Perceptions Of Generic Products

An executive summary for managers and executives can be found at the end of this article

Perceptions of generic products: a macro and micro view Gerard P. Prendergast and Norman E. Marr

Introduction The brand name of any product has always been considered important. Branding has enabled producers to develop consumer loyalties, heighten consumer awareness and develop extensions of the brand. Thus, branding is an essential element of marketing strategies. The proliferation of generic products, therefore, has been both surprising and controversial. Several titles are used interchangeably in the literature to describe generic products. In American literature, generic products may be described as “no-name” or “un-brand”. In the UK they may be described as “plain packs” or “no-frills”. The different names aside, the features of generic products are their austere packaging and lack of a “recognized” brand name. Significant price differential

The major attraction of generic products to the consumer is the significant price differential between generic products and their branded equivalent. This lower price is made possible through cost savings created by reduced packaging and promotional expenses. The benefits of this lower price were well recognized during the recessionary times of the late 1970s and early 1980s which stimulated frugality among buyers. However, consumers sometimes believe that this price discount is traded-off with product quality. The research issue of interest therefore is how do consumers perceive the performance of a range of individual generic products in terms of value, quality and packaging, and how important do consumers consider value, quality and packaging to be for these same products? This is an important issue because it may be found, for instance, that some generic products are performing well in terms of quality, but consumers do not consider quality to be important for that product. While a number of studies have looked at consumers’ perceived performance of generic products, no study has related these perceptions to the importance which consumers attach to various aspects of generic products. In addition, previous studies on generics tend to focus on the product category of generics as a whole, rather than examining a range of individual generic products. In addition to identifying general perceptions of generic products, this paper seeks to explore how consumers see a range of individual generic products performing in terms of quality, value and packing, and the amount of importance which consumers attach to quality, value and packaging when buying these products – in generic form or otherwise. Previous research on consumer perceptions of generic products In the event, where there is limited or no information regarding the product, price might well serve as an indicator of the quality of the product. More often than not, consumers have perceived the price and quality of a product as being in tandem with each other. An expensive good is usually perceived as being of superior quality and vice versa. Applied to generics, the positive relation between price and quality seems to be confirmed, as generics are usually associated with low price as well as low quality (Faria, 1979;

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Lichtenstein et al., 1993). However, while the price-quality relationship is not disputed, the actual or perceived quality of generic grocery products has been a major issue covered in past studies (Szymanski and Busch, 1987). In a study by Dietrich (1978) conducted through telephone interviews, 70 to 72 percent of generic buyers perceived the quality of generics to be of equal value to private or national brands. Only 28 to 30 percent rated generics as a lower quality product. This result was supported by Murphy and Laczniak (1979) whose study in the same year revealed that 74 percent of their interviewees rated the quality of generics as comparable to other brands. Only a minority of 7.3 percent considered generics as being low in quality. Given these results, it might seem that the actual perceptions of generics tended to be of a favorable nature. However, the results of these studies must be qualified to a certain extent because they were conducted at a time when generics were just being introduced in the market whereby the novelty of these products may have colored perceptions. Enhanced consumer perceptions of private label

A year later, a study by Wheatley (1980) found that the introduction of generic products had actually enhanced consumer perceptions of private label or neo-generic products. A positive correlation was also found to exist between price and the perceived difference in quality. Hence, when the difference in quality was perceived to be great, there was a higher tendency for consumers to purchase the higher priced brand. In other words, consumers will only accept generics when the perceived difference in quality in comparison to branded counterparts is deemed to be negligible. As the novelty of generics began to wane, so too the consumer perceptions of their quality began to ebb. Dietrich (1978) and Murphy and Laczniak (1979) found that the percentage of buyers who perceived generics to be of a comparable quality to national brands declined to only 50 percent in 1984. This was a clear indication that the perceived quality of generics was declining when compared to national and private labels (Bellizzi et al., 1981; Rosen and Sheffet, 1983). As the previous discussion indicates, perceptions of the quality of generics have changed dramatically over time. One can only speculate as to why this is the case: it may be due to the fact that there was a steady decline in the sales of generics after 1982, leading to less consumer exposure to generics which resulted in more negative perceptions, while on the retail front, less demand meant less effort was made to ensure the quality of generics or further promotion of these products.

