Paul S. Richardsoii, Alan S. Dick, & Arun K.

Jain

Extrinsic and Intrinsic Cue Effects on Perceptions of Store Brand Quality
The authors examine the relative importance of extrinsic versus intrinsic cues in determining perceptions of store brand quality in an experiment using a sample of 1564 shoppers for five products. Results of the experiment suggest that consumers' evaluations of store brand grocery items are driven primarily by the extrinsic cues that these products display rather than intrinsic characteristics. In addition, the authors found that a value for money orientation taken by retailers in the marketing of their private label lines may represent a suboptimal strategy; they recommend a quality orientation.

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tore brand grocery items are products owned and branded by organizations wbose primary economic commitment is distribution ratber than production (Scbutte 1969). With the rise of large, well-organized retail chains, store brands have emerged as a key weapon in the battle waged between manufacturers and retailers over channel control and consumer loyalty (Patti and Fisk 1982). Although retailers enjoy advantage in shelf space allocation and in-store promotion for their private brands, the market share of such brands has remained relatively constant at about 14% of total supermarket revenue over the last decade (Private Label Manufacturing Association 1993). The problem facing marketers of private label brands is that despite lower prices, quality guarantees, and even the advertising of these products, consumers continue to prefer national to store brand grocery items by a wide margin. It is quite remarkable tbat "even in these days of waning consumer loyalty, shoppers haven't become altogether immune to the pull of well-known names. If the price is rigbt they will buy big brands" (Shapiro 1993, p. Bl). Research regarding private label grocery products has been of substantial interest to both marketing academics and industry practitioners. Since the seminal work of Myers (1966), a variety of studies has been undertaken to investigate the characteristics of buyers of private label grocery products and the relationship between purchase of private

Paul S. Richardson is an Assistant Professor of Marketing, School of Business Administration, Loyola University at Chicago. Alan S. Dick is an Assistant Professor of Marketing and Arun K. Jain is the Samuel P. Capen Professor of Marketing Research and Chairman, Department of Marketing, School of Management, State University of New York at Buffalo. The authors thank the editor and three anonymous reviewers at the Journal of Marketing as well as Dipankar Chakravarti (University of Arizona), John Myers (University of California, Berkeley), and Brian Ratchford (University at Buffalo) for their valuable comments on earlier drafts of this article. Partial support for this project was provided by a research grant from a major supermarket chain that wishes to remain anonymous. The authors thank their present and former students—Pam Grimm, Cindi Privitera, Melanie Bainbridge, Frank Koo, and Rohit Chauhan—for assistance during various phases of the project.

label products and store loyalty. Most of the studies have identified sociodemographic and personality characteristics that differentiate private label buyers from nonbuyers (e.g., Bettman 1974; Coe 1971; Frank and Boyd 1965). Although these studies provide useful insights for possible market segmentation, they do not address the central managerial question of why national brands are preferred to store brands. Thus, retailers are left in an uncomfortable position of not knowing what to do to enhance their market share. In a related stream of research, marketing scholars have examined quality perceptions of private label brands. For example, in a survey, Bellizzi and colleagues (1981) obtained perceptions of national, private label, and generic brands through a series of Likert-type scales. Subjects in the study consistently rated private label brands below the national brands on attributes related to quality, appearance, and attractiveness. Similarly, Cunningham, Hardy, and Imperia (1982) observe that consumers rate national brands as superior to private label and generic brands in terms of taste, appearance, labeling, and variety of choice. Some shoppers exhibit aversion to buying store brands regardless of the amount of savings associated with their purchase (Livesey and Lennon 1978). Invariably, all studies indicate that private label brands suffer from a low-quality image compared with national brands. Conceptually, the problem is tbat product positioning and price may be used by consumers as a cue to quality. Consequently, the extent to which perceptions of poor quality are the result of actual poor levels of product ingredients or the misguided efforts of management to position private labels as inexpensive altematives to national brands needs to be assessed. The Private Label Manufacturers Association asserts that private label ingredients are as good if not better than those of national brands! Hence, unfavorable perceptions in fact may be fostered by the widespread use of inexpensivelooking packaging and the absence of an attractive brand image due to poor communication and positioning strategies. A focus on quality as opposed to price could produce more favorable perceptions of store brands and increase consumers' loyalty toward these products. Because store brands are only available at their owners' chains, this inJournat of Marketing Vol. 58 (October 1994), 28-36

28 / Store Brand Quality

