Is product innovation as effective for private labels as it is for national brands?

Abstract

As an innovation strategy for competing with private labels, national brands traditionally launch new products. However, retailers are now also launching new products, to differentiate themselves from their competitors and to add value to their consumer franchise. This article aims to learn to what extent private labels influence consumer adoption of new products and to ascertain how consumers’ experiences with private labels affect their acceptance of new products. The results show that generally, private labels positively affect consumer adoption of new products, as measured by both the trial purchase level and the repurchase rate. However, a mixed effect is observed for households that have more experience with private labels. This research provides a more complete explanation of current market dynamics and clarifies the strength of the competitive advantage that national brands enjoy over private labels when launching new products.