16 to 20 percent saving

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On the issue of perceived price differential, generic product buyers claim to achieve a saving of between 16 to 20 percent from not purchasing national brand items (Dietrich, 1978). Burck (1979) reported in Fortune magazine that the price of a typical generic product ranged from between 31 to 74 percent of its branded counterpart. Perceptions of the lower price of generics were also evidenced in the study by Murphy and Laczniak (1979). In their structured telephone questionnaires, generics were perceived to be priced at a lower level by two-thirds of the respondents. In addition, 27 percent found that the prices were very much lower than those of competing brands. Many other studies have also found that low price was a major incentive for generic consumers (McGoldrick, 1981; Neidell et al., 1984; Wheatley, 1980; Yucelt, 1987). The price differential is made possible by the absence or reduction of any advertising cost involved in the marketing of generics. Consumers sometimes cite other reasons for the price differential, such as JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 2 1997

lower packaging and labeling costs, and also lower product quality of generics (Dietrich, 1978; Murphy and Laczniak, 1979). Other reasons

Apart from value/price/quality factors, other reasons may account for generic purchases. For instance, generics were purchased by 19 percent of the respondents in Yucelt’s (1987) study by virtue of the availability of suitable package size. Since generics are usually packaged in large sizes, this catered directly to the needs of consumers from larger households. This group of consumers found that the low price of the generics coupled with packaging that came in the right size to fulfill their demands, was an attractive offer. A brief look at previous research cannot provide by itself a clear prediction of the future of the generic concept, whether in packaged grocery goods or beyond. In New Zealand, generic products still have a strong presence. In many other countries, however, private label products have replaced generic products in many categories, especially those categories which do not compete directly with national brands (Hoch and Banerji, 1993). It is probably no coincidence that the emergence of private label products has coincided with a decline in literature relating to generic products, especially in the 1990s. Yet generic products should not be cast aside too quickly. One of the major influences in the future health of generics is going to be consumers’ perceptions of various aspects of individual generic products, and how much importance they attach to these aspects. Previous research tends to look at generic products as a product category, rather than looking at specific product types within the generic group. This is an important omission in the literature since the perceptions of various generic products may vary. The objective of the research in this paper is to overcome these deficiencies by identifying: •

Who buys generic products.

•

Consumer perceptions of generics in general and, in addition, their perception of the value, quality and packaging of a range of individual generic products.

•

The amount of importance which consumers attach to the value, quality and packaging of these products – in generic form or otherwise.

Such information will allow both manufacturers and retailers to appreciate that consumers have varying perceptions for each individual generic product, and it may therefore be incorrect to draw broad conclusions about consumer perceptions of the generic product category as a whole.

Nationwide retail survey

Methodology To achieve the research objectives, a nationwide mail survey was conducted in New Zealand. In order to ensure the respondents were indeed grocery shoppers, a number of shoppers’ clubs and associations were contacted. Shoppers Bonus Club satisfied the purpose of this study as it provided a database of some 30,000 grocery shoppers which had in the recent past spontaneously responded to a one-page questionnaire included in a widely read television magazine (The Listener). A total of 1,000 names were randomly selected from this database. The questionnaire used semantic differential scales to identify respondents’ evaluations of a series of attitudinal statements as well as the performance of generic products on the three key variables of value for money, quality and convenient package size. The questionnaire was pre-tested for reliability and validity on a small group of pilot consumers and then sent to the nationwide sample with a cover letter

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and freepost envelope. A response rate of nearly 70 percent was achieved (677 usable returns). This high response might be best explained by the fact that the survey population were members of a shoppers’ club, and would therefore have a natural interest in the topic of research. The respondents closely matched New Zealand population statistics in terms of geographical representation. However, it should be recognized that the intention of the sample was to obtain a collection of respondents who were representative of New Zealand grocery shoppers rather than the New Zealand population in general.

Generic product categories

Results Generic products: who buys them? As a background to the study, respondents were given a list of generic product categories and were asked in which of the categories they had ever bought generic products. The categories included: •

personal care/hygiene (e.g. shampoo, soap),

•

paper products (e.g. toilet paper, paper towels, tissues),

•

detergents (e.g. bleach, washing powder),

•

canned foods (e.g. soup, jam, meat),

•

frozen foods (e.g. pastries, fish, vegetables),

•

dry goods (e.g. cereals, biscuits, rice),

•

ground coffee,

•

tea.

The results are shown in Table I. Only 14.8 percent of respondents had never purchased generic products in the past. Of those who had, most had purchased on several different occasions and in different product categories. In fact, 73 percent of the total sample stated having performed generic purchases in more than one of the product categories. There was a significant relationship between household income (see the Appendix for sample demographics) and the purchase of generics. In particular those in the higher household income brackets were less likely to purchase generics than those in the lower household income brackets (χ2 = 32.11 with 16 df). There was, however, no significant relationship between age and the purchase of generics, occupation and the purchase of generics, or weekly household grocery expenditure and the purchase of generics. As a measure of more recent purchasing behavior, respondents were asked which of the categories they had ever bought in generics in the past month. The results are shown in Table II.