This is similar to the diagnosticity of the cue. According to this theory. we hypothesize that when consumers taste grocery products: Hj: Regardless of product ingredients.g. texture) and augmented (e. Using this classification. Finally. Dodds and Monroe (1985). Olson and Jacoby 1973). Furthermore. Chiu. Conversely.' A review of the literature suggests that consumers rely on extrinsic cues such as price (Leavitt 1954). if perceptions regarding store brand quality are based on inferences grounded in price and product positioning. and Grewel (1991). texture. the results. shape.. Szybillo and Jacoby 1974). The relative salience of extrinsic versus intrinsic cues in quality assessment depends on their PVs and CVs (Olson 1972). Purwar summarizes 38 price cue experiments. such as price. aroma) also have been found to have high PVs and CVs (Olson 1972. The predictive value of a cue (PV) is the degree to which consumers associate a given cue with product quality. yet understanding the degree to which store brands are evaluated on the basis of their real quality or image is essential for successful management of these products. and aroma (Bellizzi et al. Cue Utilization Theory Cue utilization theory may provide an attractive framework through which to assess consumer perceptions of store brand quality. It is unclear the extent to which these evaluations stem from inferences made on the basis of the negative extrinsic cues that these products display or refiect an unfavorable response to store brand ingredients. 9 store image investigations.g. The particular cues are evoked according to their predictive and confidence values. and performance factors (Olson 1976). and 14 studies in which intrinsic compositional cue effects on quality assessment were examined. Simonson 1989. brand name is frequently used by consumers as an "informational chunk" that represents a composite of information about several attributes of the product. Previous research has relied principally on survey methodology to ascertain private brand perceptions. taste. and Rexeisen (1982). taste. and Rao and Monroe (1989). suggesting that consumers' evaluations of store brand ingredi'Since Purwar's (1982) cue classification was published. national brands will be judged to be of superior quality than store brands. Hardy. research evidence suggests that consumers tend to use both intrinsic and extrinsic cues concurrently when evaluating product quality (Jacoby. develop customer loyalty toward store hrands is that they first understand the reasons for current perceptions of these products. products consist of an array of cues that serve as surrogate indicators of quality to shoppers (Cox 1967. Intrinsically. Olson 1972). 12 brand name cue studies. Chakravarti. brand name. Purwar. it may be that the poor quality perceptions of store brands noted in the literature are simply an artifact of reliance on price or brand name in quality assessment. Sundel 1974). that cannot be manipulated without also altering physical properties of the product. Hawes. intrinsic cues represent product-related Store Brand Quality / 29 . Then. there have been four published cue utilization studies by Dodds (1985).g. and Biehal 1990). classified empirical investigations according to the cue(s) manipulated. are frequently poorly packaged. Toward this. store name (Wheatley. Excellent reviews of the literature on cue utilization theory are provided by Monroe and Dodds (1988). and are generally not advertised at the national level (Cunningham. and Thanopoulos (1982) argue that the former is the case. Of paramount importance if retailers are to. Next we describe the experimental design used to test these hypotheses. based on an analysis of data collected from 1564 households.. Purwar (1982). Previous survey-based research has not been able to disentangle the "real quality" and "image" effects on consumers' perceptions of quality. quality. Rao and Monroe (1989). Olson. 1981. Cues can be further classified as extrinsic or intrinsic to the product (Olson 1972. some deepseated beliefs about the quality of store brands may have to be changed. Our objective is to examine in an experimental setting possible causes of consumers' unfavorable perceptions of store brands relative to national brands. which represents the reliability of a cue and the likelihood that using it would lead to a successful task resolution (Dick. Monroe. are presented. Olson 1972). for example. labeling) product characteristics. store brand grocery items are judged inferior to national brands in terms of quality of ingredients. packaging (McDaniel and Baker 1977). this strategy could represent the basis for a sustainable competitive advantage in the marketplace—an advantage that appears difficult using a pricebased approach. brand name (Allison and Uhl 1962). manufacturer. If accomplished. however. store brands suffer from deficiencies relative to national brands. price. and Goldman 1977). size. Because consumers rely on extrinsic cues when assessing product quality and store brands suffer from extrinsic cue deficiencies relative to national brands. Hutchens. The confidence value of a cue (CV) is the degree to which consumers have confidence in their ability to use and judge that cue accurately (Cox 1967. first we propose specific research hypotheses based on the literature in marketing and consumer behavior. Cues characterized by high CV and high PV assume the greatest weight in the quality assessment process. such as ingredients. attributes. To accomplish this. lack strong brand recognition. Extrinsically. and Imperia 1982). Extrinsic cues are product-related attributes—such as price. taste. texture. Intrinsic cues relating to a product category (e. In particular. packaging. 1981)..creased loyalty then could be uniquely transferred to the chains themselves. This research has noted that store brands are judged inferior to national brands on a variety of core (e. Researcti Hypotheses Cue utilization studies provide us with valuable insight for examining possible causes of consumers' unfavorable perceptions of store brand grocery items. and color (Peterson 1977) when making quality assessments. we discuss the implications and limitations of our study and provide directions for further research. Dodds. These extrinsic cue deficiencies are acknowledged by consumers (Bellizzi et al. Olson and Jacoby 1973). and Haddock 1973. and packaging—which are not part of the physical product. However. Store brands are lower priced.

