Title

Essays on store brand management: The case of vertically differentiated product categories

Date of Award

2008

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Business Administration

Keywords

Game theory, Marketing channels, Product line design, Retailing, Price leadership, Brand management

Subject Categories

Business | Marketing

Abstract

This research consists of two essays investigating the strategic implications of store brands for upstream and downstream channel members. The first essay analyzes how store brand introduction affects the relationship between a retailer and national brand manufacturers, in terms of price leadership. By exploring a multi-product category retail database using a time series approach, the study found that store brand introduction leads to price leadership changes for some (but not all) national brands, and generally in a favorable direction for a retailer. However, it was also found that this impact varies across competing national brands within a product category. In order to identify the causes for the variation, the researcher developed a game-theoretic model of a channel composed of two competing national brand manufacturers and a retailer, who introduced a store brand to the category. By comparing equilibrium solutions between before and after the store brand introduction under various conditions, the study demonstrates that the size of a retailer's incentive to exercise channel price leadership depends upon the relative quality and cost levels of competing brands in the category. Essay 2 addresses a retailer's product line design problem in vertically differentiated product categories. The increased availability of store brand suppliers now provides retailers with opportunities to create their own lines of multiple store brands within a product category. If a retailer chooses to design its own line of store brands, what are the optimal product line design decisions for retailers, and how will they be different from the product lines designed by national brand manufacturers? The study explored these questions both theoretically and empirically. By analyzing a game-theoretic model of a channel to reflect different combinations of store brands and national brands in the retailer's assortment, we identify the retailer's optimal product line design and assortment decisions for different market conditions, as well as three underlying strategic forces shaping the retailer's optimal decisions. An empirical analysis follows to test two hypotheses derived from the results of the theoretical analysis. We show that the results of the empirical analysis support the hypotheses.

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