Number of generic categories bought None Single Multiple Total

Frequency 100 83 494 677

Percentage 14.8 12.3 73.0 100

Table I. Frequency of generic product (category) purchase 96

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Number of generic categories bought in past month None Single Multiple Total

Frequency 330 135 212 677

Percentage 48.7 19.9 31.3 100

Table II. Frequency of generic product (category) purchased in past month

When asked about purchases which had occurred in the last month, almost 20 percent of respondents had performed a generic purchase in one of the categories, while another 31.3 percent had performed generic purchases in more than one of the categories. This demonstrates a high rate of penetration of generic products, with more than half (51.2 percent) of respondents having purchased at least one generic good as recently as the past 30 days. The results also indicated a significant relationship between the purchase of generics in the last month and respondent’s age (χ2 = 19.48 with 8 df). In particular, it seems that older age groups are more likely to make multiple generic purchases. There was also a significant relationship between the purchase of generics in the last month and household income (χ2 = 35.9 with 16 df) with those in lower income groups more likely to have purchased generic products in the past month. However, there was no significant relationships between the purchase of generics in the past month and the respondent’s occupation or weekly grocery expenditure.

Assessing possible attitudes

Perceptions of generic products: a macro view In order to assess possible negative attitudes consumers might hold toward generic products, a series of 11 attitude statements were presented for assessment to the respondents. They were asked to read the statement and indicate their reaction to them using a five-point scale ranging from strongly agree to strongly disagree. A “don’t know” option was also made available, distinct from the neutral so as not to aggregate those who genuinely could not answer from those who wished to express indifference. Table III shows the frequency of response along each part of the scale, with the corresponding sample percentage given in parentheses. The final column in Table III shows the mean scale score for each statement (ranging from 1 = strongly agree to 5 = strongly disagree). Note that the calculation does not include any of the “don’t know” responses. In addition, during the research with consumers generic products were referred to as “plain pack products.”

“Smart shopper”

The first statement, that “someone who buys plain packs is a smart shopper,” gathered more neutral responses (46 percent) than it did agreement (34 percent). Only 17 percent of respondents disagreed with this statement. “People would not like friends to know that they buy plain pack products” received overwhelming disagreement with 68 percent either disagreeing or disagreeing strongly. About 20 percent of respondents were neutral and only 8.5 percent agreed in any way with this statement. Respondents, therefore, were not embarrassed by the thought of their friends seeing them with generic purchases.

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Statement Strongly agree Agree

Neither agree nor disagree Disagree

Disagree strongly

Don’t know

Mean

Someone who buys plain pack products is a smart shopper

56 (8.4)

172 (25.7)

307 (46.0)

100 (15)

12 (1.8)

21 (3.1)

2.75

People would not like friends to know that they buy plain pack products

5 (0.7)

52 (7.8)

128 (19.2)

334 (50)

120 (18)

29 (4.3)

3.80

Plain pack products are just as good as other products available

64 (9.6)

257 (38.5)

153 (22.9)

88 (13.2)

14 (2.1)

92 (13.8)

2.53

Plain pack products cannot be trusted to be as good as other products

13 (2.0)

100 (15.0)

134 (20.1)

286 (42.9)

59 (8.9)

74 (11.1)

3.47

It is worth paying more for a product with a name on it

12 (1.8)

101 (15.2)

132 (19.8)

289 (43.4)

122 (18.3)

10 (1.5)

3.62

4.29

It would be embarrassing if my neighbors saw my shopping bags full of plain packs

5

21

43

298

297

5

(0.7)

(3.1)

(6.4)

(44.5)

(44.4)

(0.7)

Plain packs are for poor families

6 (0.9)

19 (2.8)

46 (6.9)

289 (43.2)

304 (45.4)

5 (0.7)

4.30

Plain packs are a lot cheaper than other products

26 (3.9)

276 (41.4)

143 (21.5)

122 (18.3)

11 (1.7)

88 (13.2)

2.68

It would be very suitable to serve plain pack biscuits to guests

47 (7.1)

326 (48.9)

184 (27.6)

71 (10.7)

18 (2.7)

20 (3.0)

2.52

Plain pack products are made from cheap ingredients

2 (0.3)

40 (6.0)

121 (18.1)

268 (40.2)

46 (6.9)

190 (28.5)

3.66

Table III. Response to attitudinal statements

Plain packs just as good as others

The next statement was that “plain pack products are just as good as other products available.” This statement resulted in 48.1 percent support and only 15.3 percent disagreement: 23 percent had a neutral response. This result leans in favor of generics being as good as other products. Only 17 percent agreed that “plain pack products cannot be trusted to be as good as other products” while 50.9 percent disagreed and 20.1 percent were indifferent – which demonstrates consistency with the previous statement. Again, this result leans in favor of generics being as good as other products. When asked to assess whether “it is worth paying more for a product with a name on it,” respondents in the main disagreed with a total of 60.7 percent either disagreeing or disagreeing strongly. Nearly 20 percent were neutral and 17 percent thought a brand name was a sound investment.

