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Who Benefits from Store Brand Entry?

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Author Info

  • Koen Pauwels

    () (Assistant Professor, Tuck School of Business at Dartmouth, Hanover, New Hampshire 03755)

  • Shuba Srinivasan

    () (Assistant Professor, The A. Gary Anderson School of Management, University of California, Riverside, California 92521)

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    Abstract

    Store brand entry has become a key issue in marketing as it may structurally change the performance of and the interactions among all market players. Based on their multivariate time-series analysis, the authors demonstrate permanent performance effects of store brand entry, typically benefiting the retailer, the consumers, and premium-brand manufacturers, while harming second-tier brand manufacturers. For the , they consistently find two of store brand entry: . This increase in unit margins implies that the retailer strengthens its bargaining position vis-à-vis national brand manufacturers. However, store brand entry only rarely yields category expansion and does not create store traffic or revenue benefits. Second, do not obtain lower prices on all national brands, only on some second-tier brands. However, they benefit from enlarged product assortment and intensified promotional activity that lowers average price paid for two out of four categories. For the , store brand entry is typically beneficial for national brands, but not for national brands. Often, premium brands experience lower long-term price sensitivity and higher revenues, whereas second-tier brands experience higher long-term price sensitivity and lower revenues.

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    File URL: http://dx.doi.org/10.1287/mksc.1030.0036
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    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 23 (2004)
    Issue (Month): 3 (July)
    Pages: 364-390

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    Handle: RePEc:inm:ormksc:v:23:y:2004:i:3:p:364-390

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    Related research

    Keywords: structural change; manufacturers versus retailers; store brand entry; unit root tests; vector-autoregressive models; long-term price elasticity;

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    Citations

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    Cited by:
    1. Deleersnyder, B. & Dekimpe, M.G. & Steenkamp, J-B.E.M. & Koll, O., 2005. "Win-Win Strategies at Discount Stores," Research Paper ERS-2005-050-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    2. Cleeren, K. & Dekimpe, M.G. & Verboven, F., 2005. "Intra- and Inter-Channel Competition in Local-Service Sectors," Research Paper ERS-2005-018-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    3. Kiygi Calli M. & Weverbergh M. & Franses P.H., 2008. "Modeling the Effectiveness of Hourly Direct-Response Radio Commercials," Working Papers 2008005, University of Antwerp, Faculty of Applied Economics.
    4. Koen Pauwels & Imran Currim & Marnik Dekimpe & Dominique Hanssens & Natalie Mizik & Eric Ghysels & Prasad Naik, 2004. "Modeling Marketing Dynamics by Time Series Econometrics," Marketing Letters, Springer, vol. 15(4), pages 167-183, December.
    5. Chi-Cheng Wu & Chih-Jen Wang, 2005. "A Positive Theory of Private Label: A Strategic Role of Private Label in a Duopoly National-Brand Market," Marketing Letters, Springer, vol. 16(2), pages 143-161, April.
    6. Marco Alderighi & Alessandro Cento & Peter Nijkamp & Piet Rietveld, 2011. "Second-degree Price Discrimination and Inter-group Effects in Airline Routes between European Cities," Tinbergen Institute Discussion Papers 11-118/3, Tinbergen Institute.
    7. Kusum Ailawadi & Eric Bradlow & Michaela Draganska & Vincent Nijs & Robert Rooderkerk & K. Sudhir & Kenneth Wilbur & Jie Zhang, 2010. "Empirical models of manufacturer-retailer interaction: A review and agenda for future research," Marketing Letters, Springer, vol. 21(3), pages 273-285, September.
    8. Heerde, H.J. van & Helsen, K. & Dekimpe, M.G., 2005. "Managing Product-Harm Crises," Research Paper ERS-2005-044-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    9. Pauwels, Koen & Currim, Imran & Dekimpe, Marnik & Ghysels, Eric & Hanssens, Dominique M & Mizik, Natalie & Naik, Prasad, 2005. "Modeling marketing dynamics by time series econometrics," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/121335, Katholieke Universiteit Leuven.

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