According to cue utilization theory. Therefore. The tendency of some consumers to rely on high CV/low PV extrinsic cues over high PV/low CV intrinsic cues makes possible "mixed brand" strategies. taste. Judging product quality when cues are characterized by either high CV/low PV or high PV/low CV entails the risk of selecting a poor-quality. need not use "fancy" (grade A) or "extra standard" (grade B) ingredients. In fact. we argue that the level of product ingredient quality may be lower for store brand products and that consumers can detect this lower quality level. it is hypothesized that when consumers taste and evaluate grocery products: H3: Extrinsic cues explain more variance in perceptions of product quality than do intrinsic cues. Two were private label brands of the two largest supermarket chains in the region and the third represented an established national brand. the relative weight of extrinsic versus intrinsic cues in quality assessment depends on the cues' PVs and CVs. one can make a reasonable argument regarding these effects. Gilligan. In the context of packaged grocery products. labeling. integrated. Similarly. Instead. First. for packaged grocery items. one can assert that the CV assigned to extrinsic cues is greater than that assigned to intrinsic cues. October 1994 . We hypothesize the following: H4: Perceived value for money of store brands is more strongly correlated with consumer willingness to buy store brands than is perceived quality. Myers 1967). most retailers have chosen to stress a different terminal attribute in the marketing of their private label lines. while meeting FDA regulations. However. we hypothesize that when consumers taste grocery products: H2: Regardless of extrinsic cues. Olson. rather than competing with national brands on the basis of quality. Second. package 30 /Journal of Marketing. or packaging. Hence. it is reasonable to contend that for packaged goods the PV assigned to intrinsic cues is greater than that for extrinsic cues. to the extent that consumers rely on extrinsic cues in quality assessment. Methodoiogy Design and Subjects A 3 (extrinsic cue) X 3 (intrinsic cue) x 5 (product) betweensubjects factorial design was used to test the hypotheses. these scholars note that by FDA regulation. Myers (1967) found that the latter segment of the market (lower P. a store brand. same Q) comprises only 23% of store brand buyers. such as price and brand name. there is evidence that extrinsic cues. products with national brand ingredients will be judged to be of better quality than products with store brand ingredients. are more easily recognized. and interpreted than are harder-to-process intrinsic cues (Purwar 1982). The experiment was conducted during morning. Hence. it is unlikely that unfavorable evaluation of store brand ingredients is driven solely by inferences made on the basis of extrinsic cues. A small display board (7 inches by 7 inches) with the name.brand. To encourage the purchase of these products. afternoon. Thus. Cox (1967) observed that consumers are more likely to utilize a high CV/low PV cue than a high PV/low CV cue. Value for money implies a price (P)-perceived quality (Q) trade-off (Livesey and Lennon 1978. retailers typically price store brands 15%-37% lower than national brands (Shapiro 1993). it is likely that consumers believe that intrinsic cues such as actual product ingredients. One of the 45 (3 x 3 x 5) cue and product treatments was randomly selected during each day of the experiment period and data gathered until 35 responses were obtained in each cell. lower Q) constitutes 48% of store brand clientele whereas the former segment (lower P. In other words. texture. Wolinsky 1987). Martell 1986. these lower prices may serve only to exacerbate further unfavorable quality perceptions. Given the importance of intrinsic cues in quality assessment (Jacoby. or aroma are more important in determining the real quality of grocery products than are extrinsic cues such as advertising. Consumers' reliance on extrinsic cues in quality assessment presents retailers of store brands with a problem because these products suffer from extrinsic cue inadequacies. store brand ingredients must be of a quality that is at least competitive with that of national brands. and Sutton 1986. and evening hours on weekdays and weekends. Ody 1987). independent Variabies The level of the extrinsic cue was manipulated by showing each subject a package from one of three different brands. By taking a value for money orientation in the marketing of their store brands.ents derive solely from undue reliance on extrinsic cues in quality assessment. As evidence. whereas extrinsic cues are most likely characterized by high CVs but low PVs. Subjects were shoppers at a major shopping mall in a large northeastern city. We gathered usable data from 1564 subjects. most retailers have taken a "value for money" orientation in the marketing of their private label lines (Davies. which cannot be evaluated with a similar degree of certainty. in which manufacturers charge different prices for identical or similar ingredients packaged in national and store brand containers (Morris 1979. and Haddock 1971. That is. Subjects did not actually open the package but were made