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An Investigation Into Attitudes of TESCO Customers in South Dublin Towards
Private-Label Brands
Dissertation submitted in part fulfilment of the requirements for the degree of MSc in Marketing at Dublin Business School
Shane Mooney
Student Number: 10334970
Master of Science in Marketing 2019
Declaration: I, Shane Mooney, declare that this research is my original work and has never been presented to any institution or university for the award of Degree or Diploma. In addition, I have referenced correctly all literature and sources used in this work and this work is compliant with the Dublin Business School’s academic honesty policy. Signed: Date: 02/01/
Acknowledgments
I believe my ability to complete – not only this paper – but this Masters course as a whole was only made possible by the support of those I am lucky enough to have around me. My incredible parents, Tish and Peter, whose love and support know no limits and always know how to give me a boost at the most vital times. My wonderful girlfriend, Katie, who pushed and motivated me every step of the way, and was there for me when I needed her the most. Finally, my supervisor/mentor/friend, Alan Morgan – the man largely responsible for helping steer me on this path in my life journey – your guidance, support, openness and honesty was so inspiring from our very first meeting, and throughout the duration of this Masters journey. I am forever in debt to each one of you.
- Introduction Abstract i
- 1.2 Research Question and Objectives...................................................................................
- Literature Review...................................................................................................................
- 2.1 Introduction
- 2.2 Price
- 2.3 Quality..............................................................................................................................
- 2.4 Multi-Tier PLs
- 2.4.1 Compromise Effect
- 2.4.2 Similarity Effect
- 2.4.3 Attraction Effect........................................................................................................
- 2.5 Involvement
- 2.6 Price-Quality Schema
- 2.7 Loyalty
- 2.8 Manufacturer
- Methodology
- 3.1 Methodology Introduction
- 3.2 Research Design.............................................................................................................
- 3.2.1 Research Philosophy
- 3.2.2 Research Approach
- 3.2.3 Research Strategy....................................................................................................
- 3.2.4 Time Horizon
- 3.2.5 Sampling
- 3.2.6 Research Ethics
- 3.2.7 Limitations
- 3.2.8 Pilot Survey.............................................................................................................
- 3.2.9 Survey
- 3.2.10 Focus Group
- Data Analysis And Findings
- 4.1 Introduction
- 4.2 Dun Laoghaire – Data Analysis
- 4.2.1 Gender
- 4.2.2 Age
- 4.2.3 Occupation
- 4.2.4 Average Monthly Income
- 4.2.5 How Often Do You Shop In TESCO?
- 4.2.6 Price Is More Important To Me Than Brand
- 4.2.7 Quality Is More Important Than Price
- 4.2.8 Generally I choose…
- 4.2.9 Reason(s) For Selecting TESCO Brand
- 4.2.10 Introduction of Multi-Tier Changing Consumer Opinions Towards PLs
- 4.2.11 Willingness to Pay More For a TESCO “Finest” Product Than a NB
- 4.2.12 Increase In TESCO Brands Has Made Me More Price-Conscious
- 4.2.13 Price Reflects Quality
- 4.2.14 TESCO Brands Resulting In Consumer Loyalty
- 4.2.15 Investigating if Customers Generally Switch Back to NB After Trying PL
- 4.3 Tallaght: Data Analysis..................................................................................................
- 4.3.1 Gender
- 4.3.2 Age
- 4.3.3 Occupation
- 4.3.4 Average Monthly Income
- 4.3.5 How Often Do You Shop In TESCO?
- 4.3.6 Price Is More Important Than Brand
- 4.3.7 Quality Is More Important Than Price
- 4.3.8 Selecting Between TESCO and Name Brands
- 4.3.9 Reasons Customers In Tallaght Purchase TESCO Brands
- Brands 4.3.10 Introduction of Multi-Tier Changing Consumer Opinions Towards TESCO
- 4.3.11 Willingness to Pay More For a TESCO “Finest” Product Than a NB
- 4.3.12 Increase In TESCO Brands Has Made Me More Price-Conscious
- 4.3.13 Price-Quality Schema
- 4.3.14 PLs Resulting In Store Loyalty
- 4.3.15 When I Try A PL Brand, I Rarely Change Back to The NB
- 4.4 Focus Group - 4.4.1 Product Packaging - 4.4.2 The Perception of Others - 4.4.3 Have Opinions Changed Over The Past 10 Years Towards TESCO’s PL? - 4.4.4 Selecting Between NB and PL – Greater Selection, Less Expertise - 4.4.5 Price-Quality-Schema - 4.4.6 Economic Circumstances
- Discussion
- 5.1 Introduction
- 5.2 Consumer Attitudes Towards TESCO’s PL Products
- 5.3 The Effect of Income on Product Choice
- 5.4 PLs Have Made Customers More Price-Conscious
- 5.5 Impact of Multi-Tier PLs on Product Choice
- 5.6 PLs And Store Loyalty
- 5.7 PLs And The Price-Quality Schema
- Conclusion and Recommendations
- 6.1 Introduction
- 6.2 Conclusion
- 6.3 Recommendations
- 6.4 Directions For Future Research
- Reflection on Learning And Skills Developed
- 7.1 Introduction
- 7.2 Returning To The World of Academia
- 7.3 Understanding My Learning Technique
- References
- Appendices...............................................................................................................................