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The next statement implied that “it would be embarrassing if my neighbors saw my shopping bag full of plain packs.” To this, almost 90 percent responded by the negative. Only 10 percent of respondents were indifferent to this rather provocative statement and only 3.9 percent found it to relate to their attitude. The “plain packs are for poor families” statement received a strong denial with 87.6 percent disagreement, 10 percent indifferent responses and only 3.7 percent support. When asked to rate whether “plain pack products are a lot cheaper than other products,” 45.3 percent of respondents agreed to some extent; 21.5 percent were neutral while 13.2 percent simply did not know. A total of 20 percent of respondents disagreed and therefore implied that they thought plain pack products to be more expensive, equally priced or only slightly cheaper than their branded counterpart. More than 50 percent of respondents agreed or agreed strongly that “it would be very suitable to serve plain pack biscuits to guests.” At the same time, a rather large proportion (27.6 percent) of respondents had neutral feelings toward this statement. The mean scale score, if computed for each statement, indicates that the intensity of the reaction varied from quite strong (with an average of 4.2 and 4.3, respectively, for the statements probing if it would be embarrassing to be seen with a shopping bag full of plain pack products or whether plain pack products were for poor families) to quite mild as in the case of the suitability of serving plain pack biscuits to guests. Did not entertain negative attitude

In summary, most of the respondents did not seem to entertain any negative attitude with respect to plain pack products. In some cases they expressed quite strongly that they did not believe these were subproducts and that they would not object to being identified as plain pack purchasers. Perceptions of generic products: a micro view Performance of individual generic products on value, quality and packaging. The respondents were given a list of common generic products, including: •

rice,

•

shampoo,

•

ground coffee,

•

tissues,

•

washing powder,

•

canned soup,

•

cereals,

and were asked to rate them along three variables using a semantic differential scale. The three variables were: (1) value (1 = good value and 5 = poor value), (2) quality (1 = high quality and 5 = low quality), (3) convenient package (1 = convenient and 5 = inconvenient). JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 2 1997

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Table IV ranks the relative performance of each product on each attribute. The first figure in each cell shows the mean score (out of 5) the respondents gave the product for each attribute. Figures in parentheses show how each product ranked on that particular attribute, relative to how the other products ranked on the same attribute. Tissues and rice ranked highest

In terms of value, quality, and package convenience, tissues and rice ranked the highest. At the other end of the scale, shampoo and ground coffee lost out in terms of quality and value. In fact shampoo received the lowest ranking in all three attributes. When using ANOVA to compare the mean responses from various demographic groups there were significant differences at the 95 percent and 99 percent levels of confidence. In particular, both the older age groups and lower income groups tended to give generic products significantly higher ratings in terms of quality. Importance of value, quality and packaging. Respondents were then asked to consider the importance of value, quality and packaging when purchasing the same products (in generic form or otherwise) using a scale of 1 to 5 (where 1 = very important and 5 = very unimportant). Results are shown in Table V. Table V shows that quality and value were the most important attributes. Packaging is the least most important attribute for all products except ground coffee. Given that packaging scored around 2.5 for most products, consumers consider this attribute to be neither important nor unimportant in their purchase decision.

Generic product Rice Shampoo Ground coffee Tissues Washing powder Soup Cereal

Value rating

Quality rating

Package rating

1.666 (2) 2.341 (7) 2.265 (6) 1.608 (1) 2.035 (4) 2.091 (5) 1.848 (3)

1.549 (2) 2.515 (7) 2.486 (6) 1.477 (1) 2.218 (5) 1.960 (4) 1.713 (3)

1.614 (1) 2.121 (7) 1.693 (3) 1.643 (2) 1.853 (6) 1.830 (5) 1.761 (4)

Table IV. Generic product performance rating for each attribute

Product

Rice Shampoo Ground coffee Tissues Washing powder Soup Cereal

Value rating

Quality rating

Package rating

1.643 (5) 1.626 (4) 2.530 (3) 1.670 (7) 1.499 (2) 1.654 (6) 1.485 (1)

1.448 (6) 1.347 (3) 1.327 (1) 1.724 (7) 1.404 (5) 1.365 (4) 1.339 (2)

2.523 (7) 2.506 (6) 2.413 (5) 2.190 (1) 2.347 (2) 2.373 (3) 2.400 (4)

Table V. Importance of product attributes 100

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When using ANOVA to compare the mean responses from various demographic groups significant differences were found at both the 95 percent and 99 percent levels of confidence. In particular the older age groups and lower income groups tended to place more importance on quality and value for money than the other demographic groups. Comparing performance with attribute rankings

