European Management Journal 37 (2019) 117e128 Contents lists available at ScienceDirect European Management Journal journal homepage: www.elsevier.com/locate/emj Private label and manufacturer brand choice in a new competitive reality: Strategic directions and the future of brands Andres Cuneo a, b, *, Sandra J. Milberg b, Maria del Carmen Alarcon-del-Amo c, Pilar Lopez-Belbeze d a ESADE Business School, Universitat Ramon Llull, Av. Torre Blanca 59, Barcelona, Spain b ~ ez, Diagonal Las Torres, 2700, Santiago, Chile School of Business, Universidad Adolfo Iban c University of Murcia, Department of Economics and Management, Campus de Espinardo, 30100, Murcia, Spain d Universitat Autonoma de Barcelona, Campus de la UAB, 08193, Bellaterra, Barcelona, Spain a r t i c l e i n f o a b s t r a c t Article history: The significant expansion and transformation of private label brands (PLBs) in many categories and Received 8 July 2017 markets worldwide have dramatically modified the competitive reality of the marketplace resulting in a Accepted 24 May 2018 new configuration of the brand landscape. This phenomenon has also contributed to the emergence of Available online 29 May 2018 divergent brand choice patterns among consumers. By segmenting brand buyers on the basis of their brand choice behavior and psychographics, specifically lifestyles, we uncover four consumer segments Keywords: purchasing different mixes of brand typologies, namely, top-tier and second-tier manufacturer brands as Private label brands well as PLBs. Each segment exhibits different motives underlying its brand choice pattern. Identifying Manufacturer brands Brand choice these diverse and unique brand choice patterns and the drivers of them has meaningful strategic im- Market segmentation plications for retail managers on how to incentivize PLB choice and for manufacturer brand managers on Polarized consumption how to combat PLB growth. Finally, we discuss how the identification of consumer segments exhibiting Hybrid consumption distinct brand purchase patterns may have implications for the future of brands and brand management. Latent class analysis © 2018 Elsevier Ltd. All rights reserved. 1. Introduction in Europe and the United States on average have reached 17.1% (IRI, 2016), but this share is largely surpassed in a number of countries The marketplace has experienced dramatic changes in the such as Spain (52%), Switzerland (51%), the UK (46%), Germany competitive brand landscape, which has resulted in visible shifts in (45%), and France (33%) (PLMA, 2016). Moreover, their growth is consumer brand choice and consumption patterns. These changes also higher than that experienced by manufacturer brands (2.5% vs. are in part due to the penetration and transformation of private 1.5%) (Nielsen 2014). label brands (PLBs) across countries, industries, and product cate- The success of PLBs can in part be attributed to their trans- gories. Hence, the growth and evolution of PLBs present major formation during time. They are no longer perceived as low-cost/ competitive challenges to manufacturer brand managers and have low-quality products but rather in some cases as legitimate alter- important implications for understanding the future of brands. natives to manufacturer brands both in terms of quality and dif- A closer look at the penetration of PLBs is a testament of their ferentiation (Keller, Dekimpe, & Geyskens, 2016; Sivakumar, 2000; success and impact on the market. PLBs are present in more than terBraak, Dekimpe and Geyskens 2013). Moreover, throughout 90% of the categories of consumer packaged goods (CPGs) enjoying their development, PLBs have been able to gain consumer relevance broad product assortments, with high levels of visibility in hyper- and even to build brand equity across categories (Cuneo, Lopez, & markets, supermarkets, and discounters (IRI, 2016). Market shares Yague, 2012; Girard, Trapp, Pinar, Gulsoy, & Boyt, 2017). Presently, many PLBs, through their evolution, are successfully competing against top-tier manufacturer brand (TTB) and second-tier manu- facturer brand (STB) in similar territories of brand tangibility and * Corresponding author. ESADE Business School, Universitat Ramon Llull, Av. Torre Blanca 59, Barcelona, Spain. intangibility (Geyskens, Gielens, & Gijsbrechts, 2010; Kumar & E-mail addresses: andres.cuneo@esade.edu (A. Cuneo), sandra.milberg@uai.cl Steenkamp, 2007; Yang & Wang, 2010). (S.J. Milberg), mcarmenalarcon@um.es (M.C. Alarcon-del-Amo), Pilar.Lopez@uab. In conjunction with the penetration and transformation of PLBs, cat (P. Lopez-Belbeze). https://doi.org/10.1016/j.emj.2018.05.003 0263-2373/© 2018 Elsevier Ltd. All rights reserved. 118 A. Cuneo et al. / European Management Journal 37 (2019) 117e128 there has been an increasing trend in consumers' desire to seek choice patterns of TTB and STB as well as PLBs and to uncover everyday luxury products that provide small pleasures offering an motives that underlie these unique choice patterns. Specifically, we emotional salve in consumers’ daily lives (Silverstein, Butman, & incorporate consumer brand purchases and consumer psycho- Klara, 2006). Brands such as Nespresso, Godiva, and Haagen-Dazs graphics, in particular lifestyles, i.e., activities, interests, and opin- have successfully profited from this concept. These trends not ions (Plummer, 1974), to segment consumers. Lifestyles are only reshaped the competitive dynamics among brands but also considered to be one of the core psychographic variables given that changed the marketplace altering consumer choice options, they are patterns in which people live as well as spend time and thereby contributing to the emergence of divergent consumer money (Gunter & Furnham, 1992). In other words, they represent brand consumption patterns. how consumers express their values and personalities in their daily Marketers have commonly relied on socio-demographics, and lives (Steenkamp & Hofstede, 2002). Further, we incorporate socio- their beliefs that consumer brand consumption patterns were demographic variables as descriptors to profile the segments rather somewhat polarized to understand and segment the market. In than as the basis to segment consumers to improve the action- particular, on the one side are those consumers willing to pay a ability of the segments for brand managers. premium price for brands of high quality and image (TTBs) and on This research contributes to the literature and the current the other side are those consumers who are price-driven spending knowledge on PLB and manufacturer brand choices. Specifically, as little as possible for brands that deliver acceptable quality and although previous PLB studies examined a variety of consumer reliability (PLBs). As such, many firms have approached the market factors that influence PLB versus manufacturer brand choice, they using a two-tier strategy creating brands and retail formats that have not identified or explained divergent patterns, polarized and cater to the top and bottom ends of the markets. hybrid, of brand consumption, based on empirical research. In Currently, however, newer more hybrid patterns of brand choice addition, this research sheds light on the influence of psycho- can be observed in which the same consumer is buying an array of graphic variables, in particular consumer's lifestyles, on PLB versus brands between or within product categories (Ehrnrooth & manufacturer brand choice. Connecting consumer lifestyles to Gronroos, 2013; Silverstein & Butman, 2006; Silverstein & Fiske, brand purchase through segmentation provides both researchers 2008). For example, Silverstein and Fiske (2008) espouse the and managers with a better understanding of consumer motives viewpoint that there are situations in which the same consumer is underlying brand choice. While prior research findings are not buying brands from both the low-end and high-end of the market, easily translated into actionable marketing strategies to target that is, trading-up and trading-down between categories. In other consumers exhibiting divergent brand choice behavior, this study words, the same consumer may trade-up in some product cate- provides important and meaningful insights to brand managers of gories, buying, for example, a $5 Starbucks coffee while at the same both PLBs and manufacturer brands. Specifically, this research time may trade-down purchasing the cheapest alternative in some helps brand managers to better identify segments that may be other product categories. Further, others suggest that some con- receptive or averse to their brands and to more effectively