The Impact of Retail Promotion on the Purchase of Private Label Products: The Case of U.S. Processed Cheese

Abstract

This study examines the impact of retail promotion on the purchase of private label products. The influence of private label coupons, national brand coupons, and store features is examined. To identify these effects, a logistic model Probit is estimated where the binary variable equals 1 if the household buys the private label product, and equals 0 if the private label product is not bought. The model gives the probability that Y=1 is chosen conditional on a set of explanatory variables. In this study we focus on the American processed cheese transactions and we use the ACNielsen Homescan Panel of U.S. households for the year 2005. No significant relationship was found between private label purchase and the level of private label couponing activity. Although increasing private label couponing has no impact on increasing private label purchase, a strong negative relationship was found between national brand manufacturer couponing activity and private label purchase decision. Therefore, national brand couponing appears to be an effective strategy for manufacturers to deter the private label growth in the processed cheese market.