- Appendix i) Pilot Survey
- Appendix ii) Final Survey....................................................................................................
- Appendix iii) Record of E-mails Requesting Permission for Store Access.........................
- Appendix iv) Permission Request Form
- Appendix v) Focus Group Introduction
- Appendix vi) Focus Group Consent Form
i
Abstract
The purpose of this dissertation paper is to investigate the attitudes held by TESCO customers towards TESCO’s private label range of products and to investigate if attitudes changed depending on demographic. The author designed a survey and administered it to two different samples – customers of TESCO Dun Laoghaire and TESCO Tallaght. To gain further insight, a focus group was also conducted. Following in-depth analyses of the data gathered, it was found that the customers of both demographics held similar views towards TESCO’s private-label range. However, areas in which there were noticeable differences included those that frequented the Tallaght store expressed greater tendency to purchase national brands compared to those that shop in Dun Laoghaire. It was also found that, while consumers do report an improved opinion towards TESCO’s private-label range, this does not translate to store loyalty – much of the reasoning behind this appears to relate to brand-trust. Finally, according to the views expressed during the focus group, the extension of private- labels into more categories, combined with the introduction of multi-tier ranges, is actually adversely affecting customers confidence in their product ranges as there is a lack of perceived “expertise” in any one area, thus encouraging customers to purchase more expensive national brands which tend to focus on a single category (i.e. Lindt: chocolate; Tayto: crisps etc.). The author concludes that while the general opinion towards TESCO’s private-label range is improving, their relative newness is inhibiting their ability to gain consumer trust. Perhaps the most significant find from this study is that multi-tier ranges, while offering greater variety and accommodating to a greater demographic of consumers, is damaging the brand from the perspective of their limited expertise in any one area.
of multi-tier options. An article by Zoe Wood (2012) of The Guardian newspaper, reported that TESCO would be rebranding their ‘Value’ range to ‘Everyday Value’. This move was in response to the growing sales of TESCO’s PB range and “…to relieve consumers of the embarrassment of buying the cheapest products on its shelves.” (Wood, 2012). This study is concerned with consumers’ perception of TESCO’s PL products and if their purchase-decision is based on quality, price, or a combination of both. The reason behind the authors decision to focus this research on TESCO customers is, according to a report by Geoff Percival (2018) of the Irish Examiner published on June 05th, figures released by Kantar Worldpanel revealed TESCO as having the greatest share of the market with 22.3%. Glossary of Abbreviations Private-label PL National brand NB Fast moving consumer goods FMCG 1.2 Research Question and Objectives The current paper aims to answer or, at the very least, provide further insight and understanding to the following question: Research Question: Has the growing market-share of TESCO’s PL range impacted customers’ attitudes towards quality and price? In order to answer this question, the researcher aims to accomplish the following objectives through the combined use of quantitative and qualitative research approaches: Investigate if the extension of PL options across categories has made customers more price-conscious.
Examine the impact multi-tier options has had on consumer product choice. Explore if PLs have increased store-loyalty. Assess if PLs have impacted the price-quality schema.