tailor sumers engage in hybrid brand consumption, thus buying a variety their positioning, advertising messages, pricing, and innovation of brand typologies: TTB, STB, and PLBs within the same product strategies. Moreover, this research points to the limitation of category in search of the best value, i.e., good quality products at relying on consumer socio-demographics as a means to understand good prices (Ehrnrooth & Gronroos, 2013; Silverstein & Butman, consumer PLB and manufacturer brand buying behavior while at 2006). These patterns make predicting consumer brand choice the same time highlights the value of using socio-demographics as more difficult and challenging for managers to develop brand a means to profile consumer lifestyle segments to provide action- strategies. Therefore, it is imperative for managers to understand ability to the segments. Finally, this research provides a broader what the key drivers of these brand choice patterns are. lens to view and understand consumer choice of PLB versus The more traditional methods that rely on consumer socio- manufacturer brands across, between, and within product cate- demographics are not defining behavior as clearly as they used to gories. It is through this lens that this research helps to identify and in a marketplace characterized by both polarized and hybrid brand explain divergent consumer brand choice patterns of PLBs and consumption patterns (Gabriel & Lang, 2006; Silverstein et al., manufacturer brands, which can provide insights to both re- 2006). Successful strategies depend on the ability of firms to searchers and brand managers into the future trajectory of the identify patterns of consumption or buying behavior that can growth or decline of PLBs and manufacturer brands. explain the motives that underlie brand choice to implement sound strategies. One such basis that has proven to be effective for mar- 2. Literature review keters, both in terms of its accuracy to identify consumer segments and predict consumer choice, is consumer psychographics (He, Zou, A vast body of academic research on PLB focuses on under- & Jin, 2010; Martos-Partal, Gonzalez-Benito, & Fustinoni-Venturini, standing consumer factors that influence PLB choice (Erdem, Zhao, 2015). To better predict consumer brand choice and develop & Valenzuela, 2004; Pauwels & Srinivasan, 2004; Steenkamp, competitive brand strategies, using consumer psychographics, in Heerde and Geyskens 2010). Although there is extensive research particular lifestyle factors, may provide a more comprehensive and on consumer factors that influence consumers’ PLB choice, there richer understanding of consumers and buyers than that offered by has been little attention and empirical research focused on iden- socio-demographic variables (Ailawadi, Neslin, & Gedenk, 2001; tifying and understanding the divergent brand purchase patterns Lastovicka, Bettencourt, Hughner, & Kuntze, 1999). among PLBs and manufacturer brands as well as what may drive Thus, the objectives of this research are as follows: 1) to identify these purchase patterns. segments exhibiting divergent consumer brand choice patterns of Traditionally, marketers have relied heavily on socio- TTB, STB, and PLBs, 2) to explain some of the drivers of divergent demographics to understand and segment the market with re- brand purchase patterns among consumer segments using psy- gard to brand choice, which has resulted in two polarized tiers: chographics, 3) to develop actionable marketing strategies for consumers who are more price focused and those who are more brands to compete in each segment, and 4) to provide insights into quality/image focused. Price-focused consumers tend to be price the future landscape of brands. conscious, have a low level of quality consciousness, are not risk To meet these objectives, this research uses latent class analysis averse, and experience financial constraints (Ailawadi et al., 2001; (LCA) to identify segments exhibiting distinct consumer brand Urbany, Dickson, & Kalapurakal, 1996). Thus, their purchases are A. Cuneo et al. / European Management Journal 37 (2019) 117e128 119 primarily driven by finding the lowest prices in product categories, polarized brand choice behavior, researchers have eluded to what which in many cases are PLBs (Baltas and Argouslidis, 2007; Miquel, they call the new consumer who exhibits hybrid brand choice Caplliure, Perez, & Bigne, 2017). Consistent with this, research finds behavior (Roche et al., 2008; Silverstein et al., 2006; Silverstein & that differentials between PLBs and manufacturer brands are a Fiske, 2008). Hybrid brand choice behavior is when the same strong driver of PLB choice (Raju, Sethuraman, & Dhar, 1995). For consumer purchases both lower and higher end brands, mixing price-driven and price-conscious consumers, greater price differ- both premium and low cost. In other words, these new consumers entials between PLBs and manufacturer brands are important to may simultaneously be trading-up and trading-down between and increasing consumer demand for PLB (Miquel et al., 2017; Rubio & within product categories (Ehrnrooth & Gronroos, 2013; Silverstein Yagüe, 2009). Similarly, PLB positioning decisions made by retailers et al., 2006; Silverstein & Butman, 2006; Silverstein & Fiske, 2008). also moderate the benefits sought by shoppers and influence PLB The case in which a consumer may trade-up buying premium choice (Dawes & Nenycz-Thiel, 2013; Martos-Partal and Gonzalez- brands, e.g., TTB in one product category, and trade-down pur- Benito 2011). More specifically, when PLB positioning prioritizes chasing low cost brands, e.g., PLB in another product category, price, it incentivizes choice of price-driven consumers. clearly reflects that their choice of brand types depends on the On the other hand, those consumers who are more quality/im- product category, i.e., differs between product categories. For age focused are willing to pay a premium price for well-known example, the same consumer may trade-up in some product cate- brands to obtain higher quality products and associate them- gories, buying, for example, L'Oreal Paris shampoo, whereas in selves with a desired (higher) social status, which reduce functional another product category may trade-down purchasing PLB. and social risk perceptions, respectively (Ailawadi et al., 2001; Silverstein and Fiske (2008) argue that trading-up is more common Roche, Silverstein, & Charpilo, 2008). These consumers therefore in personally important, higher involvement product categories, are more inclined to purchase brands that are the most popular or whereas trading-down is more customary in less personal, lower best seller, the most expensive, and associated with a higher social involvement categories. Consumers' level of involvement is typi- status, and this typically corresponds to TTBs. Prior research on PLB cally higher in product categories in which consumption of prod- and manufacturer brand choice supports this. Specifically, research ucts and brands represents a symbolic form of expressing one's finds that perceptions of high quality and high status increase the values (Miquel, Caplliure, & Aldas-Manzano, 2002) and/or is asso- credibility of a brand which in turn decreases perceived risk ciated with financial, performance, and social risks (Batra & Sinha, (financial, functional, and social) and vice versa (Amrouche & Yan, 2000). On the contrary, consumption of products and brands in 2012; Gonzalez-Mieres, Maria Diaz, & Trespalacios, 2006). low-involvement product categories is related less to a consumer's Further, consumers are willing to pay premium prices for self-expression and is associated with less risk. Thus, some con- manufacturer brands because of superior quality cues relative to sumers are likely to assign different values to different product PLB (Mills, 1995; Sethuraman, 2000). Moreover, when quality cues categories in part based on their level of involvement. Hence, these between PLBs and manufacturer brands are considered equal, consumers are likely to trade-up in higher involvement, riskier consumers prefer manufacturer brands, especially top-tier because product categories by purchasing premium brands while trading- of the utilities derived from the intangible value delivered by them down by purchasing lower priced brands in lower involvement, such as social status (Sethuraman & Cole, 1997). This finding relates less risky product categories. to the symbolic nature of product/brand choices, as it suggests that Further, Silverstein and Butman (2006) and Ehrnrooth and consumers' assessments of the value of a product