to believe that the ingredients presented to them came from the package shown. To overcome this problem. resulting in perceptible differences in quality. intrinsic cues are most likely typified by low CVs but high PVs. Ironically. Szybillo and Jacoby 1974). consumers' utilization of and reliance on intrinsic cues in quality assessment suggests that these unfavorable evaluations are based to some extent on consumers' direct response to store brand ingredients. retailers hope to instill the purchase of these products not only from those consumers who perceive that store brands are lower priced but of relatively good quality but also from those consumers who perceive that store brands are lower priced and of relatively bad quality as long as savings associated with the price differential provide adequate compensation for purchase. Schellinck (1980) has suggested that consumers may attempt to alleviate this risk by placing relatively greater reliance on high CV/low PV cues because consumers first must select those cues that they can utilize with some degree of confidence. Thus.

e. The national brands of these products were Lays. This difference did not materialize in the data.e. chocolate chip cookies.^ Chocolate chip cookies and potato chips were poured onto individual plates fi-om snack dispensers. Bison. the following five products were selected for the experiment: regular potato chips." Value for money was measured using "To me. This would be quite natural given the nature of the task (i. those in the national brand (extrinsic cue) and Store II brand ingredient (intrinsic cue) condition were presented with the ingredients of Store II brand and not the national brand ingredients implied by the displayed package.. cheese slices. jelly. size. purchase willingness was assessed by "If I were to buy a brand of (product name) I would.38 Procedure Subjects in a shopping mall were randomly intercepted for participation in a taste test. Dip 8oz.89 . the product ingredients listed were quite similar across the brands within any particular product class. the price of (brand name—product) for a (size of package) is (price). the subjects were presented with the ingredients (intrinsic cue) called for by the experimental cell to which they belonged. Thank you very much for your participation! In actuality. and Welch's. Kraft (American individually wrapped). The ingredients were either from a national brand or from one of the two private label brands. As you can see from the display board. On each of the taste test tables several packages of the relevant product (extrinsic cues) were displayed. All product ingredients were purchased daily and kept refrigerated prior to sampling. In addition. the vast majority of subjects did not bother to do so.99 . Each subject evaluated only one product. Moreover. we have already prepared a sample of (brand name—product) for you to taste. Table 3 presents the treatment means. and the average elapsed time per subject was between two and three minutes. After evaluating the product. french onion chip dip. it would seem unlikely that this potential confound influenced the results in any meaningful way. extrinsic cues. The price and size of products used in the experiment are shown in Table 1. Subjects in the cheese.. he or she was guided to the taste test tables and invited to sit down. It indicated brand name. this (product name) offers. Only primary shoppers residing in the region and not affiliated with any grocery chain were invited to participate. $2. Drawing the subject's attention to the packaging of the product and the display board. and grape jelly.79 1.29 1. Jelly and chip dip were placed in individual one-ounce jars. Analysis and Results The data were analyzed using standard ANOVA techniques.^ $2.48 1. as part of the extrinsic cues). If the shopper agreed to participate. a quick taste test involving familiar brands).09 size. and a sig^Because product ingredients are considered intrinsic cues and a list of ingredients is printed in small type on the packages themselves (i. and the actual price being charged for that product at the store.25 1. After you are done sampling the product.79 1. please complete this taste test survey." followed by a 7-point scale with end points labeled "never buy the brand I just tried" and "definitely buy the brand I just tried." followed by a 7-point scale with end points labeled "poor value for money" and "excellent value for money.TABLE 1 Product and Prices Dispiayed Cheese 12 oz. there is a potential confounding of extrinsic and intrinsic cues. However. Thus." ^A list of ingredients of the various brands can be obtained from the authors on request. After consultation with private label managers. Perceived quality was measured using the following 7-point Likert scale: "All things considered I would say this (product name) has" with end points labeled "poor overall quality" and "excellent overall quality. our own observation is that though subjects had the opportunity to pick up the products and examine the ingredients. 