Prvt Label Research

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Examination of Factors Moderating theSuccess of Private Label Brands: A Study ofthe Packaged Food Market in China

Huei-Chen HsuChi-Shiun Lai

ABSTRACT . The major objective of this study is to explore how differ-ent dclcrminanls of perceived risk help explain variations in purchasingprcfcrciKcs lor national hrands versus private lahel brands (PI,B) of thepackaged food market in urban China. We selected the Chinese packagedfood market because il is "one of the niosi rapidly fastest growinjz markets"in the world (Wu & Deng. 2{)()2). Following a description of the Chinesemarket, we build our conceptual framework by combining the PLB litera-ture with .searching versus experience, price conscit)usness. and produelquality literature. Using the data we collected in GuangZhou, Shen/hen. andShanghai cities, we Unil both their direct and indirect effects. Supportingtheory-based expectations, we find that (I) PLB purchase in a categoryincreases when consumers perceive reduced consequences of making amistake in brand choice in thai category; (2) when that category has more"search " than "e xperien ce" cha racteristics: and (3) con sum er's degree ofprice consciousness in that category, through which we brought in PLB-favoring variables such as lower incomes, high deal-proneness. and adecreased belief in price-quality associations. We tliscuss our results inlight of the managerial and theoretical implications, especially the important

iluci-Chen Hsu is atfiliated with the Department ot" Managcniciit hilormationSystem s. Transworld Institute of Teehnology. Taiwan.Chi-Shiun Lai is alTiliated with the Institute of Business Administration at theNational Yunlin University of Science and Technology. Taiwan.Address correspondence to: Huei-Chen Hsu, Department of ManagementInfnrtnation Systetiis. Transworld Institute ot Technology, 1221, Zhen-nan Road,Touliu. Yunlin 640, Taiwan. (E-mail: [email protected]).Journal of Pood Products Marketing. Vol. 14(4) 2(M)8Available online at http://www.haworihpress.com


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JOURNAL OF FOOD PRODUCTS MARKETING

role played by "experience" attributes in leading consumers to favornational brands over PLBs.

K E Y W O R D S . Ptirchase risk, private label brant! (PLB). priceconsciousness, consequences ol making mistakes, quality variability

INTRODUCTIONThe packaged food market in China remains highly fragmented. Ting

Hsin Inlemalional Group, a Taiwan-based entity, continues to be theleading company, capturing just under 4.b77c of the market value share in2006 (Nielsen, 2007). The low figure reflects the intense competition thatprevailed in the market. In spite of this, a few large-scale state-owneddomestic corporations, such as Shanghai Kerry Oils & Grains IndustrialCompany, Ltd., and Inner Mongolia Yili Industrial Company, Ltd.,managed to record a marginal rise in share value. Private label productsgained further penetration, with the share being most prominent in thepackaged food market.The robust performance of the packaged food market in China willcontinue into 2008. Overall growth in current value terms of more than

8.757r is expected in 2008, with total sales reaching RMB487 billion(Nielsen, 2007). The rapid expansion of the Chinese economy contributedsubstantially to the brisk sales of packaged food. R ising [KT capitaincome, particularly in the developed regions of the country, stimulateddemand for higher-value packaged food. In tandem with the improvementin living standards, consumers in urban cities became more concernedabout hygiene standards, shifting their consumption from looseunbranded food to more expensive packaged branded items.One of the sectors benefiting greatly from the shift in consumer prefer-ences has been oils and fats, with value sales forecast to grow by M9( andvolume by 25% in 2007. In China , oils and fats consist primarily of vege-table and seed oil. The dynamic growth will also be the result of higherraw material prices. Bakery products, which are becoming almost like astaple food due to their convenience, will replace sauces, dressings, and

condiments as the largest sector in value terms in 2007, generatingRMB71 billion in sales or a 19% market share (Nielsen, 2007).