or brand go Gronroos (2013) suggest that some consumers also exhibit hybrid beyond functional benefits to include symbolic benefits such as brand choice patterns when they purchase a variety of brand ty- fulfilling emotional and aspirational needs as well as expressing pologies: TTB and STB as well as PLBs, within the same product one's self-concept (Belk, 1988; Vigneron & Johnson, 2004). Thus, category in search of the best value, i.e., good quality products at consumers often purchase products and brands to reinforce or good prices. They attribute this type of brand consumption in part express their self-concept. to changing attitudes toward frugality from a negative stereotype of In conjunction, research finds that the demand for PLB also being a stingy, “penny-pincher” to a more positive one of being a strongly depends on consumers' PLB quality and risk perceptions. smart shopper who pays less, especially when they do not perceive In many markets, PLBs are perceived as risky alternatives because material (e.g., quality) differences across brands. The consistent they are perceived to have inferior quality compared to manufac- quality improvements of PLBs are making them more comparable turer brands (Erdem et al., 2004; Hsu & Lai, 2008). Hence, re- to manufacturer brands and increasing their demand, thus rein- searchers find a strong positive association between consumers’ forcing the concept of smart shopping for those seeking the best perceptions of PLB quality and choice and negative association value ratio (price/quality) (Ailawadi et al., 2001; Nielsen 2010). In between perceptions of functional and social risks associated with conjunction, the higher price differentials between PLBs and buying a PLB (Batra & Sinha, 2000; Erdem & Chang, 2012; Martos- manufacturer brands constitute an incentive for consumers to Partal & Gonzalez-Benito, 2013). The above discussion on polarized choose PLB (Sethuraman, 2000; Steenkamp, Heerde and Geyskens brand purchase behaviors leads to research proposition 1. It is 2010). Thus, consumers seeking the best value ratio will purchase important to note that we develop research propositions instead of whichever brand offers it to them. On the basis of the above formal hypotheses that can be statistically verified because the reasoning regarding hybrid brand purchase behaviors, we state the method we use, LCA, is an exploratory technique that does not following research proposition: provide statistical tests to confirm specific hypotheses. P2. There are consumer segments that reflect diverse types of P1. There are consumer segments that reflect polarized brand hybrid brand choice behavior. Specifically, choice behavior. Specifically, a: Hybrid consumer segment choice between different product a: Polarized Price segment e price-driven consumers primarily categories e consumers' choice of manufacturer brands and choose PLBs, across product categories PLBs depends on the product category b: Polarized Quality/Image segment e quality/image-driven b: Hybrid consumer segment choice within all product cate- consumers primarily choose TTBs across product categories gories e consumers choose a mix of both manufacturer brands and PLBs within all product categories Although it is expected that some consumers will exhibit 120 A. Cuneo et al. / European Management Journal 37 (2019) 117e128 Crucial to developing a segmentation strategy is choosing the of penetration of PLBs and the frequency of purchase in durables is right variables to cluster consumers, as the segments resulting from considerably lower than in CPG categories, research indicates that a this process determine the marketing programs to be imple- number of the same factors influence both consumers brand mented. The search for useful explanatory variables for brand and choices of PLBs in CPG and durable product categories (Miquel product choice constitutes a major challenge in marketing. Socio- et al., 2017). Moreover, analyzing consumer brand choice in these demographic variables are widely used by marketing researchers two product categories allows us to explore different brand choice to segment markets owing to their ease of identifying and patterns between categories while at the same time within the measuring them and to the vast quantity of data available through same macro-category (i.e., personal care). Furthermore, these cat- numerous sources (Steenkamp & Hofstede, 2002). However, it is egories represent different levels of consumer involvement profiles important to recognize that these variables provide limited and risk perceptions, which are found to be significant factors explanatory power of consumer choice, as they do not reveal the influencing brand choice (Batra & Sinha, 2000; Kapferer, 2008). motives underlying consumption decisions. Although segmenta- Owing to its hedonic meaning (beauty and care), shampoos tion schemes based on socio-demographic variables may help generally represent higher involvement and higher perceived risk companies to categorize consumers, they do not guide firms in product categories than deodorants, which are associated more shaping their product offerings to groups who are most likely to with a utilitarian meaning. Therefore, the results from this study purchase them (Yankelovich & Meer, 2006). In fact, research sug- may generalize to a wider number of product categories that share gests that consumer socio-demographics including income are not similar characteristics, as those discussed above, with the cate- defining behavior as clearly as they used to in a marketplace gories of shampoos and deodorants. Additionally, these categories characterized by the penetration of PLBs and the obtainability of are tracked through Kantar's Beauty Panel, which, unlike other everyday luxury goods to a wide swath of consumers (Gabriel & panels of CPG categories that capture household behavior, records Lang, 2006; Gumbel & Levenson, 2007; Silverstein & Butman, an individual's brand choice behavior in conjunction with lifestyle 2006). factors that may underlie his or her individual choices. Finally, One basis that has proven to be more effective for marketers in Spain was chosen as the country setting for this research, as the terms of its abilities to both identify consumer value segments and share of PLBs in Spain is the largest in the world (52%). Moreover, predict consumer choice is consumer psychographics (He et al., the growth of PLBs has been significant in the last few years, thus 2010; Martos-Partal et al., 2015). Consumer psychographics there- allowing us to better understand the impact of PLBs in the fore are especially relevant to consider in highly competitive mar- marketplace. kets where a deeper understanding of brand choice behavior The total amount of purchases reported by all panelists is clas- constitutes a way to find new sources of differentiation to develop sified into three typologies of brands: TTBs, which stand for leading meaningful marketing strategies that socio-demographic variables manufacturer brands (57.6%), STBs, which stand for secondary do not provide (Ailawadi et al., 2001; Miquel et al., 2017). This manufacturer brands (14.5%), and PLBs (27.8%). Following Ailawadi, discussion on segmentation variables leads to the following Gedenk, and Neslin (1999) and Chintagunta and Prasad (1998), a research proposition: panelist was included in the sample if he/she bought any of the three typologies of brands more than ten times during the period of P3. Consumer psychographics explain brand choice patterns be- the study. The usefulness of selecting consumers on the basis of a tween segments better than consumer socio-demographics. given number of purchases allows for the identification of pur- chasing patterns that are not detectable when including consumers with fewer purchases (Gupta, 1991; Peral, Rondan, & Diez, 2011). In 3. Method sum, the final sample consists of 1505 panelists who purchased shampoo and deodorants 30,995 times for a period of 150 weeks. 