A tale of two brands: The joint effect of manufacturer and retailer brands on consumers’ product evaluation

Abstract

Consumers’ purchase decisions typically involve two brands: the manufacturer brand (the “what brand to buy”) and the retailer brand (the “where to buy”). While extant research suggests that consumers’ product evaluation is affected by both, much less is known about jointly affect consumers’ preferences. To fill this gap, we build a simple reference-dependent model to predict the joint effects of the two brands on consumers’ evaluation of products. Consistent with our predictions, we find that the majority of consumers evaluate a product made by a reputable manufacturer more favorably if it is carried by a reputable retailer and that the interaction effect between the two brands is moderated by the internal and external reference point evoked during the product evaluation. This research reveals that the loss/gain feelings as the underlying mechanism drive such effects, and additionally shows that reference points can be primed such that their effects for one brand can spill over to other brands. The research contributes to the academic literature by leveraging prospect theory in a branding context, and theorizing and testing a hitherto undocumented brand reputation interaction effect that is likely to prevail in the marketplace. It also offers practical implications for pricing and channel management.