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Huei-Cken Hsu and Chi-Shiiim IM _ 3In the more developed regions of east, south, and north and northeastChina, growing affluence and sophistication is helping consumers to tradetip U) packaged and branded food. In contrast, restrained by low incom e,consumers living in the less-developed regions, namely mid, southwe.stand northwest China, are still relying on loose unbranded food. In theurban cities, the busy lifestyles led to the population being more receptiveto Westem-slyle and healthier packaged food that offers convenience,such as canned and frozen ready meals. Such a trend was not discerniblein the rural areas.

Sales of private label brands, also called "store brands," have beengrowing rapidly in recent years. Previous studies .shows ihat retailers likePLBs because of their potential to increase store loyalty, chain profitabil-ity, control over shelf space, bargaining power over manufacturers, and soforth (Richardson, Jain. & Dick, 1996). Among consumers, one obviousreason for their popularity and growth is their price advantage (averaging21%) over national brands. High quality seems to be more important indetermining PLB success than lower price (Hoch & Baneiji, 1993).Previous research investigating across-category differences has looked atthem mostly from the manufacturer and retailer perspectives (Hoch &Banerji, 1993). They find that PLBs have higher shares in large categoriesoffering high margins, and where they compete against fewer nationalmanufacturers who spend less on national advertising. The gap betweennational brands and PLBs in the level of quality also depends on thetechnology rec|tiirements in manufacturing that vary across categories.

Research has been more limited on the consumer-level factors thatmake PLBs differentially successful across prodtict categories. Someresearchers studying consumer-level factors for PLB proneness-stich asRichardson et al. (1996) have not studied across-category variations atall. They have chosen instead to aggregate data across categories. Thosefew studies that have looked at cross-category differences from a con-sumer-factor perspective have sometimes omitted important variables.Sethuraman and Cole (1997), for instance, did not measure and modelthe crucial effect of the level of perceived risk in the product category(Richardson et al., 1996; Narasimhan & Wilcox, 1998). Other previousreview on the literature has revealed the foeus more limited to thediscussion of across-category differences toward the Website.(McMillan & Hwang. 2003). What are the correct managerial strategiesfor national brand retailers to induce consumers to shop? The potential


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4 JOURNAL OF FOOD PRODUCTS MARKETING

In this research, we focus upon these consumer-level perceptions ofinter-category differences. We examine the role played by differentdeterminants of perceived risk in explaining PLB acceptability acrossproduct categories, especially the role of "search" versus "experience"attributes in shaping the degree of such perceived risk in the productcategory. By doing so, we hope to shed light on what has made PLBssuccessful overall, drawing implications both for retailers marketingPLBs in China as the national brands that compete with them.

LITERATURE REVIEW AND HYPOTHESESAs the Chinese market creates new market opportunities, businessescan have a better grip of consumer behavior through understandingpurchase items they need. Any examination of the consumer-levelfactors that moderate PLB success across product categories shouldstart with a framework to explain consumer susceptibility to buyingPLBs.

Private Label BrandsPrevious research shows that consumers' propensity to purchase PLBsdepends on (!) dem ographic factors, such as income, family size, age . andeducation; (2) individual difference variables, such as the degree of reli-ance by the consumer on extrinsic cues (those more reliant on such cuespreferring national buys); and (3) consumer perceptions of the particularcategory {degree of perceived quality, level of perceived risk, the degreeof consumer knowledge about lhe category, and perceived value ofmoney) (Richardson et al., 1996).In their study. Sethuraman and Cole (1997) did model ca te gory-levelvariables in these factors. They examined the effect on '^willingness to paya price premium for a national brand " of ( 1 ) several category-level factors,such as quality perception of PLBs, average price, purchase frequency, andthe degree to which the category gives "consumption pleasure." (2) indi-vidual difference perceptual variables including the belief of a price-qualilyrelationship, perceived deal frequency, and familiarity with PLBs.However, as noted above, their list of category-level factors did not includecrucial perceptions of the degree of category perceived risk.


