Can Tesco’s brand equity be transferred to a supermarket’s own branded products?

Abstract

Developing the private brand product by the retail company has become one marketing strategy for improving its brand image and increasing profitability (Quelch and Harding, 1996). The retail company’s store image can help the company to make its customers loyal to the store brand and increase profitability of the company and hence contributes to the success of the retailers (Hansen and Solgaard, 2004). The major purpose of this research is to develop deeper understanding about the relation between cultural diversity and organisational performance. The current study also has an aim to explore the effective HR practice for managing a culturally diverse organisation in order to increase the productivity of the organisation.

This particular dissertation will be based on evaluating the relation between the image of the store and its own products private brand label. This dissertation will be researching the link between the attitude of the customers toward the retailer’s own brand and store image of the retailer (Baker et al, 2002; Mazursky & Jacoby, 1986). Even though, there are number of researches which have been done earlier showing the relation between store image and private brand label but focuses of all investigations were on the impact of private label on the store image (Lodish, 1998). But the study which I have selected for this dissertation is uncommon as the impact of store image on the private brand label is not common and sometimes provides mixed evidences.

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The primary aim of this study is to perform critical analysis on the customers’ perception toward the retailer’s private brand label compared with national brand label. Here the researcher will be attempting to know if the image of the retailer’s store can helps the retail company to enhance its own private product brand label. The researcher will be adopting inductive research approach as there is not research hypothesis in this study and empirical research strategy as researcher will be participating in the data collection and observation process. The data collection method adopted will be both primary and secondary method and simple random sampling method will be used for sample selection techniques.

Chapter 1: Introduction

1.1. Research Background:

The trend of developing private label product by the retail company and contributing to the large part of global grocery is increasing every day. This is, in fact, a global phenomenon which can be seen in all most all retail companies around the world (Ailawadi, 2008; Pauwels, 2008; Steiner, 2008). Herstein and Gamliel (2004) have explained in their work that the owners and controller of quality of the private brand label are the retailers and hence, the gap between the quality of national brand and retailer’s private brand product has become less significant which in turn has become an pronounceable threat for national brands. Developing the private brand product by the retail company has become one marketing strategy for improving its brand image and increasing profitability (Quelch and Harding, 1996). The retail company’s store image can help the company to make its customers loyal to the store brand and increase profitability of the company and hence contributes to the success of the retailers (Hansen and Solgaard, 2004).

This particular dissertation will be based on evaluating the relation between the image of the store and its own products private brand label. Significant researches have been done for discovering the customers’ view toward the private brand label products and also to explore the customers’ attitude and preferences (Baltas & Argouslidis, 2007; Bellizzi et al, 1981; Dick et al, 1995). This dissertation will be researching the link between the attitude of the customers toward the retailer’s own brand and store image of the retailer (Baker et al, 2002; Mazursky & Jacoby, 1986). Even though, there are number of researches which have been done earlier showing the relation between store image and private brand label but focuses of all investigations were on the impact of private label on the store image (Lodish, 1998). But the study which I have selected for this dissertation is uncommon as the impact of store image on the private brand label is not common and sometimes provides mixed evidences. (Lee & Hyman, 2008). Foregoing literatures are not able to shade the light on the solution of the question like if the store image of the retail company can be transferred to the retailer’s own private brand label or not?. Therefore, this dissertation will be trying to explain the impact of the TESCO’s store image on its own private product brand label.

Again, the retail company are trying to involve their hand manufacturing process to for developing their boundary of the business and get recognised as manufacturer too. Therefore, they have started to produce products on their own name with their own private brand label. Now retail companies are trying to put their products quality comparable to national brand but with affordable price for the customers to divert them from national brand label. Now this has become important to know if the name of the company as good retailer can play any role to the uplift the brand name of its own product with private label. There are not enough evidence in the foregoing literatures that retailer’s brand image is transferable to its own product brand. Therefore, this dissertation will be designed to shed the light on the link between the store image and its private brands level.

1.2. The Research Question

Seeing the gap in the literatures as presented above, the developed research question is as follows.

Can brand equity be transferred to a supermarket’s own branded products: a Case study of Tesco Supermarket?

1.3. Research aim and Objectives:

The primary aim of this study is to perform critical analysis on the customers’ perception toward the retailer’s private brand label compared with national brand label. Here the researcher will be attempting to know if the image of the retailer’s store can helps the retail company to enhance its own private product brand label.