3.1. Sample and data description The data we use in this research were obtained from a consumer 3.2. Analyses panel collected by Kantar Worldpanel in Spain. It contains data of purchases of shampoos and deodorants made by a panel of 1505 To analyze the data and identify segments of brand buyers, we Spanish consumers across Spain selected through a stratified use LCA. LCA attempts to explain the observed association between random sampling for a period spanning 150 weeks, from January a set of factors by introducing unobservable underlying classes or 2012 to December 2014. For each purchase, the brand, type of segments. The main assumption of LCA is local interdependence, product chosen by the panelist, and the price paid are identified. stating that the objects of the same latent class share a common Additionally, there is a description of each panelist in terms of 34 joint probability among observed variables (Vermunt & Magidson, lifestyle items (see Appendix) and four socio-demographic traits: 2005). LCA is a useful technique for market segmentation analyses, age, gender, social class, and number of inhabitants in the region which provides a number of benefits to researchers. Among the where they live. benefits, it allows to incorporate variables with different mea- The two product categories: shampoos and deodorants are surement scales (ratio, ordinal, and nominal) and independent chosen for several reasons. Products from both categories are variables that can be used to describe or profile rather than to purchased frequently; thus, the results from the study can illustrate define the different classes or segments of consumers. LCA has the stable brand choice patterns during time. Additionally, the brand ability to assign individuals to segments based on the probability of assortment within these categories is similar compared to many belongingness to each segment, thus overcoming the restriction of other CPG product categories, thus offering consumers a wide array a deterministic allocation, which happens with other techniques of brand choice options: TTB, STB, and PLBs. In categories such as such as nonhierarchical cluster analysis (Dillon & Kumar, 1994). durables, the penetration rate of PLBs currently is significantly To conduct the LCA, several preliminary steps, i.e., exploratory lower; therefore, it may be more difficult to assess the influence of and confirmatory factor analyses, are required that provide and PLBs on choice shares in those categories. However, while the rate validate inputs into the LCA. Specifically, first an exploratory factor A. Cuneo et al. / European Management Journal 37 (2019) 117e128 121 Table 1 Description of lifestyle factors. Factor 1: This factor is related to how consumers become informed about beauty and personal care products. They rely on advertising such as Relying on media posters, billboards, radio ads, press, and brochures and read articles in the press to become informed about brands and products. Factor 2: This factor refers to how consumers stick to the brands they know to avoid risk. They are reluctant to switch brands and products Avoiding risk (not trying new when they do not know the brand and/or its performance. things) Factor 3: This factor indicates the importance that consumers give to a brand as a distinctive symbol either for themselves (self-image) or to Concern for social image show-off (self-reflection). Factor 4: This factor encompasses items related to consumers' attitudes to try new beauty and personal care brands and products. Novelty seeking Factor 5: This factor includes items related to the consumers' preferences for PLBs when they buy beauty and personal care products. Preference for PLBs in beauty products Factor 6: This factor considers items reflecting consumers' sensitivity toward price, i.e., price as the most important variable when choosing High price sensitivity beauty and personal care products. Factor 7: This factor considers items that indicate the importance that consumers give to prices and deals. They look for sales; are sensitive to Searching for best prices and deals special promotions; and are active in comparing prices across brands and products, especially in beauty, cosmetics, personal care, and clothing categories. Factor 8: This factor encompasses items related to how consumers perceive similarities between PLBs and manufacturer brands in terms of Parity between PLBs and quality. manufacturer brands. Factor 9: This factor includes items related to consumers' perceptions regarding their hectic life and lack of free time to do things and/or caring Time constrained for self. Factor 10: This factor includes items related to the importance that consumers give to their personal care and own appearance. Caring for oneself analysis (EFA) was conducted to identify dimensions determining than 0.05. In all cases, the coefficients provided evidence of the lifestyles, based on 34 items collected by Kantar's panel capturing overall model's goodness of fit. consumers' attitudes, interests, and opinions. Second, confirmatory Finally, reliability and validity were tested. Reliability is sup- factor analyses were conducted to establish the reliability and ported given that the Cronbach's alpha values are higher than 0.6 validity of the constructs as well as to confirm the factor structure. (Malhotra, 2008), composite reliability (CR) is higher than 0.7 (Nunnally & Bernstein, 1994), and the average variance extracted 3.3. Exploratory factor analysis (EFA) (AVE) is higher than 0.5 (Hair et al., 1998) in all factors. Convergent validity was verified given that t scores obtained for factor loadings An EFA was conducted using principal components analysis were significant (p < 0.01). Further, the size of all the standardized (PCA) to explore the dimensions determining lifestyles. Based on loadings are higher than 0.50 and the average of the item-to-factor the analysis, the KaisereMeyereOlkin (KMO) value was found to be loadings are higher than 0.70 (see Appendix) (Anderson & Gerbing, 0.77, and Bartlett's test of sphericity was highly significant 1988). Therefore, this confirms that the latent variables explained (c2 ¼ 5129.206; d. f. ¼ 630; p ¼ 0.000), in both cases indicating the observed variables (Hair et al., 1998). Discriminant validity was adequacy of the sample. After assessing the quality of the data tested in two ways. First, according to the confidence interval test, through the factor analysis and applying varimax rotation for where none of the 95% confidence intervals of the individual ele- interpretation, ten factors were obtained based on the 34 lifestyle ments of the latent factor correlation matrix contained a value of 1.0 items, and these account for 66% of the symptomatic variance (see (Anderson & Gerbing, 1988). Second, the shared variance between Table 1 for factor descriptions). pairs of constructs is always less than the corresponding AVE (Fornell & Larcker, 1981). 3.4. Confirmatory factor analysis (CFA) A CFA framed with structural equation models (SEMs) was 3.5. Latent class analysis (LCA) conducted. Given that the data did not comply with the hypothesis of normality (55.24 for the normalized estimation of the Mardia The variables used as input for the LCA were the percentages of coefficient) suggested by (Bentler, 2005), robust maximum likeli- each brand typology purchased by panel members and the 10 hood (Bentler, 1995; Chou, Bentler, & Satorra, 1991) was used for lifestyle factors. To profile the resulting segments, four socio- estimations. The significance of each item included in the model is demographic variables were used as covariates: age, gender, so- accomplished by screening the significance of estimates. In our cial class, and number of inhabitants in the region where they live initial model, the weights of all variables were significant; however, plus the average price paid for the two products. The segments or according to Hair, Anderson, Tatham, and Black (1998) and classes were defined following the principles of maximum internal Steenkamp and Geyskens (2006), the mean of the loads should also coherence, i.e., homogeneity within the group, and maximum be higher than 0.5. Therefore, four items were eliminated, as they external differentiation, i.e., heterogeneity between the groups. did not meet these criteria, specifically two items corresponding to The first step was to choose the optimal number of segments. factor 2, one item to factor 7, and one item to factor 10. Initially, six models were estimated, from one (no heterogeneity) to After analyzing the significance of the parameters of the revised six (maximum heterogeneity). The goodness of fit of the model was model, the goodness of fit of the model was tested. Upon analysis, assessed by using the Bayesian Information Criterion (BIC), which the c2/df ratio was lower than 2.0, the nonnormed fit index (NNFI) allows the identification of the model with the least number of and the comparative fit index (CFI) were greater than 0.9, whereas classes that best fits the data. Hence, the model with the lowest BIC the rooted mean square of error approximation (RMSEA) was less is considered to be the best model (Vermunt & Magidson, 2005). 