It is interesting to compare the attribute performance rankings with the attribute importance rankings, i.e. Table IV with Table V. When it comes to product value, tissues receives the highest rating, yet when it comes to the importance of value, it is considered least important for tissues. When it comes to product quality, tissues receive the highest rating, and yet quality is considered least important for tissues. When it comes to packaging, rice receives the highest rating, yet packaging is considered least important for rice. In other words some generic products are performing well in areas which are of relatively less importance, and some generic products are performing poorly in areas which are of relatively more importance. Purchase probability. Respondents were also provided with a comprehensive list of products which could potentially be offered in a plain pack form and they were asked to rate the likelihood of purchasing such a product, using a five-point scale ranging from very likely to very unlikely. A “don’t know” option was provided, as some of the products do not yet enjoy a plain pack offering on the market and therefore could be difficult to assess for the respondents. Given the previous results it is not unexpected that the products likely to be purchased in plain pack form were paper products (82 percent likely or very likely), rice (74 percent likely or very likely), sugar (77.8 percent likely or very likely), flour (71 percent likely or very likely) and washing powder (60.6 percent likely or very likely). More marginal were shampoo (57.1 percent), cereals (56.8 percent), fruit juices (53.4 percent), mustard (53.7 percent), jams (54.2 percent) and soups (43.2 percent). Some products were definitely rejected in a plain pack version. These were coffee (59.8 unlikely or very unlikely), tea (55.9 percent), cake mixes (53.7 percent), canned vegetables (60.3 percent), shampoo (57.1 percent), cosmetics (77.6 percent), and clothing (43.7 percent).

High market penetration

Discussion There is a high market penetration of generic products, with just over half of the respondents in this study having purchased a generic product recently. It is clear that the purchase of generics is negatively related to household income. This finding is consistent with that found in studies by Faria (1979) and Dietrich (1978). This would seem to make sense, since one of the primary purposes of generic products is to “do away” with the frills and therefore be more attractive to the cost-conscious consumer. A similar argument explains why, historically, generic products have enjoyed their best times during recessionary periods. However, Neidell et al. (1984), Strang et al. (1979) and McEnally and Hawes (1984) found that generic buyers tended to come from middle income groups rather than being concentrated at the lowest end. They argued that this was the case because the lower income consumers did not like the lower status which the purchase of generics conferred on them. The age of the consumer also seems to be a factor influencing the purchase of generics, with older consumers more likely to do so. The rationale for this

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is more difficult to understand. It may be that older people are less brand conscious, or that their limited pensions make them a more cost-conscious consumer. Findings by others do not suggest that older people tend to be the main purchasers of generic products. For instance, some have found that middle-age consumers make the largest purchase of generics (Dietrich, 1978; Kono, 1985; Yucelt, 1987). On the other hand, Cunningham et al. (1982) and Granzin (1981) found that generic buyers were more likely to come from the young to middle-aged group. Further compounding the issue, other studies (Faria, 1979; Kono, 1985; McGoldrick, 1981; Murphy and Laczniak, 1979) noted that, since generics were served in a wide range of product categories, people of all ages could consume and therefore age had become a nonsignificant factor in segmenting the generic market. Occupation, on the other hand, did not seem to relate significantly to the purchase of generics, despite Strang et al. (1979) finding that homemakers were more likely to purchase generics than other occupational groups. Strang’s finding may have been due to the fact that homemakers have traditionally done most of the shopping. At the time of Strang’s research less women had entered the workforce and therefore presumably tended to classify themselves as homemakers. In the 1990s, however, women tend to be represented in all occupational groups. Positive attitudes

Respondents generally had positive attitudes toward generic products. They saw generics as being equivalent to branded products in many ways. In other words, when it comes to market positioning, generic products are seen as a realistic alternative to branded products, rather than being an option which is only chosen by those who, due to financial limitations, have no other choice. When it came to consumers’ perceptions of specific generic products, it was interesting to note that the older age groups and lower income groups tended to give generic products consistently higher quality ratings. In addition, there appears to be a relationship between each generic product’s value rating and quality rating, i.e. those products which are considered of low value are also considered of low quality, and those products considered of high value are also considered of high quality. Value for money is a vital factor encouraging consumer acceptance of generic products, as has been found in the studies of Cunningham et al. (1982), McGoldrick (1981), Neidell et al. (1984), Wheatley (1980) and Yucelt (1987). The quality aspect is also important, as traditionally this has been a weak area for generics. Based on studies by McGoldrick (1981) and Yucelt (1987) only around 30 percent of generic consumers deem that generic products meet their quality requirements – even though they also view generics as offering excellent value for money. Thus some consumers are prepared to trade-off quality for price savings. It would appear that the less standardized generic products (such as shampoo and ground coffee) are the ones which have the dubious quality perceptions whereas the more standardized products (such as rice and tissues – which are, in the writers’ opinion, likely to have less quality variation) score highly on quality. It is not surprising therefore that rice and tissues were the most likely products to be purchased in generic form. Tissues have traditionally been a strong seller in the generic field since they are an indigestible and therefore, in comparison to generic foods, the failure of the product poses virtually no physical risk to the consumer. Do consumers consider value, quality and packaging to be important when buying these products – in generic form or otherwise? For all the products,