32 oz. unbeknownst to subjects. Nabisco (Chips Ahoy). Please feel free to pick up and observe the packaging as much as you wish. Five products were used in the experiment. for example. and chip dip conditions were also provided with Nabisco Premium Bits and were invited to either dip or spread these products onto the Premium Bits for sampling. Store Brand Quality/31 . and price of the product was placed beside each package.59 . As an incentive for participation. Thus.5 oz. Cheese slices were precut and placed on individual plates in front of the subjects. pick it up. Cookies Jelly 12 oz. The board was designed to mimic the information presented on the shelf labels for each brand.39 $. any impact of the printed product ingredients likely would haveresultedin different results across the product categories. the experimenter stated: We would like you to sample (brand name—product). These represented the dominant brands in the sampled market.79 $1.49 1. Dependent Variables Subjects were given a short taste test questionnaire. The experimenter moved one of the packages and the display board in front of the subject. Intrinsic cue levels were manipulated by giving each subject a sample of one of three different ingredients (contents).89 $1. To save you time. potential subjects were told that they would be included in a drawing for several cash prizes totaling $600. Two criteria guided their selection: (1) The products selected must have store brand counterparts to the national brands for each of the grocery chains and (2) The products must be such that their ingredients require no cooking or preparation. or do anything they wanted with it except open it.79 1. National brand Store I brand Store II brand Chips 6. because the betweenbrand differences in product ingredients were different across the five product categories. subjects completed the questionnaire and were debriefed. Table 2 presents the results of the overall ANOVA for perceived quality. Subjects could examine the package. Store brands of these products were the counterparts of the national brands for each product and the two supermarket chains. read the label." Finally. Significant main effects of intrinsic cues. These were not necessarily the same ingredients implied by the package. respectively. Three dependent measures from that questionnaire form the basis for this study.

1519] = 33.0001).24 and 5. the intrinsic cue effects observed depend on the level of the extrinsic cue manipulated. further analysis of the data was based on several preplanned comparisons and contrasts.24 5. Because the main effects of intrinsic and extrinsic cues were embedded in an intrinsic by extrinsic cue interaction and Hi and H2 predicted specific contrasts within the interaction. the same ingredients coupled with the extrinsic cues of Store I and Store n brands received mean quality assessment of 5.73 and 5. For example.93.21 2372. These results support H2.01.11.07) and significantly better than those of Store U brand (F[l.73 5.14.57 1. Our results provide strong support for Hp Regardless of the actual ingredients sampled. Extrinsic Cue Effects H] predicted that products identified with national brand extrinsic cues would be judged to be of better quality than products identified with store brand extrinsic cues. national brand extrinsic cues re- 32 /Joumai of Marketing.30 df 2 2 4 4 8 8 16 1519 1563 Mean Square 53.01 . The contrast comparing quality ratings of national brand ingredients with the average of the ratings for the store brand ingredients was also significant and as expected (F[l. respectively.95. extrinsic cue by product. in our experiment. Similar results were found holding ingredients constant at the Store I brand level.40 ceived mean quality assessment of 5. Store H brand ingredients (F[l. the first entry. National brand ingredients were perceived to be superior to mean in each cell reflects the mean quality ratings for a given combination of extrinsic and Intrinsic cues across all five product categories. October 1994 . holding ingredients constant at the Store II brand level produced the same pattem of results.68 10.58.37. Store I and Store II brand ingredients received ratings of 5. respectively.p < . p > .02). p < .1319] = .95 5.59" . Contrasts comparing quality assessment of national brand ingredients with Store I brand ingredients (F[l.11 20. p < . nificant intrinsic cue by extrinsic cue interaction were found.TABLE 2 Treatment Effects on Perceived Quality Source Extrinsic (Ext) Intrinsic (Int) Product Extrinsic * intrinsic Extrinsic * product Intrinsic * product Ext * Int * product Residual Total «p < .78 TABLE 3 Mean Quality Ratings^ Extrinsic Cues National Store I Store II Marginal Brand Brand Brand Means National Brand Cues Store 1 Brand Store ii Brand Marginai Means 5.73. national brand ingredients were assigned mean ratings of 5.05 Sum of Squares 106. p < .1319] = 3. However.20 1.75.58 1.73. Regardless of the product category or the actual ingredients sampled. we find that national brand ingredients were judged marginally better than those of Store I brand (F[l. p < . Finally. When subjects were presented with Store II brand extrinsic cues.02). Store II brand ingredients coupled with national brand extrinsic cues received a mean quality assessment of 5.11 and 5. ingredients coupled with national brand extrinsic cues received significantly more favorable quality assessment than ingredients identified with store brand extrinsic cues. or