The major objectives that are aimed to achieve after successful completion of this research study are;

Evaluate the perception of consumers’ perception toward the retailer’s private brands level.
Understand the closeness of relation between retailer’s corporate brand and its private brand level.
Evaluate the extent to which the retailer’s corporate brand can impact on the customers’ confidence in buying retailer’s own brand label.
Identify the existing difference between national brand label and retailer’s private brand level

1.4. Rational for Selecting this Topic as Research Topic and Research Significance:

I have an aim of getting promotion and becoming marketing manager of the TESCO supermarket and hence to increase my competency and knowledge, I have chosen this topic related with marketing concept based on the retail company. To make my research process interesting and encouraging, I needed to find the topic from the area of my interest. As the marketing is the subject where my interest is engrossed, I have selected this research topic from marketing management. As I want to work to grow my professional career in retail company branding and hence to make my knowledge strong and competitive in the retail job market. This dissertation can give an opportunity to me to provide some potential recommendation for the company where I am working regarding the private brand label and place for improvement for TESCO.

1.5. Scope of this Study

For the achievement of objectives of this study, the researcher will be examining one retail company and will be surveying its customers. Even though it is very much important to consider more than one retail company to make this research study more realistic and accurate, I have selected only one company due to time and cost limitation. The selected company for this study is TESCO supermarket. I have been working in the marketing department of the TESCO supermarket for more than two years and therefore, thinking that my personal experience, knowledge of marketing style and relation with management of TESCO will be helping me a lot, I have selected this particular organisation for study. The needed data and information for this research can be available to me very easily if the selected company will be TESCO but I personally feel, it would be very hard to reach to all the necessary sources of data if the selected company would be other than where I am familiar with. Thinking this also, I have selected this company.

Chapter 2: Literature Review

2.0 Retailer Motivations for Private Labels

One of the early motivations for retailers to introduce private labels was to improve retailer gross margins. Competition between retail stores on the same or similar national brands is a major contributor to lower retailer margins (Steiner, 2004). According to industry sources, retailer gross margins on private labels are 20 to 30 percent higher than on national brands (Hoch & Banerji, 1993). Retailers also sought to strengthen their bargaining power with manufacturers through the actual or potential threat of private labels taking share from national brands, and so negotiate lower wholesale prices (Narasimhan & Wilcox, 1998). This outcome has largely been confirmed in the private label literature (eg Mills, 1999; Pauwels & Srinivasan, 2004; Scott-Morton & Zettelmeyer, 2004) although manufacturer responses may depend on the extent of customer loyalty to the national brand (Gabrielsen & Sorgard, 2007).

Another key motivation for retailers is to create competitive advantage through store differentiation by offering products unique to the store (Juhl, Esbjerg, Grunert, Bech-Larsen, & Brunso, 2006; Laaksonen & Reynolds, 1994; Quelch & Harding, 1996). Store differentiation in turn is expected to increase store patronage and create store loyalty (eg Quelch & Harding, 1996).

Nevertheless, there is significant support for the argument that private labels do create store loyalty. Richards, Hamilton, Patterson, & Portland (2007) reported that private labels play an important role in attracting customers from other retailers, and Anselmsson & Johansson (2007) found that the more private labels consumers buy, the more loyal they are to the store. Corstjens & Lal (2000) argued that high quality private labels create store differentiation and loyalty through customer ?inertia‘, while Sudhir & Talukdar‘s (2004) study found that private labels improve store patronage through store differentiation.

Private labels are also introduced to compete with leading national brands by creating brand loyalty. Private labels do take share from national brands, an exception to the accepted norm that consumer goods markets are stationary (Hoch, Montgomery, & Park, 2002). Private label brand loyalty, however, is driven at least in part by store loyalty (Anselmsson & Johansson, 2007).

2.2 Private Label Positioning

Consumer perceptions and attitudes to private labels are based in large part on perceptions of the quality, price and value of private labels relative to that of national brands. This positioning of private labels in the minds of consumers is obviously influenced by the positioning strategies of both retailers and manufacturers.