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except tissues, quality is the most important attribute. This was especially so for ground coffee (which, interestingly, was ranked sixth out of the seven generic products when it came to consumers’ perception of quality). Value was seen as being least important for tissues (which was ranked first out of the generic products when it came to consumers’ perception of value). Regarding packaging, convenient packaging is more important for tissues and washing powder. While tissues scored well when it came to consumers’ perception of the convenience of generic packaging, washing powder was ranked a disappointing sixth out of seven. Quality and value more important

Of all the demographic groups, the older and lower income groups considered quality and value significantly more important than the other demographic groups. Given that these same groups also gave a high rating to the quality and value of generic products, it is not surprising that they are among the most frequent purchasers of generic products. Do generic products perform where it counts? It seems the more basic generic products are scoring highly on the three attributes which are relatively less important for these products: quality, value and packaging. The less standardized generic products, such as coffee and cereal and washing powder, perform relatively poorly when it comes to quality, value and packaging – despite the fact that quality, value and packaging are more important for these types of generics. Summary Generic products have a high level of penetration in the New Zealand market. Older consumers and consumers on lower incomes find generic products particularly attractive because they offer the high quality and value that they are seeking in these products. For these groups, therefore, generic products are performing where it counts. In general consumers have positive views toward generic products. When looking within the generic product category, however, some generic products are not performing as well as others when it comes to consumers’ perceptions and demands. This is especially so with the less standardized products such as shampoo and ground coffee which tend to be perceived as being lower in quality and value than the more standardized products such as rice and tissues.

Two main issues

Managerial implications and recommendations Essentially there are two main issues which management needs to address in relation to generics. One is consumer retention and the other is consumer attraction. In terms of consumer retention, some consumers believe that generic products are performing where it counts, and marketers need to reinforce this belief. Since generic products typically receive below-the-line budgeting in promotion in order to support the low price objective, manufacturers of generic products need to place more emphasis on the product and distribution elements of the marketing mix. This would involve ensuring the consistency of quality levels of generics, and ensuring retail support. However, while it is important to ensure consistency of quality and low prices, it is also important not to result in a large divergence between price and quality as most consumers still maintain a “high price equals high quality” belief. In terms of consumer attraction, it is clear that not all generic products have positive consumer perceptions among all consumer groups. In

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particular, the less standardized generic products tend to generate the less positive beliefs among consumers. In order for marketers of generic products to attract segments of the market outside the older and lower income groups, and therefore to extend the life-cycle of generics, it may be necessary to embark on a program which enhances consumer perception of the quality and value of these less standardized generic products. Perhaps the only way for marketers to enhance consumer perception of these items is to encourage the consumers to trial them. Thus incentives may be provided for the “doubting Thomas” consumers to shift from branded products to generics. Typically this may involve short-term sales promotion activities such as “two for the price of one”, competitions or free samples in supermarkets themselves. In addition, marketers should be featuring the high-performing generic products (such as rice and tissues) in order to attract consumers to the less popular products in the generic group. The central challenge for marketers is to convince the consumer that even the less standardized generic product is the same as, if not better than, its branded equivalent. If marketers can convince consumers of this, then consumers will be willing to make that first trial with generics, which in turn may lead to eventual adoption. Fluctuating life-cycles

In conclusion, generic products have experienced fluctuating life-cycles on an international basis. In the New Zealand context, generic products have the chance to widen and prolong their market presence providing marketers pay sufficient attention to individual generic products, rather than pursuing blanket strategies for the generic group. References and further reading Bellizzi, J.A., Krueckeberg, H.F., Hamilton, J.R. and Martin, W.S. (1981), “Consumer perceptions of national, private and generic brands”, Journal of Retailing, Vol. 57 No. 4, pp. 56-70. Burck, C.G. (1979), “Plain labels challenge the supermarket establishment”, Fortune, Vol. 99, pp. 70-6. Chernatony, L. (1988), “The fallacy of generics in the UK”, Marketing Intelligence & Planning, Vol. 6 No. 2, pp. 36-8. Chernatony, L. (1989), “Marketers’ and consumers’ concurring perceptions of market structure”, European Journal of Marketing, Vol. 23 No. 1, pp. 7-16. Cunningham, I.C., Hardy, A.P. and Imperia, G. (1982), “Generic brands versus national brands and store brands: a comparison of consumers’ preferences and perceptions”, Journal of Advertising Research, Vol. 22 No. 5, pp. 25-32. Dietrich, R. (1978), “A first-time look at how shoppers react to generic products”, Progressive Grocer, February, pp. 80-4. Dunkin, A. (1985), “No-frills products: an idea whose time has gone”, Business Week, June 17, pp. 8, 59. Faria, A.J. (1979), “Generics: the new marketing revolution”, Baylor Business Studies, Vol. 10 No. 3, pp. 65-79. Franz, J. (1987), “Ten years may be generic lifetime”, Advertising Age, March 23, p. 76. Granzin, K.L. (1981), “An investigation of the market for generic products”, Journal of Retailing, Vol. 57 No. 4, pp. 39-55. Hawes, J.M (1982), “Retailing strategies for generic brand grocery products”, UMI Research Press, Michigan, MI. Hoch, S. and Banerji, S. (1993), “When do private labels succeed?”, Sloan Management Review, Summer 1993, pp. 57-67. Kono, K. (1985), “Are generics buyers deal-prone? On a relationship between generics purchase and deal-proneness”, Journal of the Academy of Marketing Science, Vol. 13 No. 1, Winter, pp. 62-74. Lichtenstein, D., Ridgway, N. and Netemeyer, R. (1993), “Price perceptions and consumer shopping behaviour: a field study”, Journal of Marketing Research, Vol. XXX, May, pp. 234-45.

