We present an analytical framework for understanding what makes a product category more conducive for store brand introduction. We also investigate market characteristics that help explain differences in store brand market share across product categories. Our findings suggest that the introduction of a store brand is likely to increase retailer's profits in a product category if the cross-price sensitivity among national brands is low and the cross-price sensitivity between the national brands and the store brand is high. Our model predicts that the store brand share would also be greater under these conditions. In addition, we find that the introduction of a store brand is more likely to lead to an increase in category profits if the category consists of a large number of national brands---even though the store brand market share is expected to be lower when there are a large number of national brands. We compare the key predictions of our model with data on 426 grocery product categories. The data are consistent with the predictions of the model.private labels, retailing, new product introduction, pricing, distribution channels, game theory

This paper analyzes the role played by brand loyalty in determining optimal price promotional strategies used by firms in a competitive setting. (Loyalty is operationalized as the minimum price differential needed before consumers who prefer one brand switch to another brand.) Our objective is to examine how loyalties toward the competing brands influence whether or not firms would use price promotions in a product category. We also examine how loyalty differences lead to variations in the depth and frequency with which price discounts are offered across brands in the same product category. The analysis predicts that a brand's likelihood of using price promotions increases with an increase in the number of competing brands in a product category. In the context of a market in which a brand with a large brand loyalty competes with a brand with a low brand loyalty, it is shown that in equilibrium, the stronger brand (i.e., the brand with the larger loyalty) promotes less frequently than the weaker brand. The results suggest that the weaker brand gains more from price promotions. The analysis helps us understand discounting patterns in markets where store brands, weak national brands, or newly introduced national brands compete against strong, well known, national brands. The findings are based on the unique perfect equilibrium in a finitely repeated game. The predictions of the model are compared with the data on 27 different product categories. The data are consistent with the main findings of the model.marketing: competitive strategy, pricing, promotion, games: noncooperative

We examine the retailer's store brand positioning problem. Our game-theoretic model helps us identify a set of conditions under which the optimal strategy for the retailer is to position the store brand as close as possible to the stronger national brand. In three empirical studies, we examined whether market data are consistent with some of the implications of our model. In the first study, using observational data from two US supermarket chains, we found that store brands are more likely to target stronger national brands. Our second study estimated cross-price effects in 19 product categories, and found that only in categories with high-quality store brands, store brand and the leading national brand compete more intensely with each other than with the secondary national brand. In a third product perception study, we found that although explicit targeting by store brands influenced consumer perceptions of physical similarity, it had no influence on consumers' perceptions of overall or product quality similarity. While it appears that retailers do follow a positioning strategy consistent with our model, it changes buying behavior in the intended fashion only if the store brand offers quality comparable to the leading national brands.Store Brands, Private Labels, Positioning, Retailing, Game Theory, Competition

Customers often evaluate products at brick-and-mortar stores to identify their “best-fit” product but buy it for a lower price at a competing online retailer. This free-riding behavior by customers is referred to as “showrooming,” and we show that this is detrimental to the profits of the brick-and-mortar stores. We first analyze price matching as a short-term strategy to counter showrooming. Price matching allows customers to purchase a product from the store for less than the store’s posted price, so one would expect the price matching strategy to be less effective as the fraction of customers who seek the matching increases. However, our results show that with an increase in the fraction of customers who seek price matching, the store’s profits initially decrease and then increase. While price matching could be used even when customers do not exhibit showrooming behavior, we find that it is more effective when customers do showrooming. We then study exclusivity of product assortments as a long-term strategy to counter showrooming. This strategy can be implemented in two different ways: (1) by arranging for exclusivity of known brands (e.g., Macy’s has such an arrangement with Tommy Hilfiger) or (2) through the creation of store brands at the brick-and-mortar store (T. J. Maxx sells a large number of store brands). Our analysis suggests that implementing exclusivity through store brands is better than exclusivity through known brands when the product category has few digital attributes. However, when customers do not showroom, the known-brand strategy dominates the store-brand strategy. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2764 . This paper was accepted by Chris Forman, information systems.