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Huei-Cben Hsu and Chi-Shium Mi 5consumer susceptibility to buying PLBs. Hoch and Banerji (1993) findthat PLBs have higher shares in large categories ofiering high margins,and where they compete against fewer national manufacttirers who spendless on national advertising.Because the reasons for these inter-category differences in PLB sharemight shed light on the reasons for PLB growth overall, these differencesare clearly worth researching in detail. Retailers will benefit by knowingbt'tter how to expand sales of their high-margin PLBsand nationalbrand manufacttirers will benefit by knowing better how to fight PLBgrowth. The gap between national brands and PLBs in the level of qualityalso depends on the technology requirements in manufacturing that variesacross categories (Hoch & Banerji, 1993).

In this study, the consumer-level variables include category-specificperceptions of the consequences of making a wrong brand choice, thedegree of factor in quality across brands, the "search" vs. "experience"nattue of prodtict features, and consumer price consciousness in thatcategory.Price Consciousness

The marketing literature is replete with evidence suggesting that anextrinsic information search presents a motivated and conscious decisionby the consumer to seek new information from the environment (e.g.,PunJ & Stewart, 1983). Consumers use available information systemati-cally by forming a preference based on a multi-attribute mode (Azjen &Fishbein, 1980). Considering buyers are not fully informed about thequality of sellers' goods or services, in this situation, they would likeinformation that allows them to distinguish the product of high or lowquality. Economists have investigated the implications of signals such asprice (M ilgrom & R oberts, 1986). advertisement (Chen & He, 2(X)3), andwarranties (Lutz, 1989). The role of extrinsic cue is to resolve theconsumer's classification problem in the face of potential deception bythe bad seller.

Price consciousness, defmed as the "degree to which the consumerfocttses exclusively on paying low prices" (Lichtenstein, Ridgway, &Nctemeycr. 1993), has been found to be a predictor of purchase. Weinclude it here because it can logically be expected to mediate the effectof several demographic and attitudinal variables. Previous research has


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6 JOURNAL OF FOOD FRODUCTS MARKETINGI

coiisutiiers (Babakus, Tat, & Cuntiitigham, 1988). To minimize financialrisk, consumers utilize various kinds of risk-reduction .strategies, sucb asreliance on marketer-offered money-back guarantees, warranties, freesatnples /pre-purcbase trials. (Schiffmati & Kanuk, 1987). Therefo re, wehave the hypothesis as:

H I: Consum ers are more prone lo buying PLBs in prodttcl caies^orieswhere theyperceive higher price consciousness in their brand.selection.

Consequences of Purchase MistakePerceived risk is the consutner's perception of the uncertainty and con-comitant adverse co nseq uenceso f buying a product or .service (Dowlitig &Staeiin, 1994). Bauer (I960) in bis seminal work on risk-taking, set forththe idea that consumer behavior involved risk in the sense tbat any actionof a consutner will produce consequences that she or be views witb sotnedegree of uncertainty.In the previous literature, perceived risk has been described as consistingof a set of possibly interrelated components: financial, performance,physical, psychological, social, and time convenience risks, yielding aseparate measure of overall perceived risk iJacoby & Kaplan, 1972).These six risk dimensions explain 8 8 . 8 7 P of the total risk perception(Stone & Gronhaug, 1993). W ithin overall perceived risk, product perfor-tnance risk is defined as the loss incurred when a product or brand doesnot petform as expected. Time/convenience risk relates to the time spentfor the purchase of a product and the time wasted in case a poor productor service is chosen. Social tisk teliects the disappointment in the individ-

ual by friends in case of a poor product or service choice. Physical riskrelates to the safety and health of the individual. Psychological riskreflects an individual's disappointment in him.self or herself in case of apoor product or service choice. Last, financial risk pertains to the loss oftnoney in the case of a poor product or service choice (Jacoby & Kaplan,1972).One of the determinants of such risk, according to Narasimhan & Wilcox(1998), Murray (1991), and o thers, is the "degree of inconvenience of makinga mistake." Similar conceptualizations have been offered in the extensiveliterature on product category involvement (e.g., Laurent & Kapferer, 1983).