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McEnally, M.R. and Hawes, J.M. (1984), “The market for generic brand grocery products: a review and extension”, Journal of Marketing, Vol. 48, Winter, pp. 75-83. McGoldrick, P.J. (1981), “Grocery generics – an extension of the private label concept”, European Journal of Marketing, Vol. 18 No. 1, pp. 5-24. Murphy, P. and Laczniak, G. (1979), “Generic supermarket items: a product and consumer analysis”, Journal of Retailing, Vol. 55 No. 2, pp. 3-14. Neidell, L.A., Boone, L.E. and Cagley, J.W. (1984), “Consumer responses to generic products”, Journal of the Academy of Marketing Science, Vol. 12 No. 2, pp. 161-74. Rosen, D.L. and Sheffet, M.J. (1983), “The effect of situation on the use of generic grocery products”, AMA Educators’ Proceedings, American Marketing Association, Chicago, IL. Strang, R.A., Harris, B.F. and Hernandez, A.L. (1979), “Consumer trial of generic products in supermarkets: an exploratory study”, AMA Educators’ Proceedings, American Marketing Association, Chicago, IL, pp. 386-8. Szymanski, D. and Busch, P. (1987), “Identifying the generic-prone consumer: a meta analysis”, Journal of Marketing Research, Vol. XXIV, pp. 425-31. Wheatley, J.J. (1980), “The effect of generic products on consumer perceptions and brand choice”, Advances in Consumer Research, Vol. VIII, pp. 166-9. Yucelt, U. (1987), “Consumer perceptions of generic grocery products: users versus nonusers”, Marketing Intelligence & Planning, Vol. 5 No. 1, pp. 24-7. (Gerard P. Prendergast is a member of the Marketing Faculty at Hong Kong Baptist University and Norman E. Marr is Professor of Marketing, University of Huddersfield, UK.)

Appendix I: Respondent demographics Frequency

Percentage

Lower income groups Less than $10,000 $10,000-$14,999 $15,000-$19,999 $20,000-$24,999

28 81 52 53

4.1 12.0 7.7 7.8

Higher income groups $25,000-$29,999 $30,000-$34,999 $35,000-$39,999 $40,000-$44,999 $45,000 plus

61 75 66 60 178

9.0 11.1 9.7 8.9 26.3

Missing cases Total

23 677

3.4 100

Table AI. Respondents’ household income group (NZ$)

Frequency

Percentage

Lower grocery spend per week groups Under $26 $26-$50 $51-$100

3 62 238

0.4 9.2 35.2

Higher grocery spend per week groups $101-$150 $151-$200 Over $200

258 82 27

38.1 12.1 4.0

Missing cases Total

7 677

1.0 100

Table AII. Respondents’ weekly household expenditure on groceries (NZ$) JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 2 1997

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Occupation

Frequency

Home duties Retired/superannuitants Social welfare/unemployed Student Clerical/sales Semi-skilled Skilled/technical Manager/executive Service worker Professional Manual/agricultural Other Missing cases Total

Percentage

8 96 43 5 56 18 85 102 100 85 63 10

1.2 14.2 6.4 0.7 8.3 2.7 12.6 15.1 14.8 12.6 9.3 1.5

6

0.9

677

100

Table AIII. Respondents’ occupation

Frequency

Percentage

Younger age groups 18-25 years 26-35 years 36-45 years

63 191 186

9.3 28.2 27.5

Older age groups 46-60 years Over 60 years

148 80

21.9 11.8

9

1.3

Missing cases Total

677

100

Table AIV. Respondents’ age group

Region Upper North Island Lower North Island South Island Total

Sample frequency

Sample percentage

National population percentage

493 315 192

50 33 17

50 26 24

1,000

100

100

Table AV. Geographical distribution of sample versus national population

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This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present

