How to Increase Grocery Private Labels Quality Perception

The focus of this thesis is on the grocery retail market and more specifically on the store´s private labels. It is interesting to analyse this area because of the strong competition between products and the way customers assess quality to the different items in such a context.

Research shows that private label brands suffer from a low quality image compared with national brands. The main reason for such a bad quality perception is not so much linked with the ingredients quality, but rather with the poor private label product image itself.

Based on the situation outlined above, the objective of this master thesis is the development of an appropriate strategy in order to increase grocery private labels quality perception.

This work studies four different issues: The customer´s evaluation of product quality, the identification and analysis of the causes of the low store labels quality image, the comparison between national and store brands, and the relevance of Price, Country of Origin, Package and Brand in product excellence evaluation.

There is a long history of research that demonstrates that consumers frequently use extrinsic cues to infer product quality. Therefore, management’s strategy to target the most price-elastic shoppers by discounting their store brands and investing low resources on extrinsic cues like brand, package and advertisement may actually not be the right decision.

National brands can claim a much more successful brand image in comparison with store brands. They are perceived by the customers as “better brands” and are seen as more reliable, trusted, higher quality, innovative, and exciting. To the contrary, consumers view store brands as approachable and strongly associate them with value, but do not think of them as distinctive, authentic, daring, or innovative.

On this regard, the development of a premium store brand, characterized by high quality and innovative design, can represents a source of channel power, improved retail image, customer loyalty and differentiation, as well as mean to improve the customer´s quality perception of the product.

In order to develop such store brands, it is analysed the influence that price, country of origin, package and brand have on the customer´s perception of product quality.

The result of this work, suggest the development of premium store brands, characterized by high quality, strong brand, higher price, innovative and attractive package that underlines when beneficial the country of origin of the product, is the key to increase the customer´s quality perception of store brands. However, it is advisable to retain also some generic and mimic brands, to not lose market share and to increase the excellence perception of the premium store brands.