Journal of the Operational Research Society

, Volume 66, Issue 8, pp 1237–1249

National and store brand advertising strategies

General Paper

Abstract

As the propensity of premium store brands (SBs) increases, retailers must consider different ways to drive sales besides promotional strategies. With this in mind, we consider a national brand (NB) and a (premium) SB co-existing in a market. Each brand has to decide the amount to invest in advertising its product and the prices to charge its customers, which can be determined separately or in unison. When either advertising expenditures or pricing decisions are set, each brand must keep in mind that the advertising efforts and revenue may spillover between the two brands, customers who intend to purchase the NB may end up purchasing the SB and vice versa. We derive an analytical model of the situations described and characterize equilibrium advertising decisions. We find that the characteristics of a premium SB may depend on which marketing/promoting instrument (advertising or pricing) is the primary method for driving demand; and in some situations an NB may be better off to not advertise at all and instead let the premium SB carry out all of the advertising.

References

  1. Amrouche N, Martín-Herrán G and Zaccour G (2008a). Feedback Stackelberg equilibrium strategies when the private label competes with the national brand. Annals of Operations Research 164 (1): 79–95.CrossRefGoogle Scholar
  2. Amrouche N, Martín-Herrán G and Zaccour G (2008b). Pricing and advertising of private and national brands in a dynamic marketing channel. Journal of Optimization Theory and Applications 137 (3): 465–483.CrossRefGoogle Scholar
  3. Birwadker S (2011). Store brands vs. national brands: Strategies for success. Technical report, Landor Associates, http://landor.com/#!/talk/articles-publications/articles/store-brands-vs-national-brands-strategies-for-success/.
  4. Brester GW and Schroeder TC (1995). The impacts of brand and generic advertising on meat demand. American Journal of Agricultural Economics 77 (4): 969–979.CrossRefGoogle Scholar
  5. Che H, Sudhir K and Seetharaman PB (2007). Bounded rationality in pricing under state-dependent demand: Do firms look ahead, and if so, how far? Journal of Marketing Research 44 (3): 434–449.CrossRefGoogle Scholar
  6. Choi SC and Coughlan AT (2006). Private label positioning: Quality versus feature differentiation from the national brand. Journal of Retailing 82 (2): 79–93.CrossRefGoogle Scholar
  7. Dubé J-P and Manchanda P (2005). Differences in dynamic brand competition across markets: An empirical analysis. Marketing Science 24 (1): 81–95.CrossRefGoogle Scholar
  8. Eastlack JO and Rao AG (1986). Modeling response to advertising and pricing changes for ‘V-8’ cocktail vegetable juice. Marketing Science 5 (3): 245–259.CrossRefGoogle Scholar
  9. Erdem T and Chang SR (2012). A cross-category and cross-country analysis of umbrella branding for national and store brands. Journal of the Academy of Marketing Science 40 (1): 86–101.CrossRefGoogle Scholar
  10. Horowitz I (2000). An option-pricing look at the introduction of private labels. Journal of the Operational Research Society 51 (2): 221–230.CrossRefGoogle Scholar
  11. Huang Y and Huddleston P (2009). Retailer premium own-brands: Creating customer loyalty through own-brand products advantage. International Journal of Retail & Distribution Management 37 (11): 975–992.CrossRefGoogle Scholar
  12. Karp H (2012). Store brands step up their game, and prices. Wall Street Journal, 31 January, http://online.wsj.com/news/articles/SB10001424052970204624204577179193540556620, accessed 25 July 2014.
  13. Karray S and Martín-Herrán G (2008). Investigating the relationship between advertising and pricing in a channel with private label offering: A theoretic model. Review of Marketing Science 6 (1): 1–37.CrossRefGoogle Scholar
  14. Karray S and Martín-Herrán G (2009). A dynamic model for advertising and pricing competition between national and store brands. European Journal of Operational Research 193 (2): 451–467.CrossRefGoogle Scholar
  15. Karray S and Zaccour G (2005). A differential game of advertising for national and store brands. In: Haurie A and Zaccour G (eds). Dynamic Games: Theory and Applications. Springer: USA, pp 213–229.CrossRefGoogle Scholar
  16. Karray S and Zaccour G (2006). Could co-op advertising be a manufacturer’s counterstrategy to store brands? Journal of Business Research 59 (9): 1008–1015.CrossRefGoogle Scholar
  17. Kumar N and Steenkamp J-b EM (2007). Private Label Strategy: How to Meet the Store Brand Challenge. 1st edn Harvard Business Review Press: Boston, MA.Google Scholar
  18. Levy S and Gendel-Guterman H (2012). Does advertising matter to store brand purchase intention? A conceptual framework. Journal of Product & Brand Management 21 (2): 89–97.CrossRefGoogle Scholar
  19. McDonald S and Wren C (2012). Informative brand advertising and pricing strategies in internet markets with heterogeneous consumer search. International Journal of the Economics of Business 19 (1): 103–117.CrossRefGoogle Scholar
  20. Mills DE (1999). Private labels and manufacturer counterstrategies. European Review of Agricultural Economics 26 (2): 125–145.CrossRefGoogle Scholar
  21. Narasimhan C and Wilcox RT (1998). Private labels and the channel relationship: A cross-category analysis. The Journal of Business 71 (4): 573–600.CrossRefGoogle Scholar
  22. Patti CH and Fisk RP (1982). National advertising, brands, and channel control: An historical perspective with contemporary options. Journal of the Academy of Marketing Science 10 (1): 90–108.CrossRefGoogle Scholar
  23. Raju JS, Sethuraman R and Dhar SK (1995). The introduction and performance of store brands. Management Science 41 (6): 957–978.CrossRefGoogle Scholar
  24. Raju JS, Srinivasan V and Lal R (1990). The effects of brand loyalty on competitive price promotional strategies. Management Science 36 (3): 276–304.CrossRefGoogle Scholar
  25. Roberts MJ and Samuelson L (1988). An empirical analysis of dynamic, nonprice competition in an oligopolistic industry. The RAND Journal of Economics 19 (2): 200–220.CrossRefGoogle Scholar
  26. Sayman S, Hoch SJ and Raju JS (2002). Positioning of store brands. Marketing Science 21 (4): 378–397.CrossRefGoogle Scholar
  27. Sethuraman R (2009). Assessing the external validity of analytical results from national brand and store brand competition models. Marketing Science 28 (4): 759–781.CrossRefGoogle Scholar
  28. Sudhir K (2001). Structural analysis of manufacturer pricing in the presence of a strategic retailer. Marketing Science 20 (3): 244–264.CrossRefGoogle Scholar
  29. Vilcassim NJ, Kadiyali V and Chintagunta PK (1999). Investigating dynamic multifirm market interactions in price and advertising. Management Science 45 (4): 499–518.CrossRefGoogle Scholar
  30. Webster FE (2000). Understanding the relationships among brands, consumers, and resellers. Journal of the Academy of Marketing Science 28 (1): 17–23.CrossRefGoogle Scholar

Copyright information

© Operational Research Society Ltd. 2014

Authors and Affiliations

  1. 1.Operations and Supply Chain Management DepartmentCleveland State UniversityClevelandUSA
  2. 2.Department of Management SciencesUniversity of WaterlooOntarioCanada

Personalised recommendations