Organic Private Labels Implications on the compromise and similarity effect

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2022-08-24

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en

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Lately, retailers have started introducing a fourth private label tier (i.e., an organic private label) to their existing private label portfolio (i.e., an economic, mainstream, and premium private label). This tier was added to compete fiercer with other (national) brands. However, drawing on literature concerning the compromise and the similarity effect, it can be speculated that having an additional private label tier will not only compete with national brands, but could also harm other private label tiers. As a result, an online experiment was conducted to determine how these effects affect the purchase intention of all private labels. The respondents were shown one of six scenarios in which the organic private label was placed at a high, middle, or low placement in the shelf, to manipulate the strength of the compromise effect. In addition, to test the similarity effect, three out of the six scenarios presented an organic private label that was similar in appearance to the mainstream private label. In all other scenarios, the organic private label had a differentiating appearance from all private labels. The findings show no difference in purchase intention for all private labels between scenarios. Therefore, altering the product placement or appearance of the organic private label will have no direct effect on the strength of the compromise and similarity effect. In addition, purchase intention was found to be affected by control variables such as familiarity and the purchase history of the respondent.

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Faculteit der Managementwetenschappen

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