122 A. Cuneo et al. / European Management Journal 37 (2019) 117e128 Table 2 Latent class segment indicators. Segment 1 Segment 2 Segment 3 Segment 4 Wald p-value R2 Price Driven Image Reflectors Category Discerners Smart Shoppers Segment Size 26.39% 24.33% 22.27% 27.02% (1) TTB Shampoo (%purchased) 23.78% 88.15% 94.03% 49.35% 896.7693 4.40E-194 0.7519 STB (2) Shampoo 2.83% 6.57% 1.57% 27.91% 110.3944 9.00E-24 0.3980 (%purchased) PLB (3) Shampoo 73.39% 5.28% 4.40% 22.74% 590.2793 1.30E-127 0.7745 (%purchased) TTB (1) Deodorant 36.11% 90.26% 44.60% 41.90% 564.584 4.80E-122 0.4384 (%purchased) STB (2) Deodorant 9.86% 7.21% 29.85% 29.95% 97.0241 6.80E-21 0.2190 (%purchased) PLB (3) Deodorant 54.03% 2.52% 25.54% 28.15% 277.9159 6.00E-60 0.3235 (%purchased) (1) Top-tier brands (2) Second-tier brands (3) Private Label Brands Factor coefficients F1: Relying on media 2.6866 2.6907 2.5887 2.9392 6.7679 0.08 0.0274 F2: Avoiding risk 3.0110 3.4371 3.1149 3.2352 9.8277 0.02 0.0429 F3: Concern for social image 1.8035 2.2209 1.8725 2.1782 19.3862 0.00023 0.0687 F4: Novelty seeking 3.1138 2.7882 2.9955 3.1774 11.0412 0.012 0.0350 F5: Preference of PLB 2.4654 3.0568 2.7834 3.0657 27.2671 5.20E-06 0.0754 F6: High Price sensitivity 3.0771 3.0133 3.0675 3.0969 0.0222 1 0.0012 F7: Searching for best prices and deals 3.5306 3.4891 3.4176 3.598 1.1813 0.76 0.0068 F8: Parity between PLB and MB 2.6153 2.9305 2.9394 3.0526 11.0488 0.011 0.0286 F9: Time constrained 3.2655 3.2617 3.1472 3.2986 1.5597 0.67 0.0039 F10: Caring for self 2.4833 2.3468 2.531 2.6818 2.1866 0.53 0.0128 Note: Factor values represent mean values for each segment. Values close to 1 indicate lower levels of a construct, whereas values close to 5 indicate higher levels of a construct. A value of 3 indicates a neutral response. Boldface indicates the most relative importance by segments. Grey color indicates the lowest relative importance by segments. 4. Results: latent class analysis Additionally, they purchase some TTBs (24% in shampoos and 36% in deodorants) while purchasing only a limited number of STBs (3% The best model, i.e., the one that minimizes the BIC value, in shampoos and 10% in deodorants). Interestingly, while they will contains four latent class segments. The four latent class segments buy TTBs when offered at the lowest discounted prices, they rarely identified for the entire sample of buyers of shampoos and de- afford STBs with the same consideration. odorants are labeled as follows: segment 1, “Price Driven”; segment They are called Price Driven as the main driver for this segment is 2, “Image Reflectors”; segment 3, “Brand Category Discerners”; and to buy products at the lowest price. They are highly price sensitive segment 4, “Smart Shoppers”. Table 2 provides a description of each (F6) and always seek the best prices and deals (F7). Members of this of the four latent class segments. Specifically, it shows the share of segment are not concerned about social image (F3) or any other each typology of brands purchased by each segment and the mean risks (F2); hence, price becomes the main driver of brand choice. score for each of the factors. It also shows the Wald statistic, used to Although they do not perceive parity between PLBs and manufac- evaluate the statistical significance of the set of estimated param- turer brands (F8), they mainly opt for PLBs unless they find eters. As can be observed, factors 1e5 and 8 are significant, opportunistic price deals in TTBs. Price-Driven consumers pay the meaning that they discriminate the segments (Vermunt & lowest prices of all segments in both shampoos and deodorants. Magidson, 2005). Consumers in this segment become informed through media (F1) The four latent class segments are similar in terms of size, and are open to novelty in the market (F4). Although Price-Driven although there are some variations in size. However, these seg- consumers do not perceive parity between manufacturer brands ments are distinct in terms of the motivations and brand choice and PLBs and express little concern for social image by primarily behaviors. The description and interpretation of the four distinct opting for PLBs, the cheapest alternatives in the market reinforces latent class segments of PLB and manufacturer brand buyers are as the notion that they are mainly motivated by pure price. Brand follows: choice results from this segment lend support to proposition 1a in Segment 1 e Price Driven. This is the second largest segment of that price-driven consumers exhibit polarized buying behavior buyers, encompassing 26.39% of the sample. The majority of in- primarily choosing PLBs, the lowest price alternatives across dividuals in this group are middle class women aged between 42 product categories. and 49 years, living in larger cities with more than 30,000 in- Segment 2 e Image Reflectors. This is the third largest segment habitants. Consumers in this segment reflect a polarized con- of buyers, encompassing 24.33% of the sample. The majority of sumption pattern, as they pay the lowest prices in both product individuals in this group are middle class women aged between 46 categories, primarily purchasing PLBs. Specifically, when purchas- and 53 years, living in medium-sized cities with inhabitants be- ing shampoos and deodorants, the largest share of the brands they tween 10,000 and 30,000. Interestingly, this is the segment with buy correspond to PLBs (73% in shampoos and 54% in deodorants). the highest percentage of men (24%). When purchasing shampoos A. Cuneo et al. / European Management Journal 37 (2019) 117e128 123 Table 3 Latent class segments covariates e Socio-demographic profiles. Intercept Segment 1 Segment 2 Segment 3 Segment 4 Wald p-value Price Driven Image Reflectors Category Discerners Smart Shoppers 2.0316 3.2612 1.4822 2.7119 22.8945 4.20E-05*** Covariates Prices Average Price Shampoo (per 100 g) (1) Mean 1.73 2.32 2.28 1.89 47.7468 2.40E-10*** Average Price Deodorant (per 100 g) (1) Mean 2.40 3.08 2.71 2.74 7.0902 0.069* Socio-demographics Age* <42 12.41% 13.16% 12.65% 36.15% 2.617 0.45 42e45 22.60% 13.30% 23.34% 9.68% 46e49 30.25% 27.27% 20.43% 28.92% 50e53 16.75% 25.60% 20.38% 6.75% >54 17.99% 20.66% 23.20% 18.50% Mean 48.518 49.5255 49.3266 46.5798 Gender Man 11.38% 24.70% 10.89% 9.76% 4.4047 0.22 Woman 88.62% 75.30% 89.11% 90.24% Social class Lower class 10.70% 10.42% 18.87% 11.28% 4.9486 0.84 Lower middle class 21.02% 23.76% 25.48% 26.08% Middle class 46.67% 40.64% 32.04% 41.21% High and upper middle class 21.61% 25.18% 23.61% 21.43% No. of Inhabitants* <2000 6.65% 8.21% 11.73% 11.18% 7.8104 0.05** 2000e5000 20.57% 16.37% 28.33% 26.49% 5000e10,000 13.53% 18.24% 17.24% 23.45% 10,000e30,000 28.76% 32.09% 25.83% 23.76% >30,000 30.50% 25.09% 16.87% 15.12% Mean 3.5589 3.4948 3.0777 3.0516 Notes: Significance levels: *p < 0.1; **p < 0.05; ***p < 0.001. (1) Prices in V *These intervals were estimated by the Latent Gold statistical program, as the variables introduced were numeric. and deodorants, the vast majority of the brands they buy corre- account for the largest share (45%), consumers also consider other spond to TTBs in both categories (88% in shampoos and 90% in typologies of brands e STBs (30%) and PLBs (26%). They are called deodorants). This segment also purchases a small percentage of Brand Category Discerners as the purchase behavior of this segment STBs (7% in shampoos and 7% in deodorants) and a marginal varies depending on product categories. They are willing to pay amount of PLBs (5% in shampoos and 2% in deodorants). This more in some categories, for example, in shampoos, whereas in pattern of brand purchases reflects a predominately polarized other categories (deodorants), they exhibit more price sensitivity purchase pattern because consumers in this segment primarily (F6) and search for the best prices and deals (F7). The most choose higher quality/image brands, i.e., TTBs, lending support to remarkable characteristic of this segment is that while they are risk Proposition 1b. averse (F2), they do not show concern for social image (F3), and as Image Reflectors pay the highest prices in both product cate- such, the risk aversion is most likely related to functionality. Hence, gories. They are called Image Reflectors as this segment's brand the motivation of this segment is to find in some categories the choices are driven mainly by their interest in avoiding risk (F2) and brand option that offers the best price-to-quality ratio, whereas in high concern for their social image (F3). Image Reflectors stick to other categories in which they may have greater involvement, the TTBs and show the lowest propensity to seek novelty (F4), reluctant motivation is to trade-up purchasing high-quality TTBs that reduce to try new products and brands. They rely on the media to become functional risk. Thus, the brand purchase pattern exhibited by the informed (F1). Although perceiving some parity between PLBs and Product Category Discerner segment lends support for Proposition manufacturer brands (F8), they opt almost exclusively for TTBs. In 2a in that brand choice differs between product categories, i.e., in sum, consumers brand purchases in this segment are primarily deodorants they purchase the full array of brand typologies, driven by risk reduction and image reassurance that TTBs offer, as whereas in shampoos they predominantly purchase TTBs. they are generally perceived to be of higher quality and associated Segment 4 e Smart Shoppers. This is the largest segment of with higher social images. Thus, TTBs better satisfy the needs of this buyers, encompassing 27.02% of the sample. The highest percent- segment, as they deliver functional and more importantly symbolic age of individuals in this group is middle class women aged less value to consumers. than 42 years, living in cities with inhabitants between 2000 and Segment 3 e Brand Category Discerners. This is the smallest 5000. When purchasing shampoos and deodorants, they purchase segment of buyers, corresponding to 22.27% of the sample. The a good share of the full array of brand typologies in both product majority of individuals in this group are middle class women aged categories. Specifically, they buy TTBs (49% shampoos and 42% more than 42 years, living in small-sized cities with inhabitants deodorants), STBs (28% in shampoos and 30% in deodorants), and between 2000 and 5,000, and medium-sized cities with in- PLBs (23% in shampoos and 28% in deodorants). They are called habitants between 10,000 and 30,000. When purchasing shampoos Smart Shoppers, as this segment seeks good quality products, but at and deodorants, consumers show asymmetric buying behavior in the same time, they are highly price sensitive (F6). Therefore, they the two categories. In shampoos, the vast majority of buyers pur- search for the best prices and deals (F7). Although the main motive chase TTBs (94%), but with regard to deodorants, although TTBs of Smart Shoppers is to find good quality at good prices, members of 124 A. Cuneo et al. / European Management Journal 37 (2019) 117e128 Main drivers of brand choice Price Quality/Image Brand Purchase behavior Polarized Segment: Segment: Price-driven Image age reflectors Hybrid Segment: Segment: Smart buyers (1) 1) Category discerners (2) C Source: Own elaboration (1) Smart buyers pay special attention to the price/quality ratio (1) Depending on the category, category discerners can show smart shopping or quality-driven behaviors Fig. 1. Segment classification according to brand purchase behavior and drivers of brand choice. this segment are risk averse (F2) and as such rarely buy brands they and quality options: TTB, STB, and PLB. This change in the do not know (F2). Smart Shoppers also show concern for their social marketplace has contributed to the emergence of diverse consumer image (F3); consequently, they buy TTB and STB. brand consumption patterns: polarized behavior and hybrid However, as they perceive quality parity between manufacturer behavior. brands and PLBs (F8), they also purchase a considerable share of Although academic research on PLB is prolific, there remains a PLBs when they are not able to find TTB or STB on promotion or lack of knowledge of consumers' diverse brand choice patterns with special deals. Additionally, this segment seeks product novelty among manufacturers and PLBs as well as of the motives that un- (F4) from the brands they know (F2), and although being time- derlie these choice patterns. Moreover, previous research findings constrained (F9), they devote time to media messages to become are not easily translated into actionable marketing strategies to informed about products and brands (F1). The brand choice results target consumers. To provide a remedy this, this research identifies indicate that consumers in this segment exhibit hybrid buying consumer segments based on consumers' brand choice patterns behavior choosing a different array of brands within each of the and lifestyle factors that motivate manufacturer brand and PLB product categories in search of the best deals, thus lending support choice. This is of critical importance to brand manufacturers to to proposition 2b. combat PLB growth and for retailers to incentivize PLB consump- Table 3 shows the profile of each segment in terms of socio- tion. In addition, incorporating consumer socio-demographics to demographic variables. Profiling segments is useful for marketers profile consumers enhances the segments' actionability in terms of to make market segmentation actionable. The Wald statistic in- the development of tailored product offerings and communication dicates that both the average price paid for 100 g of shampoo and strategies aimed at influencing consumers’ brand choices. deodorant and the number of inhabitants in the region where they Results from our analysis reveal four distinct consumer seg- live are significant. Interestingly, age, gender, and social class are ments that buy different mixes of brand typologies (namely, TTB, nonsignificant variables, meaning that while these variables are STB, and PLB) for different reasons. Specifically, we observe con- helpful to describe the segments, they do not discriminate between sumption patterns that are best characterized as polarized, almost segments contributing no added value as bases for segmenting exclusively purchasing one typology of brands, specifically Price PLBs, thus lending support to proposition 3 that consumer psy- Driven buying predominantly PLBs and Image Reflectors buying chographics, in particular lifestyles, explain brand choice patterns TTBs. The presence of these two segments reflects and supports the between segments better than consumer socio-demographics. characterization of a more traditional view of segment types. More specifically, the segment, referred to as Price Driven, exhibits 5. Discussion polarized brand purchase by primarily opting for PLBs, the cheapest alternatives in the market reinforcing the notion that the main The successful penetration and evolution of PLBs across product driver of their brand choice is price. The second segment identified categories and countries have dramatically modified the competi- is Image Reflectors whose product purchases can also be best tive dynamics between brand manufacturers and retailers, thereby described as polarized in that they pay the highest prices, primarily becoming a main source of managerial concern. This phenomenon purchasing one typology of brands, i.e., TTBs. Their brand purchases has also radically altered the brand landscape across product cat- are motivated by risk reduction and image reassurance that TTBs egories in terms of choice options for consumers, both in terms of offer, as they are generally perceived to be of higher quality and the range of brands available on the shelves and in terms of price associated with higher social images. A. Cuneo et al. / European Management Journal 37 (2019) 117e128 125 In addition to segments that exhibit polarized brand choice opportunities for PLB managers to build on this advantage by patterns, our research identifies segments that exhibit distinct exploring the development of new tiers of PLB. For manufacturer types of hybrid brand choice patterns. Specifically, we find two brands to attract this segment, they will have to aggressively segments: Product Category Discerners who display a pattern of combat PLBs through discounts and/or promotional activities or hybrid brand choice that depends on the product category and introduce value brands. However, there are drawbacks in imple- Smart Shoppers who purchase a full array of brand types in both menting these strategies. Aggressive promotional activities by TTBs product categories. Brand Category Discerners purchase almost may attract Price-Driven consumers and may also damage the value exclusively TTBs in certain product categories (shampoos) while of the brand in other segments and erode profitability. Introducing they also purchase substantial amounts of all three-brand typol- value brands might also seem an effective strategy but not feasible, ogies in other categories (deodorants). The pattern of brand choices as existing PLBs generally occupy this space and retailers would not of Category Discerners is somewhat consistent with those