three-way interaction.20 5. and chip dip and liked least were the cookies and cheese.37 5. and the average ratings for both store brand ingredients (F[l.07 4.001 *>p < .17. /? > .46.89 2.20 and 5.02). the data were pooled across the five products to conduct the contrasts. The difference in quality ratings between the national brand and average of the store brand extrinsic cue conditions is significant and as expected (F[l.0001). respectively.45a 3.29 5. under the same packaging condition. the same ingredients coupled with the packaging of Store I and Store II brands received mean quality ratings of 5. intrinsic Cue Effects H2 predicted that national brand ingredients would be judged better than store brand ingredients regardless of the extrinsic cue treatment level.18 5. ingredients coupled with national brand extrinsic cues received significantly more favorable quality assessment than the same ingredients coupled with store brand extrinsic cues.1519] = 5.75 5.1319] = 7. The main effect of product indicates that subjects perceived different quality levels across the five product categories.85). 5.42" 6. the same ingredients identified with the extrinsic cues of Store I and Store II brands received mean quality ratings of 5.48 5.1319] = 6.50^ 2. chips. Store I brand ingredients coupled with national brand extrinsic cues received a mean quality rating of 5. Liked best were the jelly.58. The contrast comparing mean quality ratings of the two store brands with that of the national brand is significant and as expected (F[l.29.04 7. holding extrinsic cues constant at the national brand level. holding ingredients constant at the national brand level.11 5.85) were all insignificant. For example.95.61 19.30).04. Comparing these means. preference for national brand ingredients dissipated when the subjects were presented with Store I brand extrinsic cues. For example. p > .28 16.95.22 5.1319] = . respectively.19. Interestingly. Because there was no intrinsic cue by product. we again find that the difference is significant and as expected (F[l.58 5.34 5. Comparing national and average store brand ratings.1519] = 37.30 2572.28 5.59 40.66 . reflects the average quality rating across all five product categories when national brand ingredients were combined with national brand extrinsic cues.55 F 34.29 10.1319] = . similar but not identical results were found. p < .01 5.

30 ences in ratings of product quality when extrinsic cues were held constant at the store brand level.29 = 10.01).38).35.2] = 53.08. p < . intrinsic cues were largely ineffectual in explaining differ- Store Brand Quality / 33 . 5.10). The intrinsic cues were effective in explaining quality differences when extrinsic cues were held constant at the national brand level. intrinsic cue effects also assume importance. subjects did not actually have to buy the products).25.61 5. A preference for quality rather than value may suggest that positioning store brands as high-quality altematives to national brands may induce greater consumer willingness to buy these products.69* TABLE 5 iViean Value for iVioney Ratings" Extrinsic Cues Nationai Store! Store ii iVIarginai Brand Brand Brand Means National Brand Intrinsic Cues Store 1 Brand Store II Brand Marginai iUleans 5.06 5. p > . the first entry. where it can be seen that all correlations are positive.e. These results do not support H4. strong extrinsic cue effects were observed regardless of the level of the intrinsic cue manipulated.57 National Brand Perceived quality . However. The extrinsic by intrinsic cue interaction discussed previously provides additional support for this hypothesis and offers some refinement. p < .60 Value for money ..72 t = 2. For example.25 5. mean value for money mean in each cell reflects the mean value for money ratings for a given combination of extrinsic and intrinsic cues across all five product categories.1319] = 4.22 5.736^ Value for money . 193). In fact.433 Value for money . refiects the average value for money rating across all five product categories when national brand ingredients were combined with national brand extrinsic cues.78.02 4. Support for H2 is therefore mixed. Store I brand ingredients (F[l. subjects in our experiment were much more likely to indicate differences between national and store brand ingredients when these ingredients were coupled with national rather than store brand extrinsic cues. large. store brands enjoy an average price advantage of 21% relative to the national brands.34/5. Tests of differences between these dependent correlations were then calculated (Bruning and Kintz 1968.91 5. these results are provocative in terms of managerial implications. The Pearson correlations are shown in Table 4. however.39 5. p.31 5. and statistically significant (p < . although store brand prices are 21% lower. as discussed regarding H2.38 5.1319] = . These results suggest that expectations created by the extrinsic cues influenced consumers' judgments of product quality.27 5. perceived quality is more strongly associated with willingness to buy the products than is perceived value for money.1319] = . We tested this hypothesis with a direct test of the variance explained by the extrinsic versus intrinsic cues respectively (F[2.TABLE 4 Correiations