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Huei-Chen Hsu and Chi-Shium M 7inhibits the selection of PLBs. They find that English consumers servenational brand tea to guests, but consume less expensive store brand teathemselves. We thus hypothesize:

H2: Cimsifwers are m ore prone to htiying PLBs in prodttct categorieswhere theypercetve lower conseqttemes of making a mistake intheir brand selection.Information '"Searching" versus Purchasing ^'Experience"

Prior research has established that consumers are less skeptical of searchattribute claims than they are of claims involving experience attributes (Ford,Smith, & Sw asy, 1990). Erde m and S wait (1998)arg tie that in prodtict cate-gories where the attributes are of this "experience" type, instead of being ofthe "search" variety, a well-respected brand will have a higher purchase|)robability because awareness will serve to reduce perceived risk.

Previous marketing theorists conceive that consumers develop ways ofreducing risk by searching for information that enables them to act with adegree of confidence in situations of uncertainty (e.g., Bauer, 1960; Murray,1991). Because services appear to create particularly uncertain and riskyptirchase situations, it is logical to expect that consumers acqtiire informa-tion as a strategy of risk reduction in the face of this specific uncertainty.

Constimer information sources can be classified into two broad types,internal and external. Constuners use both types when gathering infonna-tion and coping with perceived risk. In general, the greater the degree ofperceived risk in a pre-purchase context, the greater is the consumer's pro-[X'nsity in seeking information about the service and quality. The marketingliterattire is replete with evidence suggesting that an external inforrnalionsearch presents a motivated and conscious decision by the consumer to seeknew information from the environment (Punj & Stewart, 1983).Experience

Knowledge and prior experience have been shown to affect how con-stuiicrs evaluate the risk inherent in their purchase (Murray & Schlacter,1990) with more knowledge and experience generally reducing perceivedrisk. Corbitt (2003) found the purchasing experience increa.sed the degree


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H 3: // consumers search for more information of the product thanpurchasing experience, they will perceive lower variability inquality levels across brands.

H 4: Consum ers have loner incidences of purchase m istakes in productcategories if they search for more inform ation of the products.Degree of Quality Variability in Product Category

Earlier studies, such as Narasimhan and Wilcox (1998) have arguedthat the degree of perceived risk increases with the degree of per-ceived quality variation across brands in product category. Supportingthis notion. Richardson et al. il996) found, in their analysis of aggre-gate across-category data, that perceived quality variation led toreduced perceived value-for-money of PLBs both directly and via per-ceived risk. Hoch and Banerji (1993) found that PLB share was lowerin categories where the quality variability of store brands was high.We thus hypothesize:

H 5: Consumers have lower consequences of purchase mistake inproduct catego ries where they perceived lower variability inquality levels across brands.

THEORETICAL METHODOLOGYResearch Design

As mentioned previously, using construct definitions and measuresavailable from the literature, this research is designed to investigate thefactors perception mentioned above regarding how to affect consumers'purchasing PLB intention. To surmount methods and make a break-through in consumer behavior research, structural equation modeling(using LISREL8.3: Joreskog & Sorbom, 1993) is used to guide theresearch design and the systematic analysis procedure.Questionnaire Development

Reviews frotn related literature were previously shown to apply well topurchase intention (Laurent & Kapferer. 1985) and from the PLB scales


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Huei-Chen Hsu and Chi-Shium M 9The urban Chinese were our target population. For the purpose ofconsistentcy wilh the Chinese market, we used the dyadic approachdeveloped by Anderson and Weitz (1992), by parallel wording for the

retailer managers and experts' reports. First, the retailers chosen musthave sales experience. Items of the questionnaire were modified based onfour interviews with retail officials and professors in the univc'isities (tworetail managers, and two professors). We consulted with both of them toensure the questions were worded with an appropriate consistency.Multiple Likcil ilems on seven-point scales were asked for each of ourlour category-level perceptual variables.Pretest