described be open to introduce manufacturer brands challenging the position by Ehrnrooth and Gronroos (2013), Silverstein and Butman (2006), of their own brands. Therefore, while some limited tactical efforts and Silverstein and Fiske (2008). Specifically, consumers in this can be directed toward Price-Driven consumers, they should not be segment trade-up by purchasing premium high-quality brands in a strategic priority for TTBs. higher involvement product categories (shampoos) to reduce per- Regarding Image Reflectors, there are a number of strategies that formance risk while simultaneously trading-down by purchasing PLB and manufacturer brand managers could implement to attract brands in typically lower involvement, low-risk categories (de- this consumer segment. PLB managers can design brand strategies odorants) that optimize the best price-to-quality ratio. Although focusing on developing symbolic value by delivering emotional these consumers do not trade-down to purchase brands solely benefits. This could be accomplished by changing the value prop- based on the absolute lowest price, they are driven to purchase ositions of existing PLB toward a more intangible territory or by brands that offer a good value at a low price. trading-up by developing premium PLB under different brand Finally, Smart Shoppers consist of consumers who display a names. This segment is the bread and butter for TTBs because Image hybrid brand purchase pattern buying a full array of brand types Reflectors are concerned with status and prestige, and TTBs typi- across both product categories. Their main motive is to buy good cally build their positioning on these associations. Therefore, quality products at good prices; therefore, they buy whichever manufacturer brands should reinforce their positioning through brands satisfy this motive. However, because Smart Shoppers also communication strategies and product innovation. are concerned about social image, they prefer to purchase manu- Further, for PLB brand managers to attract Brand Category Dis- facturer brands, especially TTBs, but because price is a crucial cerners in higher involvement, riskier product categories, they motivator, they will not purchase manufacturer brands when there should focus on improving the performance of their products to are no deals; instead they will purchase PLB. See Fig. 1 for the reduce risk perceptions. In low involvement, low-risk product classification of the four segments based on brand purchase categories, PLBs should maintain meaningful price differentials and behavior and the main drivers of brand choice. reinforce the positioning of value for money. On the contrary, Another noteworthy finding is that linking consumer lifestyles manufacturer brands should reinforce consumers’ perceptions of to brand purchase behavior provides a better understanding of the the parity gap with PLBs, especially in high-involvement, high-risk brand choice patterns and motivations driving consumer purchases product categories, as consumers are known to prefer TTBs as a of PLBs versus manufacturer brands than socio-demographic vari- mean to reduce risk. Additionally, even in low-involvement product ables. Although consumer socio-demographics are useful to profile categories, TTBs may attempt to convince Product Category Dis- the segments and increase actionability in terms of informing cerners that quality matters. marketers about who the consumers are in each segment and Finally, Smart Shoppers suggest strategic avenues to both PLB where and how to reach them, this study indicates that these managers and manufacturer brand managers. For example, PLB variables do not discriminate between segments. To summarize, managers should maintain a significant price gap between their the results reveal diverse and distinct brand choice patterns and brands and manufacturer brands. Further, PLB should move beyond psychographics, specifically lifestyles factors that underlie the a pure functional value proposition of their PLB offerings, as this patterns among the four consumer segments. Identifying these focus can limit growth within this segment. Instead, given that unique segments and understanding some factors that motivate Smart Shoppers are concerned about their social image, PLB man- consumers’ brand choices among them provides meaningful stra- agers should start to explore less functional territories by devel- tegic insights to brand managers and into the future prospects for oping and communicating intangible brand promises that are brands. linked to symbolic value. For manufacturer brands trying to compete based solely on quality, this may not be fruitful. Instead, 5.1. Strategic directions for brand managers they should strengthen their differentiation based on the intangible aspects of their brands, reinforcing, for example, brand status. Traditionally, brand manufacturers have responded to the threat Additionally, manufacturer brands may want to selectively imple- of PLB decreasing costs, cutting prices, increasing promotional ac- ment price promotional activities to reduce perceptions of the price tivities, introducing value brands, and even manufacturing PLBs gap with PLBs, but at the same time, they need to be careful not to (Ailawadi & Keller, 2004). Although these tactics seem to be suc- diminish the equity of their brands. cessful with some consumer segments, they are not effective with others. Segmenting brand buyers based on their brand choice 5.2. The future of brands patterns and lifestyles reveals additional segments with somewhat a unique choice behavior of brand typologies, thus providing The growth and transformation of PLBs across categories and valuable insights to PLB and manufacturer brand managers. countries have been impressive in the last decades, and it is likely For Price-Driven consumers, PLBs have an important advantage that will continue during time. According to a forecast from compared to manufacturer brands. PLBs should maintain signifi- Rabobank (2012), by 2025, PLBs are expected to reach a global cant price differentials with manufacturer brands. There may be market share of 50% across all CPG categories. This trend can be in 126 A. Cuneo et al. / European Management Journal 37 (2019) 117e128 part attributed to retailers’ use of a multitier strategy to target new penetration of PLBs are lower in durables than in CPG categories, consumers (Geyskens et al., 2010). Interestingly, premium PLBs are research indicates that a number of the same factors influence the fastest growing brands in the market (Dobson & Chakraborty, consumers’ choices of PLBs in both of these two types of product 2009) providing further evidence that retailer brands should be a categories (Miquel et al., 2017). However, with that being said, to great concern to manufacturer brands, as they will increasingly increase generalizability and confidence in the findings of this pose a competitive threat at every level of the market. This devel- study, future research could continue exploring consumer brand opment not only is expected to continue affecting retailer shelf choice patterns in other product categories both within and outside space allocation among TTB, STB, and PLB but will also significantly the domain of CPG, which vary in terms of consumer involvement. modify the competitive dynamics between brand manufacturers In addition, this research examines brand purchase patterns in and retailers. Spain; to extend our findings, future research should investigate Owing to the speed of growth and transformation of PLBs, a consumer brand consumption patterns in additional countries. number of marketers have sounded the alarm about the future of Further, PLB managers, to maximize growth, are now focusing manufacturer brands. Our results can contribute to this conversa- much deeper on multi-tier branding strategies extending beyond tion by providing a perspective on how understanding consumer price and quality tiers, by also expanding PLB brand promises into segments exhibiting unique brand choice patterns may provide more intangible, symbolic territories offering emotional benefits to some insights into the future brand landscape. Results from our those segments that are not driven primarily by price. Therefore, it research suggest that the brand landscape will continue to polarize would be interesting and beneficial to examine the effects of PLBs between top-tier manufacturers and PLBs. Three out of the four on brand choice in product categories in which PLBs are using segments that we identify are purchasing significant shares of TTBs multi-tier strategies. Finally, an