of Perceived Quaiity and Perceived Vaiue for iUloney With Wiilingness to Buy Store I Brand Perceived quality Correlation with wiliingness to buy ^Significant at a < .71 5. although extrinsic cues explain greater variance. For each of the store brands. p > .65 t = 3. Table 5 shows that products associated with store brand rather than national brand extrinsic cues receive higher value for money judgments. For exampie. the correlation of perceived quality and perceived value for money with purchase willingness was calculated at each of the extrinsic cue level treatments for each product. value for money ratings of store brands are not as favorable as one would expect on the basis of the size of the price discount. Lower store brand prices should create favorable value for money perceptions of these products. particularly when subjects were faced with evaluation of what purportedly was a national brand. Interestingly. In fact. Although this finding may have been to some degree the result of the task (i.29 5. consumers by and large seem to be more interested in quality than value for the money even for store brands. as well as the national brands. Perceived Quaiity Versus Perceived Vaiue for iVioney H4 predicted that perceived value for money is more strongly correlated with willingness to buy store brands than is perceived quality.04) but comparable to Store II brand ingredients (F[l. that is.55).57 5.05 Store II Brand Perceived quality . As discussed in the test of Hi. The contrast comparing quality ratings of national brand ingredients with averaged ratings assigned to the store brand ingredients was also insignificant (F[l. Thus. Thus. they support the opposite of what is predicted by the hypothesis.51.54 64 t = 4.21 5. Relative Importance of Extrinsic Versus Intrinsic Cues H3 suggested that extrinsic cues explain greater variance in perceived quality of store brands than intrinsic cues. Perceived Vaiue for Money and Purctiase Wiiiingness Across the five products. To test this hypothesis.

22 5.'' Private labels need not be at a disadvantage relative to national brands in the marketplace. It appears that the poor perceived quality of store brands partially offsets the otherwise favorable reactions to their lower prices. Real differences in ingredients between national and store brands had less impact and. When there is no difference from a performance point of view. we find that retailers' value for money promotion efforts may do little to alleviate problems associated with the poor perceived quality of store brands. as long as expectation levels are low. regardless of the product category or real ingredient differences manipulated. Correlational evidence in this study suggests that consumers may care less about value than they do about quality. interestingly. ingredients disclosed to be of national manufacture received significantly more favorable quality assessment than ingredients disclosed to be of store brand origin. perceptions are only 7% higher than those assigned to the national brands. consumers may be less willing to pay the premium for national brands. The mean scores relating to purchase willingness lends further support to this explanation. originally a nondescript private label brand sponsored by Canada's Loblaws. This could explain the greater likelihood of ingredient effects when national rather than store brand extrinsic cues were employed. little discrimination between national and store brand ingredients was found.06 5. With respect to store brands.03 5. In Table 6. However. for store brands in which there may be detectable quality differences. Conversely.66 5. For example. A value for money approach has the advantage that it can avoid direct competition with national brands.06. 6. National brands that are not backed by an effective communication strategy may not enjoy any advantages relative to store brands. a value for money positioning may make more sense to attract price-driven market segments. 34 /Joumai of iMariceting. This pattern of results is similar to that reported for perceived quality. October 1994 . one might argue that when subjects sampled national brand ingredients coupled with store brand extrinsic cues.10 5. the first entry.TABLE 6 Mean Willingness to Buy Ratings^ Extrinsic Cues National Store i Store ii iVIarginal Brand Brand Brand iVIeans Nationai Brand Intrinsic Cues Store i Brand Store ii Brand iUiarginal Means 6. losses loom larger than gains. purchase willingness is substantially higher under the national brand than either of the store brand extrinsic conditions. Retailers who market high-quality store brands and use a value for money promotional focus may be signaling "lower quality for lower prices" rather than "very good quality for lower prices" as hoped.41 5. This pattern of interaction can be explained within the context of prospect theory (Tversky and Kahneman 1981). this gain may have been perceived as insignificant and therefore had little effect on quality assessment of ingredients in this condition. On the other hand. now comprises over 1000 items with annual sales of over $65 million (Liesse 1993). the French retailer Carrefour has been extremely successful with its private label line. According to prospect theory. For example.71 