2.3 Consumer Attitudes to Private Labels

While many studies have attempted to identify private label buyers on the basis of demographic, socio-economic and psychographic segmentation variables, the evidence has been mixed (Dick et al., 1995) and remains inconclusive (Ailawadi, 2001). Consumer attitudes to private labels may be more useful than segmentation studies as a basis for identifying market segments (Myers, 1967). Researchers investigating consumer attitudes have examined attitudes to private labels with respect to factors such as quality, price and value. While some researchers simply highlight differences in consumer perceptions between these different brand types, others have drawn on the differences in an attempt to explain private label proneness and the success of private labels. This section briefly summarises the findings of studies relating to consumer attitudes to private labels pning the past forty years. The determinants of these attitudes and preferences will be examined in the following section.

Consumer perceptions of private labels have changed as retailers have repositioned them over time. The reduction in the gap between own labels and national brands in terms of price and quality, together with the increasing promotion of retailer names and their own brands, has changed consumer perceptions of own labels and reduced perceived risk associated with their purchase (McGoldrick, 1984). Nevertheless, studies continue to show that private labels are perceived as inferior in quality to national brands. ?Private labels suffer from a lack of a strong, quality image? (Vaidyanathan & Aggrawal, 2000, p. 216).

In contrast to some of the earlier studies, Cunningham, Hardy, & Imperia (1982) found that shoppers shared similar perceptions of both private labels and national brands on all product characteristics such as quality, reliability, nutrition, appearance and taste regardless of which they purchased. However, private label users perceived private labels to be more favourably priced and national brand users rated national brands higher on quality. Interestingly, national brand buyers perceived the prices of national brands and private labels to be similar even though they were not, suggesting that their purchase decisions were driven by non-price factors.

2.4 The Effect of Store Image on Private labels

As the discussion above suggests, a number of researchers have highlighted the role of private labels in contributing to store image and retailer differentiation. Few studies have investigated the effect of perceived store image on consumer attitudes to private labels, however, despite the fact that store image is often mentioned as relevant. Dick et al. (1995), for example, suggested that because consumers still doubt the quality of private labels, retailers need to pay attention to private label quality and cues that signal quality such as packaging, brand image and store image. Ailawadi & Keller (2004) suggest that providing high quality national brands enhances consumer perceptions of the retailer‘s overall image, which in turn improves perceptions of the retailer‘s private label. The discussion that follows, examines the few studies that have specifically investigated the effect of store image on attitudes to private labels.

An early indication that store image affects attitudes to private labels is provided by Livesey & Lennon‘s (1978) study which found that the degree of private label acceptance is store-specific. Richardson et al. (1996b) investigated the effect of one aspect of store image – store aesthetics – on consumer evaluations of private label grocery products. They found that whereas consumers judge the quality of national brands to be the same regardless of store aesthetics, evaluations of private labels are influenced by store attractiveness. Citing from Liesse (1993) ?a national brand is a national brand everywhere?, Richardson et al (1996b) suggest that national brands have higher brand equity as a result of the marketing efforts of manufacturers. They surmise that an investment by retailers in store aesthetics will benefit all private labels offered since the effect is not product-specific.

In a more comprehensive study involving consumer attitudes to the private labels of three grocery stores across four product categories, Semeijn et al. (2004) found that consumer judgements of private labels are influenced by their perceptions of store image. Semeijn et al also found that store image can act as a ?risk reducer‘by reducing functional and psychosocial risk associated with buying private labels in certain categories. Adding to these findings, Vahie & Paswan (2006) reported that consumer perceptions of the quality of private labels in the apparel market are influenced by the store image dimensions of store atmosphere and store quality. Liu & Wang (2008) found that store image is a strong predictor of general attitudes to private labels in Taiwan, while store image does not affect attitudes to national brands. Looking specifically at service, Huang (2009) found that the quality of service offered by retailers is a strong predictor of the perceived quality of private labels in Taiwan. In a Spanish study, Guerrero et al. (2000) found that the perception of private label quality depends on the store, which again suggests that store image plays a role in private label attitudes. Against these positive findings, however, Lee & Hyman (2008) found that store attitude had only a weak effect on attitudes to private labels, although the authors note that the significance of the relationship may depend on which stores and store image factors are studied.

Chapter 3: Methodology

3.0 Research Approach:

Inductive and deductive aproaches are the two main approaches in research study.If the research study is proposed to proceed with the hypothesis set up, deductive approach is adopted in practice while inductivve approach is taken if the research is to be done without setting hypothesis.The approach of researh researcher will take here will be inductive but not the deductive because the research study is going to be carried out without hypothesis setting.Hence the approach is inductive but not the deductive one.