Sorgard (2000), this strategy may be adopted by NBs targeting “brand addicts” – consumers that have developed a habit of always purchasing a particular brand and find it very difficult to change to another brand, regardless of perceived advantage – while knowingly sacrificing, in the short-term, “brand switchers” – consumers willing to try another brand if it offers an advantage (e.g. cheaper). Gabrielsen & Sorgard (200 0 ) found that strong NBs have made such an impact on the habits of its customers, that they possess a greater sense of risk towards switching to another and, in their mind, inferior brand. Consequently, these consumers make the ideal target when a new PL enters the market, typically offering the same at a considerable price-advantage. Under such circumstances, “switchers” are the target for the newly introduced PL – they are often already familiar with PLs and therefore possess less sense of risk and are willing to try alternates when they offer an advantage over their existing preferred choice. Relating to consumers switching between NB and PL brands is the subject-matter of changing economic-climates. Several authors have related the performance of brands to economic conditions. Quelch and Harding (1996) observed that US PL shares peaked to 17% during the ’81-’82 recession period, compared to an average 14% in the years previous, suggesting that during times of a weaker economy, sales of PLs increase. This finding was supported by a study by Nandan and Dickinson (1994), as cited in Lamey et al. (2007), while also reporting findings that times of stronger economic growth give rise to an increase in NB sales. However, as a report by The Wall Street Journal (1993) highlighted, as cited by Lamey et al. (2007), often when consumers switch from a NB to a PL as a result of difficult financial periods, a significant portion are unwilling to change back even when they can afford to, thus resulting in a permanent loss in the sales of NB. A paper by Bowman et al. (1994) supports this perspective by pointing out that consumers change their spending behaviour more promptly during times of economic difficulty than they do when the economy is on the path to recovery. Shea (1993a), as cited in Bowman et al. (1994), found – using information on union contracts to construct a
measure of expected wage growth in his sample – that the response of consumers’ willingness- to-spend declined more promptly during times of anticipated decreases to their income than their willingness-to-spend during times of economic flourish.
- 3 Quality A consumer’s perceived quality of a product is dependent on many different factors, all generally decided upon within a matter of seconds of seeing a product. Therefore, naturally, a product’s packaging is an important factor – it needs to be attractive enough to grab the customer’s attention. In this area alone, PLs are always playing catch-up as NBs have the advantage of investing in the areas of product-and-packaging innovation according to research conducted by Kumar & Steenkamp ( 2007 ), as cited in Steenkamp (2010). As a result, upon first glance, PLs are almost always perceived as of lower quality than their NB counterpart. However, should NBs fail to continue to innovate or introduce new, attractive features to their product, this results in consumers going from noticing something for its innovative newness to, over time, becoming familiar and developing a sense of been-there-done-that, which ultimately benefits the PB as they have time to develop a similar feature at a more attractive price. Product packaging is an important issue relating to this area. As cited in Geyskens et al. (2010), Kapferer’s (1995) study discusses how consumers can project the perception they have associated over time towards a NB product onto a PL when their packaging is similar. This is a major concern for NBs and a key motivation for manufacturers to ensure their product remains distinct from the PL competition. Should the packaging of PL and NB be similar and should they be placed within close proximity on a shelf, a phenomenon known as “stimulus generalisation” is a likely occurrence (Geyskens et al., 2010). “Stimulus generalisation” occurs when a customer, who has acquired a perception through past experience with a particular
with a history of buying a particular product, will consider changing their purchase-habit in- light of the introduction of a new, competing product. According to Geyskens et al. (2010), context effect are comprised of three principle phenomena that have been widely researched and can be attributed widely to consumer behaviour towards multi-tier PL ranges – the compromise effect, the similarity effect, and the attraction effect. Figure 1: Positioning of Choice Set Along Quality-Tier and Brand-Type Dimensions (Geyskens et al., 2010, p. 793)
- 4 .1 Compromise Effect The compromise effect suggests that when a premium PL product is introduced to compete with a premium NB, it negatively influences the sales of the lower-end offering, rather than the higher-end NB it was introduced to compete with (Prelec et al., 1997). Wernerfelt (1995) offers a possible explanation for this – during the process of product selection, consumers often have limited awareness of their personal preferences towards a certain product, however, they have a perception of where they place themselves relative to others in terms of, for example, social-class. By using this as a form of relativity, they choose products according to how they want to be perceived by others and thus, will choose the mid-tier option. Prelec et al. (1997) used the example of selecting a new camera to illustrate the compromise effect; often a
consumer will not know the specific features they want from a product, but rather compare their needs to the needs of others in terms of below, equal-to, or above the typical needs of others, and will use this to determine their own needs and purchase accordingly.