5. when ingredients were disclosed to be sponsored by retailers. Prices for Carrefour's store brands compare fa''However. because losses loom larger than gains. the outcome may have been encoded by subjects as a gain (compared with sampling store brand ingredients coupled with store brand extrinsic cues). For example. as expected. One could speculate that subjects who sampled store brand ingredients disguised as national brand ingredients encoded the outcome as a loss (as compared with sampling national brand ingredients coupled with national brand extrinsic cues).27 5. national brand ingredients were judged superior to store brand ingredients. There are substantial managerial implications of our findings.15 4.00 5. In this case. Carrefour matches or even beats the quality of the category leader and actively communicates quality infonnation to consumers through instore information boards and an aggressive public relations campaign. Discussion and Managerial Implications Our results indicate that consumers' unfavorable reactions to store brand grocery items are largely the result of consumers' propensity to rely on extrinsic cues when assessing product quality. President's Choice. This makes national brand marketers especially vulnerable if quality control systems fail or internal cost cutting measures lead to quality variation. product quality may be less critical. and its Decadent Chocolate Chip Cookie is already the number one seller in Canada. Similarly. which is responsible for over 25% of the giant chain's turnover (Ody 1987).21 °The mean in each cell reflects the mean willingness to buy ratings for a given combination of extrinsic and intrinsic cues across all five product categories. To achieve this penetration. were more likely to affect consumers' judgments when the ingredients were disclosed to be sponsored by a national manufacturer. reflects the average value for money rating across all five product categories when national brand ingredients were combined with national brand extrinsic cues.10 5.39 5. Retailers may implicitly recognize this in their value for money promotion efforts. development of a strong brand image without delivering a correspondingly high level of real product quality may result in disconfirmation and depress the perceived quality of national brands. Thus. However. This could account for the significantly lower ratings of national brands when store brand ingredients rather than national brand ingredients were provided. However. it may be time to question the wisdom of such an approach.01 5. Marketers of national brands may note that success depends on not only maintaining a high level of intrinsic product quality but also making investments to develop a strong brand image.88 5.

57 (Winter). Moreover. (1974). Isabella CM. Hamilton. K. 4). Bettman. Researchers in the future could manipulate such extrinsic cues independently to assess their relative importance. Ralph I. it is possible that there are other store brands sponsored by different chains that are marketed with even greater attention to packaging and other extrinsic cues. and Safeway are pursuing some of these tactics in revamping and reformulating their private label lines. As one private label manager noted. Barbara Davis (1971).. Andrew P. and price because product offerings are identical across chains. Bellizzi. location. Monroe (1985).L. Kintz (1968). The latter strategy—active marketing of retailers' own store brands—may provide a viable altemative to the passive approach of the past. p. Coe. "Generic Brands Versus National Brands and Store Brands. Alan. "Memory Based Inferences Durinjg Consumer Choice. Limitations We recognize that. such information would permit stronger tests of the various research hypotheses proposed. 25-32. Donald F. retailers might conduct in-store taste tests and publicize the results to overcome any negative perceptions of store brand quality. "Private Versus National Preference Among Lower and Middle-Income Consumers. Foresman and Co." Intemational Joumai of Retailing.. William B. 22 (October/November). James R. A finding that national brands are rated better than store brands even when store brand ingredients are superior to those of national brands would offer strong evidence that extrinsic cues dominate intrinsic cues in the quality assessment process of these respective brands. In further replications. Gilligan. However. 79-83. 4). D.. Sutton (1986). price. active marketing of store brands necessitates greater emphasis on promotional campaigns that focus on the real intrinsic product benefits associated with these brands. it was not possible to identify the relative importance of specific extrinsic cues (e. Hardy. Vol. "to create products so that customers will say. Virginia Polytechnic Institute and State University. "The Effect of Brand and Price Information on Subjective Product Evaluations. This will require that marketers of private label lines be aware of customer requirements and actually benchmark their offerings against category leaders to ensure acceptable or superior quality levels. Dodds. Glenview. "A can of Campbell's soup is a can of Campbell's soup everywhere" (Liesse 1993." Journal of Retailing. 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