An Empirical Investigation into the Factors Influencing Consumer Perceptions of the No Name Brand Food Items: Special Focus - South Africa

MA-Thesis / Master von Aron Embaye

Introduction:

In today’s complex business environment, doing business is no longer business as usual; it has evolved into quick change, quick response, and quick results. In such an environment it is only those business enterprises which understand these trends and position themselves for tomorrow can survive and grow successfully. Nowhere is this reality truer than in the retail industry, where changes on the consumer side are creating new challenges and opportunities at a frantic pace.

In the past, the consumers’ demand for high-profile brands let a retailer capitalize on the foundation of those solid, reputable brands to build its own reputation. This brand centric- approach to retailing meant strong competition, which has resulted in tight profit even to the bigger players of the industry. In response to the increased challenges, there has been a significant movement by most prominent retailers towards store brand solutions to improve margins and better meet the changing needs of the consumer. By creating high-quality product tied to the retailer’s own brand, retailers are reaping the benefits of brand loyalty for themselves. Leading global retailers like Wal-Mart, Aldi, Asda, Marks & Spencer, Migros, Tesco, Loblaw and many others now have two or three store brands, which allow for appeal across a wider variety of price points. According to recent studies, in Europe, store brands already represent over 45 Percent of the product mix, while in the U.S., store brands represent 25 percent (Internet 5).

Compared to the U.S and Europe, the South African market for store brands is not well developed and is far from being saturated. Store brands are sold throughout retailers in the country and categories are widespread - from beverages (milk, coffee, water, etc); including most confectionary categories; most household and toiletry categories; and from premium brands, to the more cost effective. Leading retailers like Spar, Shoprite, and Pick n’ Pay and others have various store brands. Even though South African retailers are utilizing own brands as a means of differentiation, some studies are also indicating the lack of well tuned major store brand strategies and own brands were not perceived as of value by consumers as well (Internet 2).

Like in the case of national brands, retailer’s brands have also evolved into many different forms (McGoldrick, 2002). The focus of this study is on the No Name Brand food items which are one form of the store brands offered by the Pick n’ Pay Group in their discount supermarkets. In other countries the No Name Brands are also offered by leading retailers such as the Loblaws of Canada (Internet 4).

The Pick n’ Pay Group has both commercial and non commercial objectives to be attained with offering the No Name Brand food items. However, the successes of these objectives largely depend on the consumer’s trust in the company and particularly on the No Name Brand products themselves. Therefore, this study is undertaken to establish a greater insight into consumer perceptions toward those products by investigating the influence of selected economic, psychosocial and demographic variables. There after, based on the empirical findings, necessary recommendations are forwarded which could help the company to deliver relevant product and service benefits to the consumer while gaining true customer loyalty to its retail brand.

Table of Contents:

	Chapter One –Introduction	13
1.1	Introduction	13
1.2	Background for the Research	14
1.2.1	The Distinction between Manufacturer's and Retailer's Brands	14
1.2.2	Overview of Store Brands in other Countries versus South Africa	16
1.2.3	Risks and Benefits of Store Branding for Retailers	16
1.3	Motivation for the Research	19
1.4	Value of the Project	19
1.5	Problem Statement	20
1.5.1	Sub-Problem	20
1.6	Objectives of the Study	20
1.7	Research Hypothesis	20
1.8	Limitations of the Research	21
1.9	Structure of the Study	21
1.10	Summary	22
	Chapter two: Consumer Decision Making	23
2.1	Introduction	23
2.2	the Decision Making Process	23
2.3	Individual Determinants of Behaviour	26
2.3.1	Psychological Factors	26
2.3.2	Personal Factors	27
2.4	Environmental Influences	28
2.4.1	Culture	28
2.4.2	Social Class	28
2.4.3	Reference Groups	29
2.5	Previous Studies on Store Brands	30
2.5.1	The Role of Consumer Socio-Economic Variables	31
2.5.2	The Role of Quality, Price and Promotion	31
2.5.2.1	Quality	32
2.5.2.2	Price	32
2.5.2.3	Feature and Display Promotion 33
2.6	Summary	33
	Chapter 3: Research Methodology	35
3.1	Introduction	35
3.2	Research Design	35
3.3	Secondary Data	35
3.4	Sampling	35
3.4.1	Sample Population	36
3.4.2	Sample Size	36
3.4.3	Sampling Design	37
3.4.4	Complex Probability Samplin	37
3.4.5	Systematic Sampling	37
3.5	Administration	38
3.6	Questionnaire Design	38
3.7	Pilot Questionnaire	39
3.8	Data Analysis	39
3.8.1	Descriptive Statistics	39
3.8.2	Inferential Statistics	40
3.9	Validity and Reliability	41
3.9.1	Reliability	41
3.9.2	Validity	41
3.10	Summary	42
	Chapter 4: Analysis of Results	43
4.1	Introduction	43
4.2	Sample Demographics	44
4.3	Descriptive Statistical Analysis	44
4.3.1	Consumers' Awareness and Usage Level of the No Name Brand food items	46
4.3.1.1	‘I buy the No Name Brand food items’	47
4.3.1.2	‘I include the No Name Brand food items in my shopping list’	48
4.3.1.3	‘I think of the No Name Brand food items only when I see them in the store’	48
4.3.1.4	‘Greater knowledge about the No Name Brand food items will lead to greater use’	49
4.3.1.5	‘Retailers should continue providing the No Name Brand food items’	50
4.3.2	consumer perception toward the Price and Quality of the No Name Brand food items	50
4.3.2.1	‘Buying No Name Brand food items save a lot of money’	40
4.3.2.2	‘Buying No Name Brand food items provides a high quality product’	52
4.3.2.3	‘Buying No Name Brand items requires a lot of planning before shopping’	53
4.3.2.4	‘Buying No Name Brand food items requires a lot of searching in the store’	54
4.3.2.5	‘Generally speaking the lower price of food items indicates lower quality’	55
4.3.2.6	‘No Name Brand food items are good substitutes to other food items under national brands’	55
4.3.3	The influence of psychosocial factors onconsumer perceptions toward the No Name Brand food items	56
4.3.3.1	‘Buying No Name Brand food items is something my family likes me to do’	57
43.3.2	‘Buying No Name Brand food items is something people may look down upon’	58
4.3.3.3	Item 15: ‘I would not mind serving No Name Brand food items to my guests’	58
4.4	Inferential Statistical analysis	59
4.4.1	Chi-square test to determine the impact of Age, Education and Income on consumer awarenessand usage level of the No Name Brand food items	59
4.4.1.1	‘ I buy No Name Brand food items’- the impact of Age	60
4.4.1.2	‘ I buy No Name Brand food items’- the impact of Education	61
4.4.1.3	‘ I buy No Name Brand food items’- the impact of Income	62
4.4.2	Chi-square test to determine the impact of Age, Education and Income on consumer perception toward the price and quality of theNo Name Brand food items	63
4.4.2.1	‘ Buying the No Name Brand food items saves a lot of money’- the impact of Age	63
4.4.2.2	‘ Buying the No Name Brand food items saves a lot of money’- the impact of Education	64
4.4.2.3	‘ Buying the No Name Brand food items saves a lot of money’- the impact of Income	65
4.4.2.4	‘ Buying the No Name Brand food items provides a high quality product’ -the impact of Age	66
4.4.2.5	‘ Buying the No Name Brand food items provides a high quality product’- the impact of Education	67
4.4.2.6	‘ Buying the No Name Brand food items provides a high quality product’-the impact of Income	68
4.4.3	Chi-square test to determine the influence of Psychosocial Factors on consumer perception toward the No Nam Brand food items	69
4.4.3.1	‘Buying No Name Brand food Items is something people may look down upon’ - the impact of Age	70
4.4.3.2	‘ Buying No Name Brand food Items is something people may look down upon’ - the impact of Education	71
4.4.3.3	‘ Buying No Name Brand food Items is something people may look down upon’ - the impact of Income	72
4.4.4	Results ofHypothesis Testing	74
	Chapter 5 - Summary and Discussion of the Findings	76
5.1	Introduction	76
5.2	Findings on consumer awareness and usage level of the No Name Brand food items	77
5.3	Findings on consumer perception toward the price and quality of the No Name Brand food items	77
5.4	Findings on the influence of psychosocial factors on consumer perception toward the No Name Brand food items	77
5.5	Findings on the impact of Age, Education, Income On consumer perceptions toward the No Name Brand food items	78
5.6	Summary	79
	Chapter 6: Conclusion and Recommendations	80
6.1	Conclusion	80
6. 2	Recommendations	81
6.2.1	Product	81
6.2.2	Price	81
6.2.3	Promotion	82
6.3	Recommendations for Future Study	82
7.	Bibliography	83
8.	Appendices	87

Text Sample:

Chapter 5.2, Findings on consumer awareness and usage level of the No Name Brand food items:

The results show that all the surveyed consumers are aware of the No Name Brand food items.