important goal of this research was and/or PLBs. STBs are losing traction as supported by the relatively to uncover and identify consumer segments based on their brand low choice shares they exhibit in the majority of the consumer purchase patterns and lifestyle variables that may drive these segments in our study. They are being assaulted from both high- patterns. With this goal in mind, we used LCA, an exploratory and low-end brands, thus becoming squeezed between these two approach, to assign individuals to segments based on the proba- brand typologies. The growth of PLBs will most likely be at the bility of belongingness to each segment rather than imposing a greater expense of STBs, as they seem to lack consumer traction more restrictive method, which tries to force consumers into pre- evidenced by the greater switching behavior toward PLB than that specified segments based on a deterministic allocation that occurs toward STBs (Hoch & Lodish, 1998). Therefore, the pressure on STBs with other techniques. As our research has revealed four distinct will continue to increase and the challenge for them will be to find a segments, future researchers could employ other methodologies to competitive space either for consumers (demand side) or retailers reconfirm the segmentation scheme found in this study. (supply side). In other words, second-tier manufacturers will have to decide whether to focus on brand development or alternatively 6. Conclusions to expand their economies of scale tapping into PLB production. Although our results suggest that PLBs do constitute an impor- In conclusion, this research makes valuable contributions in that tant threat to manufacturer brands, especially for STBs, TTBs it reveals divergent consumer behavior types exhibiting unique continue to play an important role for a significant number of brand consumption patterns that both support and augment those consumers. There are still many consumers who are attracted to the previously characterized in the literature and underscores the high value that TTBs deliver, being it functional and/or symbolic. importance of understanding the motives that underlie these diverse For example, Image reflectors care for status and prestige; hence, brand purchase patterns. While academics have discussed trends in they will continue to purchase the symbolic value that TTBs deliver. consumer brand purchase behavior, to the best of our knowledge, Similarly, Category Discerners, although not being image driven, there is no empirical research that uncovers consumer segments they are concerned about functional risks and prefer TTBs, which exhibiting these distinct brand purchase patterns and a set of unique are generally associated with higher quality; therefore, they are drivers that underlie these patterns. Thus, this research makes perceived as less risky than PLBs. In addition, given the chance, important and meaningful contributions to the current knowledge of Smart-shoppers prefer to purchase TTBs at affordable prices. brand choice behavior. Moreover, the research findings provide sig- Therefore, TTBs are likely to continue to be relevant and to garner nificant insights to brand managers and have important implications significant market share. However, it is critical for TTBs to continue for management practice. Specifically, the results provide strategic investing in innovation and building consumer value, especially if directions for managers of different brand typologies to survive and PLBs persist in developing premium products and building sym- flourish in the changing competitive reality. Certainly, the strategic bolic value. Supporting this, our research indicates that consumers moves that both manufacturer brands and PLBs make in the near who perceive parity between manufacturer brands and PLBs future will determine the array of brands from which consumers can increasingly opt for PLBs. Thus, the strategies that both manufac- choose and the future trajectory of brands. Hence, the findings of this turer brands and PLBs develop and employ will certainly determine research contribute to the dialogue among academics as well as the future trajectory of brands in the marketplace. managers about the future of brands. 5.3. Limitations and future research Acknowledgements It is important to note that there are some limitations of this We would like to thank Kantar Worldpanel (Spain), especially research and interesting directions for future research. Given that Ms. Raquel Arribas (Director of Institutional Relations), for this research considers purchases of products from CPG categories providing us with access to the panel data. Additionally, we thank that are purchased in high volume and frequently, a question re- professors Ronald C. Goodstein (Georgetown University), Monica mains as to whether study results generalize to other product Silva (Pontificia Universidad Catolica de Chile), Ana Valenzuela categories. For example, purely hedonic or durable products, where (ESADE Business School) and Leonardo D. Epstein (Universidad de the rate of purchases is significantly lower and the levels of los Andes) for their helpful comments on the manuscript. This involvement and risk tend to be considerably higher. Although the research was supported by the Research Center for International level of involvement is higher and the purchase frequency rates and Competitiveness UAI, SOC 1105 (Conicyt Chile). A. Cuneo et al. / European Management Journal 37 (2019) 117e128 127 APPENDIX 1. Measurement Items: Reliability and validity Factors Standardized Cronbach's Composite Average variance factor loading* alpha reliability (CR) extracted (AVE) F1: Relying on media I tend to notice posters and billboards. 0.62 0.85 0.85 0.50 I tend to read magazines specializing in fashion and beauty. 0.70 I often listen to ads on the radio. 0.59 I normally buy beauty and personal hygiene products because I've seen them advertised. 0.69 Advertising helps me know what products are available. 0.65 I frequently look at ads in magazines and newspapers. 0.80 I like receiving informational brochures to learn about products and brands. 0.65 F2: Avoiding risk (not trying new things) If I like a brand, I rarely change or try a new one. 0.59 0.78 0.86 0.60 I prefer to be faithful to the brand I normally buy rather than try something I'm not very sure of. 0.80 I am very prudent when it comes to trying new brands. 0.79 I rarely buy brands if I'm not completely sure about how they'll work. 0.69 F3: Concern for social image I buy brands that are in style. 0.60 0.82 0.80 0.50 I like for others to see the brand of clothing I'm wearing. 0.64 I tend to buy clothing from exclusive brands. 0.74 When buying clothes, the brand I buy is important to me. 0.83 F4: Novelty seeking In terms of beauty and personal care products, in general, I like to try new brands. 0.89 0.90 0.92 0.85 In terms of beauty and personal care products, I generally like to try new products. 0.96 F5: Preference of PLBs in beauty products In cosmetics and personal care products I prefer selective brands than supermarket brands. 0.66 0.64 0.70 0.54 When I buy cosmetics or personal care products is important which brand I buy. 0.80 F6: High price sensitivity When it comes to buying clothes, price is the most important factor. 0.94 0.80 0.81 0.68 When it comes to buying a beauty/personal hygiene product, price is the most important factor. 0.69 F7: Searching for best prices and deals For beauty/personal hygiene products, I like to take advantage of the promotions offered on 0.77 0.70 0.72 0.56 packages or labels. When I buy beauty and/or personal care products, I like to take advantage of promotions in which I 0.72 get extra amounts of the product or a different product. F8: Parity between PLBs and manufacturer brands In beauty and personal care products, private label brands are made by name brand manufactures. 0.89 0.92 0.93 0.88 In beauty and personal care products, private label brands offer the same quality as name brands. 0.98 F9: Time constrained It seems that I never have free time. 0.66 0.74 0.75 0.51 I'm a very busy person and I often eat fast and on the go. 0.88 I don't have time to take care of myself. 0.55 F10: Caring for self I tend to complete my habitual skin care treatment with other products (serums, masks, etc.). 0.91 0.72 0.78 0.64 I dedicate time and effort to conditioning my hair. 0.67 *Robust t value sig. at 1% level. Robust goodness of fit index: Satorra-Bentler c2 (361 df) ¼ 491.152; c2/df ¼ 1.36; NNFI ¼ 0.945; CFI ¼ 0.955; RMSEA ¼ 0.032. References (pp. 13e36). 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