The twelve product categories of packaged food we chose for the testwere canned food, ready meals, snack bars, milk, ice cream, bakery prod-ucts, packaged vegetables, vegetable oil. baby food, and instant noodles.Conducting a pretest, we evaluated the content validity of the items bysubjecting them lo 45 mall consumers at Wal-Roon shopping mall in thecity of Shenzhen. Then, we administered the resulting items to retailermanagers in face-to-face meetings to assess whether the items were as

intended. Finally, we made some additional changes lo the wording ofsome of the items. The constnicts we developed are not expected to behighly correlated (Bollen & Lennox, 1991; Fornell Larcker, 1981).We conducted the second pretest after one week at different malls inShenzhen and S5 consumers were interviewed. A confimialory factor analysisof the 13 items was tested. All loadings are significiuit. G(X)dness-of-rit statis-tics for the data are X^ = 56.11 (p value = .00); RMSEA = 0.062; AGFI =0.89; NFI = 0.87; CFI = 0.9; GFI = 0.87; RMR = 0.49. The fit statistics areas expected given the formative nature of the scales.For discriminant validity, we tested to see if all the inter-construct cor-relations (the phi's) were significantly below 1.0 (Anderson & Gerbing,1988). This test was met in every item. Thus, we deemed our scale ade-quate for consistency of this study.

Data CollectionData collection in this study is still considered a convenience sample.The sample for this study was conducted across three impoilant cities(GuangZhou, Shenzhen, & Shanghai) in urban China. Our data come


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10 JOURNAL OF FOOD PRODUCTS MARKETINGpotential respondents by inquiring whether a specific packaged food cate-gory had been purchased in Ihe past month. If the answer was affirmative,a short questionnaire on prodtict category perceptions was discussed andadministered. In this manner, each respondent provided data on two orthree categories selected at random from a list of twelve. In all, 753 usablequestionnaires were obtained across the twelve categories. There wereapproximately 60 responses for each of the product categories.Measures

Table 1 shows the dependent variable, PLB purchase, is a continuousvariable on a five-poin t interval scale from 1 (exclusively purchasenational brands) to 5 (exclusively purchase PLB brands). Because it is asingle-item construct, it is modeled in otir confirmatory factor analysiswith a measurement error of 1-a rather than zero. This approach is a

TABLE 1. Descriptive statistics (N = 753 samples) of means (standarddeviations)Category Consequencesof PurchaseMistake

Search/Experience PriceConsciousness QualityVariation PLB*

Canned foodReady mealSnack barsVegetables oilMilkIce creamBakeryproductsPackagedvegetablesInstantnoodlesSoupBaby foodConfectioneryOverall

615958616160656261697066

75 3

4.15(1.35)4.12(1.85)3.71(1.20)4.25(1,65)4.39(1.65)4.46(1.74)3.32(1.53)3.95(1.26)3.72(1.83)4.37(1-71)4,50(1.55)4.16(1.45)4.43(1.71)

3.91(14-29(13,50(13,40(13.77(13.69(13.23(13.10(13.75(13.49(14,91(13.56(13.72(1

.65).22),47).57),32).76).34),79),61).14).30).62),25)

4.01(14.65(14.52(14,09(14.13(14.22(13,97(14-75(14,01(14.12(14.82(14.02(14.26(1

.70).72)

.56)-87)

.79)

.60),54),81),06),25)-62),23).89)

4,35(14,60(13,75{13,85(14,26(14.11(13,75(14,25(14,28(14,47(14,78(13,86(14,19(1

,38),26),35),83),16),55),75),68),85),54),39),75),93)

3-88(1,35)3.99(1,09)3,50(1,03)3,95(0,89)4,10(0,92)3.99(1,23)4.87(1,21)3-98(0.91)4.78(0,97)3,91(0,99)3.39(0,83)4-15(1,14)4.04(1.28)

Notes: '1 = Exclusively national brands, 5 = Exclusively Private Label Brands (PLBs),


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Huei-Chen Hsu and Chi-Shium IM I Istandard, but conservative procedure. A reliability of 0.85 is assumed (cf.,MacKetizie & Lutz, 1989).The data also ptovides some descriptive statistics from the analy-sis. It shows that baby food was perceived highest in purchasetnistakes, with bakery product as the lowest. Baby food also is ratedhighest on search versus experience, and bakery product is the lowest.Baby food is tated highest on price consciousness, and baby food alsorates highest on quality variation. These findings appears to have facevalidity.

ANALYSIS AND RESULTSMeasurement Model '.

