Drivers of private-label purchase behavior across quality tiers and product categories

Abstract

Private labels hold a substantial share of consumers’ wallets and their popularity is still growing as they spread into various product categories and quality tiers. To determine the right branding strategy, in terms of offering uniform or different private-label brands across product categories, retailers have to know whether consumers use their private-label experience across product categories and private-label tiers. Therefore, we examine different determinants of consumers’ consideration sets. We apply proneness for certain private-label tiers, product categories purchased, purchase frequency, and variety seeking as internal determinants, which contribute to consumers’ knowledge and experience with private labels. Further, we use consumers’ price consciousness and promotion sensitivity as external determinants, which the retailer can use to influence consumers’ consideration sets in the short run. Our analyses are based on large-scale loyalty program data for a period of 24 months. In particular, we use the first 12 months to derive the determinants of consumers’ share of wallets regarding different private-label quality tiers in the second half of the sample. We conduct our analyses for 12 different product categories and aggregate the results by using meta-analytic techniques. Notably, some determinants show dissimilar effects across product categories (e.g., price consciousness and promotion sensitivity), while others (e.g., private-label proneness) are rather similar. We find that consumers’ general proneness for certain private-labels tiers leads to a propensity to purchase them in a specific category and in adjacent quality tiers. Further, we reveal that product category characteristics moderate the determinants of private-label share.