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Bridge, focus, attack, or stimulate: Retail category management strategies with a store brand

Publication ,  Journal Article
Du, R; Lee, E; Staelin, R
Published in: Quantitative Marketing and Economics
December 1, 2005

We investigate a monopolist retailer's category management strategy where the main strategic decisions are how to horizontally position a store brand relative to the incumbent national brands and how to price the store and national brands for retail category profit maximization. We analyze a market composed of two consumer segments with differing tastes and heterogeneity with respect to willingness to pay and a product category consisting of two competing national brands and one store brand. We find that contrary to the existing literature, it is not always optimal for a retailer to position its store brand against the leading national brand; instead there are many situations where it is best to position the store brand close to the weaker national brand or to position it in the "middle" so it appeals to both national brands' target segments. In the process we identify four distinct category management strategies that a retailer can use with a store brand. In three of these the optimal store brand price is the brand's monopoly price, while in the remaining one strategy the price is lower. We also suggest an easy to implement means for a retailer to determine which strategy is best to use, depending on the particular competitive environment present before the introduction of the store brand and the relative quality of the store brand. We find that the store brand entry is most beneficial to the retailer when the national brands are moderately differentiated. Finally we show that introducing a store brand not only allows the retailer to garner a higher share of the channel profits through higher retail margins, but also often provides the retailer the benefit of increases in national brand unit sales as well as incremental sales from the store brand. © Sprnger Science + Business Media, Inc. 2005.

Duke Scholars

Published In

Quantitative Marketing and Economics

DOI

ISSN

1570-7156

Publication Date

December 1, 2005

Volume

3

Issue

4

Start / End Page

393 / 418

Related Subject Headings

  • Marketing
  • 3801 Applied economics
  • 1505 Marketing
  • 1402 Applied Economics
 

Citation

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Du, R., Lee, E., & Staelin, R. (2005). Bridge, focus, attack, or stimulate: Retail category management strategies with a store brand. Quantitative Marketing and Economics, 3(4), 393–418. https://doi.org/10.1007/s11129-005-2779-8
Du, R., E. Lee, and R. Staelin. “Bridge, focus, attack, or stimulate: Retail category management strategies with a store brand.” Quantitative Marketing and Economics 3, no. 4 (December 1, 2005): 393–418. https://doi.org/10.1007/s11129-005-2779-8.
Du R, Lee E, Staelin R. Bridge, focus, attack, or stimulate: Retail category management strategies with a store brand. Quantitative Marketing and Economics. 2005 Dec 1;3(4):393–418.
Du, R., et al. “Bridge, focus, attack, or stimulate: Retail category management strategies with a store brand.” Quantitative Marketing and Economics, vol. 3, no. 4, Dec. 2005, pp. 393–418. Scopus, doi:10.1007/s11129-005-2779-8.
Du R, Lee E, Staelin R. Bridge, focus, attack, or stimulate: Retail category management strategies with a store brand. Quantitative Marketing and Economics. 2005 Dec 1;3(4):393–418.
Journal cover image

Published In

Quantitative Marketing and Economics

DOI

ISSN

1570-7156

Publication Date

December 1, 2005

Volume

3

Issue

4

Start / End Page

393 / 418

Related Subject Headings

  • Marketing
  • 3801 Applied economics
  • 1505 Marketing
  • 1402 Applied Economics