Prior to testing the hypotheses, the multi-itetn tneasures were subjectedto a series of validity checks. A confirmatory factor analysis for theseitems is reported in Table 2.The covariance matrix was used to run the Lisrel program. TheMaximutn Likelihood (ML) solution was applied to gel the fitted modeland estitnates, The measuretnent model shows satisfactory level (>0.5) ofaverage variatice extracted (Table 3) (Fomell & Larcket; 1981 ).For discriminate validity, we tested to see if all the interconstructcorrelations (the phi coefficients)were significantly below LO (Anderson &Getbing, 1988). This test was met in every instance. A more stringetitrquirement calls for the average variatice extracted (AVE) for each con-stt-uct in a pair to exceed the square of the phi coefficient for that pair(Fornell & Larcker, 1981 ). It also was tuet in every case.Confirtnatoty factor indicated high ititernal consistency and one-factorsolutions for those data, which together with statistical properties (Table3. itidicales tbat the six theoretical constructs assess convergent validityby shared extracted variance (.5) (FotTiell & Larcker, 1981).Structural Model

The estitnated beta parameters from the structural model are depictedin Figure 1 atid it fits well. The tnodel had statistics: X' = -^^6.37;R M S F : A = 0.007; AGFI = 0.96; NFI = 0.97; CFI = 0.97; GKI = 0.97;KMR = 0.024. The overall fit of the models are thus acceptable (Hair,


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2 JOURNAL OF FOOD PRODUCTS MARKETINGTABLE 2. A confirmatory factor analysis

Items

PLB purchaseY1Y2Y3

StandardizedLoading

.89

.92

.86Consequences of Purchase MistakeX1

X2X3"Search" vs. "ExperienceX4

X5X6

Price ConsciousnessX7XSX9

.81.86.84

.85.82

.86,79.81.87

Degree of Quality Va riation in CategoryX10X I IX12X13

(Items

PLB purchaseConsequences of

Purchase M istake"Search" vs. "Experience"Price ConsciousnessDegree of QuaiityVariation in Ca tegory

.79

.85.87

.85Domposjte Reliability

CompositeReliability.89.94.96.94,95

t value Standard

11,9915,616.21

5,616,214,98

13.8213,2211,287,624,505,61

11,4812,7813.3312.82

error0.300,210.360,410.360.220.260,370.240.240.490.340.550.260.330,26

Average VarianceExtracted.73.86.89.83.84

Hypothesis TestingSupport for HI is found significant as a direct relationship valtie 0.49(t value =7.58). That is to say, the Chinese online consumers' price con-


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Huei-Chen Hsu and Chi-Shium M TABLE 3. Constructs correlation matrix

ConstructsS v s . EPCQVCPMPLBVariance Extracted

Svs. E1.000 . 5 1 "-0 .37*- 0 . 4 3 "0.22*0.89

PC

1.00- 0 . 3 1 '- 0 . 3 2 "0 . 3 9 "0.83

QV

1.000 . 3 7 "- 0 . 1 3 '0.84

CPM

1.00- 0 . 3 2 "0.86

PLB

1.000.73'Correlation is significant at the .05 level."C orr ela tion is significant at the .01 level.Notes: S vs. E = Search versus Experience; PC = Price Consciousness; OV = Quality Variability;CPM = Consequences of Purchase M istake; PLB = Private Label Brand.

FIGURE 1. Paths Coefficients in Structural Mode.

-0 .37* ' - 7 . 2 9 J-0 .2S* < - 4 . 2 8 )

As detailed earlier in our hypotheses, we find the hypothesized effectsof consequences of purchase mistakes in H2 lo be supported. The directetTect value is -0.28 {t value = -4.28). It means that consumers are moreprone to buying PLBs in product categories where they perceive lowerconsequences of making a mistake in their brand selection. H4 is alsosupported, the effect of S vs. E on CPM is -0.37 (t value = -7.29).It means that concerning to miike a purchasing mistake, most of the con-sLiuiers will look for experience more than searching information, and if theshopper spends more time surfing for information on product category, heor she may choose and be more likely to buy private label brand products.