- 4 .2 Similarity Effect The similarity effect, also referred to as the “substitution effect”, predicts that when a new product is introduced, the choice probability to products similar will decrease dis- proportionally. An example of the similarity-effect is when an economy-tier PL is introduced. As the economy-tier works to extend the range of brands to appeal to those looking for better- value, there are no similar products for it compete with on this level (see Figure 1 above). Therefore, the product range it is most similar to is that of the mid-tier PL range. According to Geyskens et al. (2010), under these circumstances, the similarity effect can adversely affect the sales of mid-tier PL products. The explanation offered for this is that of product-image quality- dilution. According to findings by Dacin and Smith (1994), the introduction of lower-quality can create a “step-down” effect. A “step-down” effect can work to create a negative impression by customers towards the core brand. This can result in overall uncertainty on the part of consumers as they develop an inconsistent impression towards a store, it’s PL brands, and the variation in quality being offered. The same principle applies when a premium-tier PL is introduced – customers form scepticism towards products that form the company’s historical expertise (i.e. functional, price-based products).
- 3 Attraction Effect In contrast to the above similarity-effect, is the “attraction effect”. According to Simonson (1989), the attraction-effect essentially predicts the opposite to that of the similarity effect – customers uncertain of whether to decide between a newly introduced economy-tier PL product, versus a mid-tier option, will base their decision according to how they expect others,
low-purchase-involvement are more prone to purchasing NBs, while those with higher involvement will take the time to assess and compare the pros and cons offered by each brand. As a result, those with higher-involvement were found to be more likely to purchase PL. One limitation to Maiksteneine & Auruskeviciene’s study was that it focused exclusively on one product type within a specific population – diapers among Lithuanian consumers – and therefore, their findings cannot be generalised. Nonetheless, it does present an interesting insight into how consumers within that category decide among brands.
- 6 Price-Quality Schema There is a myth related to how consumers make their purchases – the more expensive it is, the better it must be. This is known as the “price-quality schema”. As customers encounter vast amounts of information relating to quality in a variety of different variations – television advertising, word-of-mouth, billboards etc. – the limited cognitive abilities of the human brain develops ideas or, as they are scientifically referred to as, “schemas”. Schemas are the brain’s way of summarising what represents quality allowing us to quickly assess the world around us in seconds and make an informed judgment (Lichtenstein & Burton, 1990). Through experience, we further develop our schemas more accurately, rather than abstractly. Peterson and Wilson (19 85 ), as cited in Geyskens et al. (2010) first coined this term, and theorised that if a customer develops a belief that quality is strongly associated with price, they will use this association to help them make shortcuts in their decision-making process. Quelch and Harding (1996) make the point that while PLs offer greater profit-margin, retailers still rely heavily on NBs for their ability to pull those customers who are attracted to NBs. By offering NBs, they enable the price-quality schema to work, and so, without NBs, it could be argued that incentivising customers to switch to PLs would be more difficult. The logic used is that, in order for the price-schema to become activated, the stimulus of a NB is required to trigger the beliefs/opinion towards that brand before it can be generalised to the similar-looking PL.
Geyskens et al. (2010) found that heavy price-promotion dilutes the consumer perception of products and emphasize price-sensitivity while also diluting the gap in quality between NB and PL. Therefore, they recommend that manufacturers decrease intensity of price promotions during difficult economic periods, and instead increase advertising and product innovation. In contrast, Dhar & Hoch (1997) believe that the bigger the price gap between brands, the more likely a customer is to trade-down. However, this directly contradicts Geyskens et al.’s (2010) theory of price-dilution. Interestingly, a study by Raju et al (1995) found that greater price-gap among competing brands showed less penetration among PL brands, thus supporting the theory of a price-quality schema.
- 7 Loyalty It is generally accepted that when first introduced, PL products were considered the cheap alternative to NB. However, as technology has advanced, the ability for retailers to invest more into the quality of their PL offerings has allowed them to compete far more closely against their NB counterpart. This improvement in quality, while also maintaining strong price-advantage has been noticed by customers (Ward et al, 2002). As a result, retailers have been able to capitalise on this and use their PL range as a method to differentiate from other retailers, thus using their PL range to enhance their store image and further encourage loyalty to their store. According to a poll commissioned by the Private Label Manufacturer Association (PLMA), as cited in Ward et al. (2002), consumer awareness of improvements among PLs resulted in consumer awareness rising from 86% in 1991 to 91% in 1995, while the percentage of consumers that regularly bought PLs rose from 77% to 83%. Supporting this view is a study by Richardson, Jain and Dick (1996), as cited in Bhatt and Bhatt (2014), that states that PLs help to increase store traffic by offering lines that are unavailable elsewhere. Furthermore, of consumers surveyed by the PLMA, 76% agreed that store-brands were of similar quality to NBs. As Moberg (2006) states, as cited in Szymanowski and Gijsbrechts ( 2007 , p. 231), “…