Executive summary and implications for managers and executives Generic products and the consumer Some readers will recall the old fashioned grocer. These traders sold some branded items but, in the main, they sold standard products “loose.” You went in and bought a pound of rice which the shopkeeper weighed out and placed in a brown paper bag. The same went for sugar, oatmeal, flour and much else. Some thoughtful shopkeepers made their life easier by weighing out standard amounts (half pound, pound, and so on) and putting them in bags ready for sale. The same went for cooked meats, sausages and sweets. The buyer trusted the shopkeeper’s ability to select quality goods rather than use other cues – such as a brand – to determine that quality assessment. Although the sale of loose produce is now mostly gone, the generic product persists and plays its role in the grocery market. Prendergast and Marr look at the New Zealand experience of generic products to find out what consumers feel about them. Do they, as most brand owners would like to feel, see generic products as low quality goods that consumers are mildly embarrassed about buying? Or does the consumer feel content with the quality and confident with the image of economy implied by buying lower priced goods? The essence of generic products is that they do not have any real branding. The packaging is simple (perhaps appearing cheap) and, as Prendergast and Marr note, often in larger quantities than brands in the same category. No advertising support is given and there is reliance on low prices rather than promotion in making the product attractive. Prendergast and Marr comment that in many places generic products are now displaced by own label developments. They comment that own label presents a different approach and need not necessarily replace generics. What is important is how consumers perceive generic products and set out to look at consumer opinions of generic products across a range of product categories rather than undertaking comparisons with own label or branded goods. The result of this New Zealand study indicates that generic goods play an important role in the mix of products within each category. Consumers are not (generally speaking) concerned about the image of generic goods and reject the contention than “plain packs are for poor people.” Moreover, most people are happy to expose their purchase of generics to friends and family. The brand, it seems, carries only so much weight in consumers’ self-image. Prendergast and Marr also demonstrate that the attraction of generic products varies across product categories. What emerges is a very different response for different products. Some categories are dominated by branded goods – cosmetics and beauty products being the one where generics are rejected presumably in favor of branded items. In contrast, consumers saw tissues, rice, sugar and flour as categories where buying a generic product is more likely. This finding indicates how the more “standardized” a product is, the more likely it is that generic products will succeed. Going back to our traditional grocer it is the things he sold loose that now make for successful generic products – rice, flour and sugar. In contrast, areas of substantial quality variation like ground coffee and shampoo are not good areas for generic products.

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When we look at the challenge to brands from own label and “unbranded” generics there is a tendency to focus on investment in the brand. Many brand owners put their problems down to promotional issues rather than a fundamental problem with consumer attitudes. If Mrs Smith doesn’t perceive any difference in quality between Uncle Ben’s rice and an unbranded bag of rice she won’t pay the price premium to buy the brand. For some categories there is plainly a belief that brands don’t reflect additional quality and this must affect the long-term viability of big brands seeking significant market share. However, the good news for brand owners in the study lies in the fact that around 15 percent of consumers reject the generic option whatever the category. This suggests that there will always be a market for branded goods but that marketers need to look at who these brand-committed consumers are and target them with appropriate promotions. Looking at Prendergast and Marr’s profile of those buying generic products it’s clear that any assumptions about social class, age and income could mislead. For those using generics as part of a product strategy careful marketers should consider the options of advertising and promotion. However, caution dictates that any advertising might undermine the “unbranded” image. After all, advertising is the realm of the brand owner. Far better to take an overall view of generics and pricing by promoting the retail outlet and the general pricing approach. The low price approach of discount chains like Germany’s Aldi and Denmark’s Netto present a particular attraction. Moreover, these discounters have adopted a tactic of building in close proximity to large “premium” supermarkets in order to attract generic sales without undermining the consumer’s choice. Prendergast and Marr, while focussing on one relatively small market, do help us understand how consumers approach generic products. And it’s worth noting that in the fresh goods categories our purchasers are still, largely speaking, generic. Even with the branding efforts of fruit producers our greengrocery purchases do not relate to any brand. The same process has occurred with bread in the UK and it is likely that other product categories will move toward generics under the umbrella of a strongly promoted and effective store brand. In some categories unbranded goods will struggle. Either because there exist strong brands associated with being the best (breakfast cereals are a good example here) or because the consumer’s self-image requires some form of branding (cosmetics, beauty products and fashion clothing being good examples). While some transference may occur from those buying other generic products to these categories they will remain dominated by the brands. (A précis of the article “Perceptions of generic products: a macro and micro view.” Provided by Marketing Consultants for MCB University Press.)

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