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TABLE 4. The estimated effects of the structural modelVariables Predictors

Direct effects:CPMSEPCQV

Indirect effects:CPMQVSE

Total effects:CPMQVSEPC

DependableVariable: QV

- 0 . 8 1 *

- 0 , 8 1 '

ModelDependableVariable: CPM

- 0 , 3 7 *0,45*

0.45*- 0 , 3 7 '

DependableVariable: PLB

- 0 .28 *0 ,49 '

- 0 , 1 2 '0 , 1 0 '

- 0 , 2 8 '- 0 . 1 2 *

0,10*0,49*

about quality. Support for H3 is found significant as a direct relationshipvalue -0.81 (t value = -12.24). This should, in turn, raise the perceivedconsequences of a purchase mistake and reduce the propensity to buyPLBs. This model thus showed certain mediating processes. Searchversus experience was also modeled as directly influencing consequencesof purchase mistakes. Quality variation was not modeled as directlyinfluencing the propensity to buy PLBs because this link appeared non-significant in our model.H5 is also supported for the value is 0.45 (t value = 8.69). Comparingour results to previous quality variation studies (e.g., Batra & Sinha,2000), we find that Chinese consumers employ similar decision-makingprocesses as those used by their North American counterparts. Faced withquality description, Chinese consumers categorize the variation into thesame set of consequences of purchase mistakes and make no significantlydifferent choices.Our statistics closely follow our theoretical framework. All of the

coefficients in the model are significant and have the expected signs. Thus,PLB purchases rise when 1 ) lhe consequences of making a purcha.se


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Huei-Chen H su and Chi-Shium IM 15the pri^duct categories have more Search than Experience characteristics(indirectly via both QV and CPM ). In addition, category price consciousnesshas a significant and positive effect on PLB purchase within a categoty (0.49).Thus, the stmctural model provides stronger support tor our hypotheses.

DISCUSSION AND M ANAGERIAL IM PLICATIONSDiscussion

This study offers both a theoretical and practical contribution toexplain variations in purchasing preferences for national brands versusPLBs across twelve different packaged food ca tegories. Interesting to findthat Chinese consumers' exposure to PLBs products is relatively new. itappears that searching product information in reducing purchase mistakesvaries significant and consumers will be more likely to buy PLBs. Thisfinding concurred with the work of Batra and Sinha (2000) who foundthat the determinants of the degree of risk, as perceived by consumers inmaking a purchase, varied according to the searching or experience.Another finding is that PLB buying increases as the "price consciousness"increases. We included that the consumer's degree of price consciousnessin that category, might bring in PLB-favoring variables such as lowerincomes, high deal-proneness and a decreased belief in price-quality asso-ciations. For example, from our results regarding brand equity choice, wefind that Chinese consumers have significant positive attitudes and inten-tions toward well-known PLBs (such as Ting Hsin International Group).Given that Chinese consumers' exposure to PLB products is relativelynew. it appears that some have trouble in distinguishing between the dif-ferences. By virtue of their similarity, comparable brand alternatives maythus hurt each other in the selection process or. in other words, lead cer-tain brands to benefit from others that are similar, whereas still remainingfor future testing.

Additional analysis, after incorporating control variables in the model,shows that consumers with higher incomes and higher eduction tend tobuy national brand products.

Managerial Implication


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16 JOURNAL OF FOOD PRODUCTS MARKETINGto develop. The level of growth will remain strong, predicted at an annualaverage of 79c in constant value terms over the 2004-2009 periods(Chinese Statistical Yearbook, 2004), although the pace will slow downslightly in anticipation of the soft economy and the moderation in detnandin the developed regions of China. The north, northeast, and the south-west will witness dynamic growth.

Our findings about search versus experience attributes suggest severalkey managerial implications. Previous prescriptions for how nationalbrands should respond to PLB incursions have ptoperly stressed the tieedto add more benefits and value, and to raise the level of technology(Hoch, 1996). Our results suggest that it tiiight also be impotiant fornational brands fighting strong PLBs to raise the consumer's perceivedconsequences of making the wrong btand choice. We do this by creatingmore anxiety about the consumers' likelihood of making a wrong brandchoice. This may be accomplished by downplaying the "search" nature ofthe benefits while highlighting the "experiential" benefits involved.

