Yes” or “No”, and ranking question for asking the degree of customers’ preferences. Also, the unstructured question is needed because the open answer can get more additional information.
Therefore, the limitations and recommendations will be provided after all primary and secondary data are collected and analyzed.
Information to be collected
There are two types of needed information should be collected that including primary and secondary information. For the primary information, I will conduct a survey and hold a random investigation for collect the needed information such as what is the critical factor for a super market to successfully build their own-brands.
For the secondary information, there are some useful information I can get from different sources, for example, Wal-Mart’s background information, the existing market information such as market share, how many supermarket Wal-Mart is competing with and etc. Academic journals are also useful for me to analyze Wal-Mart’s own-brands in multi-angle.
How Information will be collected
By conducting the survey, I can set some questions to get the useful information. I can create two types of questions open and close. The open questions can collect the opinions and feelings from interviewees. And I can set some close questions to ask interviewees to answer “yes” or “no” or ranking question to get the useful information.
Moreover, I can get the secondary information through book, news and internet. There are many academic journals can give me insights to analyze my dissertation from e-resources like library.
Analysis Technique
For the analysis technique, there are some marketing concepts needed, for example, customer-based brand equity pyramid help to analyze the process of building own-brands’ loyalty of Wal-Mart.
Figure 2. Customer-Based Brand Equity Pyramid
Figure 2. Customer-Based Brand Equity Pyramid (Keller, 2001)
Besides the marketing concepts, SPSS is also needed in this dissertation because it can help to analyze the correlation about different factors with Wal-Mart, for example, reliability analysis, descriptive analysis and linier regression analysis are also needed in the following.
Timeline of Dissertation
Week
Description
1
Briefing of dissertation
2
Consultation of dissertation topics
3
Choosing topics and getting feedbacks
4
Review of relevant background materials
5
Clarify research aim and objectives
6
Literature Review – On the relationship between store image, store satisfaction and store loyalty
7
Literature Review – Retailer Premium Own-Brands: Creating Customer Loyalty through Own-Brand Products Advantage
8
Literature Review – Reviving brand loyalty: A reconceptualization within the framework of consumer-brand relationships
9
Draft initial review of relevant literature chapter
10
Consultation with supervisor
11
Draft research methods chapter
12
Draft information to be collected and how information will be collected chapter
13
Draft analysis technique chapter
14
Completed dissertation outline and submit
Reference:
Aaker, D.A. (2004), ‘Brand Portfolio Strategy’, The Free Press, New York, NY.
Binninger, A. (2008), ‘Exploring the relationships between retail brands and consumer store loyalty’, International Journal of Retail & Distribution Management, Vol. 36 No. 2, pp. 94-110
Bloemer, J. and Ruyter, K.D. (1997), ‘On the relationship between
store image, store satisfaction’, European Journal of Marketing, Vol. 32 No. 5/6, 1998, pp. 499-513
Burt, S. and Davis, S. (1999), ‘Follow my leader? Look-alike retailer brands in non-manufacturer-dominated product markets in the UK’, International Review of Retail, Distribution & Consumer Research, Vol. 9 No. 2, pp. 163-85
Choi, S.C. and Coughlan, A.T. (2006), ‘Private label positioning: quality versus feature differentiation from the national brand’, Journal of Retailing, Vol. 82 No. 2, pp. 79-93
Corstjens, J. and Corstjens, M. (1995), Store Wars, Wiley, West Sussex. Retailer premium own-brands 989 Corstjens, M. and Lal, R. (2000), ‘Building store loyalty through store brands’, Journal of Marketing Research, Vol. 37 No. 3, pp. 281-91
Day, G.S. and Wensley, R. (1988), ‘Assessing advantage: a framework for diagnosing competitive superiority’, Journal of Marketing, Vol. 52, pp. 1-20
Engel, J.F., Blackwell, R.D. and Miniard, P.W. (1990), ‘Consumer Behavior’, The Dryden Press
Fournier, S. (1997), ‘Reviving brand loyalty: A reconceptualization within the framework of consumer-brand relationships’, International Journal of Research in Marketing
Huddleston, P. (2009), ‘Retailer premium own-brands:creating customer loyalty throughown-brand products advantage’, International Journal of Retail & Distribution Management, pp. 977
Jacoby, J. and Mazursky, D. (1984), ‘Linking brand and retailer images – do the potential risks outweigh the potential benefits?’, Journal of Retailing, Vol. 60 No. 2, pp. 105-22
Keller, K.L. (1993), ‘Conceptualizing, measuring, and managing customer-based brand equity’, Journal of Marketing, Vol. 57, pp. 1-22
Kiesler, C.A. (1968), ‘Commitment’, Theories of Cognitive Consistency: A Source Book
Lastovicka, J.L. and Gardner, D.M. (1977), ‘Components of involvement’, Attitude Research Plays for High Stakes
Laaksonen, H. and Reynolds, J. (1994), ‘Own brands in food retailing across Europe’, Journal of Brand Management, Vol. 2 No. 1, pp. 37-46
Morris, D. (1979), ‘The strategy of own brands’, European Journal of Marketing, Vol. 13 No. 2, pp. 59-78
Montoya-Weiss, M.M. and Calantone, R.J. (1994), ‘Determinants of new product performance: a review and meta-analysis’, Journal of Product Innovation and Management, Vol. 11 No. 4, pp. 397-417
Oliver, R.L. (1997), ‘Satisfaction: A Behavioral Perspective on the Consumer’, McGraw-Hill, New York, NY
Richardson, P.S., Dick, A.S. and Jain, A.K. (1994), ‘Extrinsic and intrinsic cue effects on perceptions of store brand quality’, Journal of Marketing, Vol. 58 No. 4, pp. 28-36
Song, X.M. and Parry, M.E. (1997), ‘The determinants of Japanese new product success’, Journal of Marketing Research, Vol. 34, pp. 64-76
Steenkamp, J. and Dekimpe, M. (1997), ‘The increasing power of private labels: building loyalty and market share’, Long Range Planning, Vol. 30 No. 6, pp. 917-30.
Wileman, A. and Jary, M. (1997), ‘Retail Power Plays: From Trading to Brand Leadership’, New York University Press, New York, NY.
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