It was found that the majority of the respondents from all the surveyed age, education and income groups buy the No name Brand food items. However, it was also found that majority of the respondents buy those products sporadically.

Though the awareness level seems to be high among all the surveyed consumers, the image of the No Name Brand food items is not established on a solid ground for consumers to include them in their shopping list.

Majority of the respondents have shown their agreement that greater knowledge about the No Name Brand food items would lead to greater use.

Findings on consumer perceptions toward the Price and Quality the No Name Brand food items:

It was found that most respondents perceive that buying No Name Brand food items provide with an opportunity to save some money.

It was found that quality of the No Name Brand food items were not very highly rated by majority of the respondents.

Majority of the respondents indicated they could make the decision of buying No Name Brand food items easily with out spending much time and energy for planning. Moreover, the analysis showed that it is not as such difficult for many of the respondents tolocate the No Name Brand food items in the Pick n’ Pay stores.

It was found that many of the respondents equated lower price of food items with poor quality.

It was found that there is a general view among majority of the respondents that the No Name Brand food items are not good substitutes to other similar products under the national brands.

Findings on the influence of psychosocial factors on consumer perceptions toward the No Name Brand food items:

It was found that most respondents were not encouraged by their family to buy the No Name Brand food items. This clearly shows the negative influence family had in shaping the respondents perception and willingness to buy the No Name Brand food items.

It was also found that majority of the respondents had concerns regarding the perceived negative image which others can implicate up on them with buying and using the No name Brand food items.

Majority of the sample indicated their hesitation to serve the No Name Brand food items to their guests (visitors). This lower enthusiasm might be related to the above stated respondents’ general predisposition that an open consumption of the No Name Brand food items might lead to being perceived as lower class by other people.

Findings on the influence of Age, Education and Income on consumer perceptions toward the No Name Brand food items:

It was found that Age, Level of Education and Income have no bearing on consumer awareness of the No Name Brand food items. However, it was found that Level of Income did play a role on the actual usage and frequency of purchase of the No Name Brand food items. Respondents with lower- to- middle income levels (below 2000, 2001-4000 and 4001-6000 rand) purchase more No NameBrand food items compared to the respondents in the two higher income brackets (6001-8000 and over 8000 rand).

It was found that the perception toward the saving obtained from purchasing the No name Brand food items varied with income. The results also showed that the perception toward the saving benefits associated with the No Name Brand food items diminishes as the respondents’ income level increases.

It was found that majority of respondents within the surveyed age, education and income groups underrated the quality of the No Name Brand food items.

It was found that both age and income have an impact on the strength of the concern consumers have regarding the perceived lower image associated with using the No Name Brand food items The hypothesis testing showed significant correlation between consumer’s unfavourable perception toward the quality of the No Name Brand food items and the general bias consumers have toward the lower priced store brand food items.

Summary:

Overall there is a good indication that most respondents surveyed were well aware of the No Name Brand food items and buy the products occasionally. However, majority of the respondents were not ready to include those products in their shopping list. This implies that, so far, the image of the No Name Brand food items is not well established to create a strong base of loyal consumers.

When it comes to the price of the no name brand food items, consumers are well convinced about the availability of saving associated with buying those products. On the other hand, consumers do not have an overwhelming favourable perception towards the quality of the No Name Brand food items. On the top of that, a large number of respondents also associated lower price of food items with lower quality. This implies that the lower price of the No name brand food items might have its own contribution toward the prevailing consumer perception of quality of those products. The literature review has indicated consumers have a tendency to impute a quality on the bases of price and the findings of this study seem to agree with it.

The findings also revealed that the consumption behaviour of No Name brand food items is greatly influenced by psychosocial factors including the immediate family, friends and the general perception the general public have on lower priced food items which also include the no name Brand food items.

With regard to the influence of the three demographic variables, the findings are showing that compared to education; age and income have more bearing on various aspects of the No Name Brand consumption behaviour.