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Factors Affecting Consumer Preferences towards Private Label
in the Thai ContextWhat could motivate Thai shoppers to
prefer private labels?
Thittapong DaengrasmisoponDoctor of Business Administration
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What is Private Label (PL)…?
Products that are owned and/or licensed exclusively by retailers, wholesalers, restaurant operators, food service distributors or caterers for distribution in their respective segments of the marketplace
Fitzell, 1992, p. 8
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Increasing dominance of European retail chains in Thailand
The Big Four Hypermarket / Cash & Carry Chains
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PL is significant to the modern retail scene worldwide…
• Internationally, PL sales contribution accounts for…– 15% of total category in US– 54% of Sainsbury’s sales– 41% of Tesco’s sales
Quelch and Harding (1996)
• In Thailand, PL has been growing as driven by The Big Four– 500+ items at Tesco Lotus– 1,000+ items at Big C– 400+ items at Carrefour– 300+ items at Makro
Business Thai (2002); Jitpleecheep (2002)
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From the Western literature…What factors correlate to PL purchase proneness?
• Economic situations– Economic growth– Disposable income growth
• Demographics– Age, income, education,
marital status, household size
• Purchase behaviour/nature– Frequency buyers– Heavy buyers
• Consumer attitudes– PL risk perceptions– PL familiarity– Manufacturer brand loyalty
• Price & perceived quality– Low price– Extrinsic cues for product
quality perceptions• Cue Utilization Theory (Dick et al.,
1997; Richardson & Jain, 1994, 1996)
Inconsistent or inadequate results to conclude PL proneness from shopper
characteristics and from ‘macro’ view…
More consistent findings on factors that influence PL preferences and more relevant
to shopper/retailer’s view...
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From the Thai literature…
Very limited research articles, mostly in local journals…
• Some cultural variables were investigated…– Materialism, but no significant difference between PL
shoppers and non-PL shoppers– ‘Face’ might have effects varying upon different categories
Shannon & Lockshin (2002, 2003)
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1. WHAT ARE POTENTIAL FACTORS AFFECTING CONSUMER PURCHASE PREFERENCES IN THE THAI CONTEXT?
Hence, the key research questions…
2. TO WHAT EXTENT EACH FACTOR CORRELATE WITH PRIVATE LABEL QUALITY PERCEPTION?
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Research Methodology
Qualitative 4 focus groups 38 BKK Female
29 PL users & 9 non users
QuantitativeQuestionnaire survey222 BKK PL shoppers
Pearson’s Correlation Test
Phase 1 : Identify potential factors influencing PL preferences
Phase 2 : Investigate correlation of each factor vs. PL quality perception
Research Question 1 :What are potential factors affecting consumer Purchase preferences in the Thai context?
Research Question 2 :To what extent each factor correlate with private label quality perception?
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Phase 1 : Overall Private Label Perception
• Smart choice for products that do not require ‘the best quality’
• ‘Trial-and-error’ often by impulse (at point of purchase) and sensory cues (looks okay / smells nice); therefore…– More familiar with household, low-risk products– More receptive to purchase for ‘business use’ and ‘for others’– Less tendency to purchase ‘for personal use’– Less and less tendency towards ‘sensitivity’ and ‘riskiness’
• e.g. Cotton bud vs. cotton ball
• Identifies 27 potential factors classified into Perceived Saving, Perceived Quality and Perceived Risk in the proposed framework…
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ConsumerPreference Toward
Private LabelPurchase
(CPPP)
Perceived Saving(PS)
Perceived Quality(PQ)
Perceived Risk(PR)
PRODUCT-RELATED FACTORSBrand name (+)Packaging design (+)Indication of quality content (+)Uniqueness of product (+)Similar appearance to national brand (+)Manufacturer image (+)Country of origin (+)Pricing image (+)Satisfaction warranty (+)
RETAIL-RELATED FACTORSStore aesthetics (+)In-store promoter (+)In-store demonstration (+)Retailer image (+)Foreign retail ownership (+)
SAVING-RELATED FACTORSPrice difference from national brand (+)Price promotion (+)Purchase volume (+)
RISK-RELATED FACTORSPhysical risk perception toward category (-)Financial risk perception toward category (-)Social risk perception toward category (?)Familiarity with particular private label (+)Familiarity with private label concept (+)Conspicuousness of usage (?)Urgency of need (+)Gift/donation recipient (+)Purchase for others (+)Trust in consumer protection mechanism (+)
FACTORS DRIVING PRIVATE LABEL PREFERENCE IN THAILAND
1. Perceived Saving (PS)
2. Perceived Quality (PQ)
3. Perceived Risk (PR)
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• Correlations of between each factor statement rating and PL quality perception by each retail channel were tested– Pearson’s Correlation Test
• Found most correlations with Hypermarket retail channel – Hypermarket could be perceived as representation of
private label as 91.44% aware of having private label
Phase 2 : Factor Correlation with Overall PL Quality Perception
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• Perceived Saving : Saving-related factors1. Price difference from national brand (+)2. Price promotion of private label (+)3. Purchase volume (+)
Phase 2 : Factor Correlation with Overall PL Quality Perception
*The color bars indicate factors with correlations with Hypermarket’s PL Quality Perception
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• Perceived Quality : Product-related factors1. Brand name (+)2. Packaging design (+)3. Indication of quality content (+)4. Uniqueness of product (+)5. Appearance similar to national brand (+)6. Manufacturer image (+)7. Country of origin (+)8. Price image (+)9. Indication of satisfaction warranty (+)
Phase 2 : Factor Correlation with Overall PL Quality Perception
*The color bars indicate factors with correlations with Hypermarket’s PL Quality Perception
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• Perceived Quality : Retail-related factors1. Store aesthetics (+)2. In-store promoter (+)3. In-store demonstration (+)4. Retailer image (+)5. Foreign retail owner reputation (+)
Phase 2 : Factor Correlation with Overall PL Quality Perception
*The color bars indicate factors with correlations with Hypermarket’s PL Quality Perception
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• Perceived Risk : Risk-related factors1. Physical risk perception toward category (-)2. Financial risk perception toward category (-)3. Social risk perception toward category (-)4. Familiarity with the private label product (+)5. Familiarity with private label concept (+)6. Conspicuousness of usage (?)7. Urgency of use (+)8. Gift/donation recipient (+)9. Purchase for others (+)10. Trust in consumer protection mechanism (+)
Phase 2 : Factor Correlation with Overall PL Quality Perception
*The color bars indicate factors with correlations with Hypermarket’s PL Quality Perception
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Discussion
• Confirms the existence of the proposed framework• PL perception is primarily in the hypermarket context• Supports Cue Utilization Theory
– Product and retail perception/image
• Weak consumer confidence on quality– Extrinsic cues and familiarity with product and concept
play key role toward preferences
• ‘Face’ issue seems not that big, in general, among PL shoppers– Acceptable to purchase for others/donation
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Implications for Retailers
• PL acceptance seems not yet at the tipping point• Consumer understanding of PL concept is one
important driver to acceptability at large• Perceived savings is primary, BUT ALSO…
– Choose well to select which suitable product to enter– Look at all extrinsic cues and how to be perceived, such as
• Generic vs. similar appearance vs. premium look• Or combination of them
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Research Limitation
• Limited generalizability– Bangkok / urban Thailand context– Exploratory framework
• Current validity of the 2003 study• Influence from the economic circumstances to
purchase criteria
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Suggestion for Future Research
• Further empirical investigations– By product type or category specific– Retail channel specific– User vs. non-user
• Nationwide representation• Cross-country comparison
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Questions?