Academics look at the effect of social status on private brands

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Academics look at the effect of social status on private brands

By Dan Ochwat - 12/17/2019
Carlos Torelli, professor of business administration, University of Illinois

New academic research looked at how a consumer’s social status effected their perception and preference of private brands, and found that in countries such as China, Brazil and Mexico, consumers in lower ranks of the society bought national brands so as to reflect a higher status, whereas consumers in higher ranks preferred private brands for their value.

This finding reflected everyday items, as opposed to private brand items in categories like fashion, but still surprised Carlos Torelli, a professor of business administration at the University of Illinois, Champaign, Ill., who co-wrote a paper on the subject. He worked with two researchers out of Indiana University and Miami University, and the paper was published in the Journal of Business Research.

“You would assume that it would be the other way around – that low-status consumers would buy the cheaper private label brand because they have less disposable income, but that’s not what we found,” he said.

He continued, “There’s an opening for the national brand to target low-status consumers who are not traditionally thought of as part of their consumer demographic. If national brands manage the size and certain other parameters to make the product slightly more affordable, then there is a market for premium brands in that demographic – as long as they don’t cheapen or water down the quality of the product itself to make it more price competitive with the store brand.”

The research out of the Illinois business school used data from 32 countries over a four-year period, looking at products in 21 categories, to examine how consumers in higher ranks of the country’s society viewed private brands compared to those of lower social status.

In more broader terms, Torelli said the research points to this tip for private brands: “If you're a private label brand, the one thing you could possibly do is burnish your image by ‘branding up,’ much like what Target did, and create a higher-end private label to sell exclusively in your stores,” Torelli said. “That’s a trend we’re seeing – a movement among retailers to do their own branding. Our research would suggest that just because it’s a private-label brand doesn’t mean it’s destined to be low status.”