Culture-based private brand positioning
Private label brands traditionally have appealed to the cost-conscious consumer that often is on a budget. Recently, some of these brands have become more sophisticated in their marketing by focusing on product innovation and quality, as well as by enhancing their status appeal through eye-catching packaging.
This has elevated these private brands to a premium status, and hence increased their acceptance among U.S. consumers.
For instance, Target’s strategy of investing in its private label brands has helped the company successfully compete with Amazon and Walmart. However, as U.S. markets become more culturally diverse due to accelerated migration patterns, managers of private label brands should not only pay attention to budget considerations when segmenting their markets, but also to cultural factors that could foster the development of ethnic markets.
In this regard, recent research conducted with my colleagues suggests that managers of private label brands should segment their markets based not only on budget considerations (i.e., lower- vs. higher-status consumers), but also by considering the extent to which consumers’ cultural priorities emphasize the acceptance and endorsement of a social hierarchy. This cultural variable — the extent to which people in a cultural group accept and endorse status differentials along a social hierarchy — also is called power distance belief, or PDB.
Crossing these two dimensions delineates four different segments of consumers with different needs and aspirations, and with different propensity to favor national versus private label brands.
Consumers who accept inequality and hierarchy (high PDB), and who also have a relatively lower status, tend to have a heightened need of consuming for status, and hence tend to favor the status appeal of national brands. This preference is particularly pronounced for mundane, utilitarian products that hold low symbolic value (e.g., cleaning products). For these consumers, national brands serve a psychological purpose, by heightening feelings that their status has been uplifted. In contrast, regardless of their status, consumers who believe that society is more egalitarian (i.e., low PDB) tend to favor private label and national brands equally.
PDB varies widely between cultures and nations, and in the United States it can fluctuate across different ethnic groups. For instance, immigrants with Asian and Hispanic heritage tend to be high in PDB. Based on this new research, low status consumers from these groups would have heightened status consumption needs, and hence likely be responsive to the premium status of national brands.
What should managers of private label brands do to win this growing segment of high-PDB consumers? Although the findings in this new research sound like bad news for private label brands, there are positive steps that managers of these brands can take.
For one, instead of solely focusing on low price and good value of their products, private brands may be wise to increase their brand equity via eye- catching packaging and improved product quality, as these steps would create a more upscale and premium image. This would entice low-status consumers high in PDB because of the perceived status provided by the product.
If product affordability became a concern for these consumers, managers of private label brands might manipulate product size rather than dilute the product’s status.
Carlos J. Torelli is a professor of marketing, Gies College of Business, at the University of Illinois at Champaign-Urbana