3.1. Research Strategy:

The two important research strategies used by the researcher are the theoretical strategy and the empirical one.If the writing of others is used not being involved directly in the data collection and observation of the evidence,it is called theoretical strategy.Empirical one is such research strategy in which researcher involves in observation or feels particular event to colect research data.In this research study, researcher will be involving the direct observation and collection of information and data for evidence. So,the research strategy here is said to be emprical but not the empirical.

3.2. Research Philosophy:

Positivism and phenomenology are the two major philosophies adopted in research study.Positivism gets derived from natural science and has allienation to deductive theory while phenomenology gets derived from the social science and has allienation to inductive theory .The research study here gets alliened to inductive theory and derived from social science so the research philosophy that will be taken by research in this research study will be phenomenology but not the positivism.

3.3. Data Collection Method:

The data collection method for this research study will be both secondary as well as primary as the researcher will be particiapting himself in the process of the data collection process as well as form the forgoing literatures published in other forms.

Primary data collection method takes long time to get response from respondents and even the responses may not be true but with the collection of secondary data no such problem is expected by the researcher.

As compared to the primary data colection method, secondary data collection method is cheaper and has fast and easy access of data collection as through company websites,university library etc (Dunsmuir and Williams 1992)

Due to the time and resource limitations with the researcher the secondary data collection method is chosen by the researcher here but not the primary one.

3.4. Data collection tools

For collecting the primary data, the reseracher will be forming questionnarie and distributing to the the customers of the TESCO supermarket and also the reseracher will be collecting the qualitative data by taking interview with some staffs of the TESCO supermarket. In this way both questionnare and interview will be the tool for primary data colleciton. The resercher has selected this method becuase the secodnary data collected might not be uptodate and may reuslt the conlcusion in the wrong outcome if used alone. Also primary data can be used for adding more literautres for future reserach. Other’s research may not be accurate so it is important to do own reserach by the reseracher.

For collecting secondary data, the reseacher will be studing others’ previous reserach, journals, articles, books publications, newpapers etc.

3.5. Analysis Techniques:

As we know the approach of data collection in this research study is inductive, the technique and of data collection and analysis must have a base on qualitative research type but not the quantitative.To conduct this research sample size chosen by the researcher will be small & it will be non random sampling due to the limitations of the time and many other resources.Data collected during the research study will be analysed in a systematic way.There exists different data collection techniques but the technique used by the researcher here will be the cross sectional but not longitudinal because there appears time and resource liitation to conduct research deeply.The research is not required to conduct frequently and update regularly but longitudinal research needs update at a particular time interval with the need of long time.

3.6. Sampling Techniques

In this study, I will be using simple prabablistic sampling technique so that the biasing in sample selection from the population can be avoided. Customers will be selection randomly in first come first serve fashion.

4.0. Research Resources.

All the resources needed for the research will be made available from the government publications,company profile,internet database,university/college library,stationery shop etc.

Research Schedule

The duration to complete the whole research actiivties will be presented in the chart form popularly known as GANT chart that contains lists of the activities in one axis ie.vertical one and time duration in other i.e.horizontal axis.The assumption made by the researcher to complete the research work is within the six weeks duration.Some important activities which will be involved in research study are mentioned below.

Introduction and background

The first part which appears in the research study is the introduction and backgroound of the research study.It is significant to know what research activity is and how this activity can be proceeded which provides lots of information and concepts in relation to the research topic.This section is supposed to be completed within about 4 days.

Literature review

This is the most important part in research which describes the things done in the related field by the researchers before.It is essential to conduct research in the systematic way.About 2 weeks period is allocated for conducting the review on literature.

Methodology

The another very important part in the research study is methodology or research procedure which consists of several other sections on it as research approach,research philosophy, research strategy, method of data collection and many more.The researcher needs to have thorough understanding of the methodology to conduct research in an effective way.The time allocated for this section by the researcheer is about 3 weeks.

Reference and bibliography

The final section of the research study is reference and bibliography.It has been separated time period of about 4 days.

Personal Reflection

Hopefully, the research study proposed to proceed based on the above mentioned framework will be an essential tool to complete my Master’s Degree in Business Administration in an effective way as this piece of work acts as a useful tip for wriring dissertation to me.It will be moreover advantageous for me for doing some research work in future on behalf of the company for its further business growth if I get opportuity to work in this organization.

6.0. References and Bibilography
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