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The Introduction and Performance of Store Brands

Author

Listed:
  • Jagmohan S. Raju

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6371)

  • Raj Sethuraman

    (Department of Marketing, University of Iowa, Iowa City, Iowa 52242)

  • Sanjay K. Dhar

    (Graduate School of Business, University of Chicago, Chicago, Illinois 60637)

Abstract

We present an analytical framework for understanding what makes a product category more conducive for store brand introduction. We also investigate market characteristics that help explain differences in store brand market share across product categories. Our findings suggest that the introduction of a store brand is likely to increase retailer's profits in a product category if the cross-price sensitivity among national brands is low and the cross-price sensitivity between the national brands and the store brand is high. Our model predicts that the store brand share would also be greater under these conditions. In addition, we find that the introduction of a store brand is more likely to lead to an increase in category profits if the category consists of a large number of national brands---even though the store brand market share is expected to be lower when there are a large number of national brands. We compare the key predictions of our model with data on 426 grocery product categories. The data are consistent with the predictions of the model.

Suggested Citation

  • Jagmohan S. Raju & Raj Sethuraman & Sanjay K. Dhar, 1995. "The Introduction and Performance of Store Brands," Management Science, INFORMS, vol. 41(6), pages 957-978, June.
  • Handle: RePEc:inm:ormnsc:v:41:y:1995:i:6:p:957-978
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    File URL: http://dx.doi.org/10.1287/mnsc.41.6.957
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