Tactically, this could call for (1) additig unique ingredients to thenatiotial brand, (2) stressing the hedonic or setisoi-y betiefits of theseingredients, or (3) creating uncertainty about the quality of the manufac-turing or assembly process used by the PLB competitor. In essence, thenational brand should find every legititTiate way to create fear, uticer-tainty, and doubt in the consumer's mind about the quality equivalencebetween the national brand and the PLB in the hope that the resultinganxiety nudges the consumer to prefer the "tried and tru.sted" nationalbrand over the cheaper PLB.The implication made to retailers selling PLBs is exactly the opposite.Retailers need to put as tnuch objective infortnation about product itigre-dients and manufactitring quality as possible on the package label andreduce the uncertainty consumers feel about the quality they will experi-ence on consumption. Such itiformation should include specifications, butmay go beyond this by seeking seals of approval or other, third-partyendorsements.

LIMITATIONS AND DIRECTIONSFOR FUTURE RESEARCH

The major litnitation of our study concerns our measurement


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Huei-Chen Hsu and Chi-Shium M 17that these questions are able to capture the rich dimensionality of thesedecision processes. Second, we are able to provide only a snapshot ofongoing processes and not measures of the same process over time. Ourdilemma is that to test the hypothesized model we need to sample a largentuiiber in eqtiivalent ways. The previously mentioned concerns and limi-tations should be considered in understanding the meaning of our fitidings.

By collecting data only in several principal cities and investigatitig onlycertain samples, findings are not representative of all Chinese , in this coun-try where tegional differences abound. More consumer-level variables,including demographics, attitudes to PLBs, and other perceptions of prod-tict category characteristics, need to be modeled. Through our findings inthe study, future examination will be important to investigate the relation-ships among these different determinants of perceived risk to see if there isa better fitting iiuxlcl. It seems to be a crucial problem faced by a retailerthrough the expansion of the consumers' opportunity to find more favorableoptions in China.Faced with multi-brand choices, whether or not, Chinese customersemploy similar decision-making processes, as those sttidies used by NorthAmerican counterparts. "Effective international management of sales pro-motions is crucial to the success of many consumer prodticts/services. Itrequires an tinderstanding of how consumers ix'spond to specific promo-tions in different countries" (Dowling & Staelin, 1994, p. 120). Futurestudy of the effects of sales promotions (coupon, bundling price, etc.) onftK'al and competing brands in consumers' consideration remain to tested.Since modern Chinese consumers' purchase patterns may differdepending on where they live and the level of globalization experienced,it would be advisable to conduct more wide-scale studies. The consumers,especially the more educated and affluent tirbanites. may also base their

brand choice decisions on the information acquired through advertising(Zhou. Zhang, & Vertinsky. 2002). To attract stich affluent consumers,who presumably have gieater disposable income; retailers should haveadvertising strategy.

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APPENDIXDetails of measures (source Laurent and Kapferer, 1985)

Constructs Items*Consequences of Purchase

Mistake

"Search" vs- "Experience"Nature of Category

Price Consciousness

Degree of Quality Variationin Category

When 1 choose a bran d, it is not a big deal if I makea mistake.

One can't go too wrong if one buys the wron g brand.I feel upset if buying the w rong brand.I don't need to actually try a brand to know how g oodit isthe information of the product tells me everythingI need to know.For a category, the written description of the productcovers All the features that are important to howI choose a brand.

Before buying a product, I'll search for the information.Whe n buying a bran d, I look for the cheapest brandavailable.Price is the m ost important factor w hen I am choos inga brand.

I'll look tor its price before choosing a brand.All brands are basically the same in quality,I don't think that there are any significant differencesamong different brands in terms of quality.Brands do not vary a lot in terms of quality.There are only minor variations am ong brands in termsof quality.

*AII items we re m easured on 7-point scales w ith 1 : Disagree strongly an d 7: Agree s trongly.


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