Paul S. Richardsoii, Alan S. Dick, & Arun K.

Jain

Extrinsic and Intrinsic Cue Effects on Perceptions of Store Brand Quality

The authors examine the relative importance of extrinsic versus intrinsic cues in determining perceptions of store brand quality in an experiment using a sample of 1564 shoppers for five products. Results of the experiment suggest that consumers' evaluations of store brand grocery items are driven primarily by the extrinsic cues that these products display rather than intrinsic characteristics. In addition, the authors found that a value for money orientation taken by retailers in the marketing of their private label lines may represent a suboptimal strategy; they recommend a quality orientation.

tore brand grocery items are products owned and branded by organizations wbose primary economic commitment is distribution ratber than production (Scbutte 1969). With the rise of large, well-organized retail chains, store brands have emerged as a key weapon in the battle waged between manufacturers and retailers over channel control and consumer loyalty (Patti and Fisk 1982). Although retailers enjoy advantage in shelf space allocation and in-store promotion for their private brands, the market share of such brands has remained relatively constant at about 14% of total supermarket revenue over the last decade (Private Label Manufacturing Association 1993). The problem facing marketers of private label brands is that despite lower prices, quality guarantees, and even the advertising of these products, consumers continue to prefer national to store brand grocery items by a wide margin. It is quite remarkable tbat "even in these days of waning consumer loyalty, shoppers haven't become altogether immune to the pull of well-known names. If the price is rigbt they will buy big brands" (Shapiro 1993, p. Bl). Research regarding private label grocery products has been of substantial interest to both marketing academics and industry practitioners. Since the seminal work of Myers (1966), a variety of studies has been undertaken to investigate the characteristics of buyers of private label grocery products and the relationship between purchase of private

Paul S. Richardson is an Assistant Professor of Marketing, School of Business Administration, Loyola University at Chicago. Alan S. Dick is an Assistant Professor of Marketing and Arun K. Jain is the Samuel P. Capen Professor of Marketing Research and Chairman, Department of Marketing, School of Management, State University of New York at Buffalo. The authors thank the editor and three anonymous reviewers at the Journal of Marketing as well as Dipankar Chakravarti (University of Arizona), John Myers (University of California, Berkeley), and Brian Ratchford (University at Buffalo) for their valuable comments on earlier drafts of this article. Partial support for this project was provided by a research grant from a major supermarket chain that wishes to remain anonymous. The authors thank their present and former studentsPam Grimm, Cindi Privitera, Melanie Bainbridge, Frank Koo, and Rohit Chauhanfor assistance during various phases of the project.

label products and store loyalty. Most of the studies have identified sociodemographic and personality characteristics that differentiate private label buyers from nonbuyers (e.g., Bettman 1974; Coe 1971; Frank and Boyd 1965). Although these studies provide useful insights for possible market segmentation, they do not address the central managerial question of why national brands are preferred to store brands. Thus, retailers are left in an uncomfortable position of not knowing what to do to enhance their market share. In a related stream of research, marketing scholars have examined quality perceptions of private label brands. For example, in a survey, Bellizzi and colleagues (1981) obtained perceptions of national, private label, and generic brands through a series of Likert-type scales. Subjects in the study consistently rated private label brands below the national brands on attributes related to quality, appearance, and attractiveness. Similarly, Cunningham, Hardy, and Imperia (1982) observe that consumers rate national brands as superior to private label and generic brands in terms of taste, appearance, labeling, and variety of choice. Some shoppers exhibit aversion to buying store brands regardless of the amount of savings associated with their purchase (Livesey and Lennon 1978). Invariably, all studies indicate that private label brands suffer from a low-quality image compared with national brands. Conceptually, the problem is tbat product positioning and price may be used by consumers as a cue to quality. Consequently, the extent to which perceptions of poor quality are the result of actual poor levels of product ingredients or the misguided efforts of management to position private labels as inexpensive altematives to national brands needs to be assessed. The Private Label Manufacturers Association asserts that private label ingredients are as good if not better than those of national brands! Hence, unfavorable perceptions in fact may be fostered by the widespread use of inexpensivelooking packaging and the absence of an attractive brand image due to poor communication and positioning strategies. A focus on quality as opposed to price could produce more favorable perceptions of store brands and increase consumers' loyalty toward these products. Because store brands are only available at their owners' chains, this inJournat of Marketing Vol. 58 (October 1994), 28-36

28 / Store Brand Quality

creased loyalty then could be uniquely transferred to the chains themselves. To accomplish this, however, some deepseated beliefs about the quality of store brands may have to be changed. If accomplished, this strategy could represent the basis for a sustainable competitive advantage in the marketplacean advantage that appears difficult using a pricebased approach. Of paramount importance if retailers are to. develop customer loyalty toward store hrands is that they first understand the reasons for current perceptions of these products. Previous research has relied principally on survey methodology to ascertain private brand perceptions. This research has noted that store brands are judged inferior to national brands on a variety of core (e.g., quality, taste, texture) and augmented (e.g., price, packaging, labeling) product characteristics. However, if perceptions regarding store brand quality are based on inferences grounded in price and product positioning, it may be that the poor quality perceptions of store brands noted in the literature are simply an artifact of reliance on price or brand name in quality assessment. Previous survey-based research has not been able to disentangle the "real quality" and "image" effects on consumers' perceptions of quality, yet understanding the degree to which store brands are evaluated on the basis of their real quality or image is essential for successful management of these products. Our objective is to examine in an experimental setting possible causes of consumers' unfavorable perceptions of store brands relative to national brands. Toward this, first we propose specific research hypotheses based on the literature in marketing and consumer behavior. Next we describe the experimental design used to test these hypotheses. Then, the results, based on an analysis of data collected from 1564 households, are presented. Finally, we discuss the implications and limitations of our study and provide directions for further research.

attributes, such as ingredients, that cannot be manipulated without also altering physical properties of the product. The relative salience of extrinsic versus intrinsic cues in quality assessment depends on their PVs and CVs (Olson 1972). Excellent reviews of the literature on cue utilization theory are provided by Monroe and Dodds (1988), Purwar (1982), and Rao and Monroe (1989). Purwar, for example, classified empirical investigations according to the cue(s) manipulated. Using this classification, Purwar summarizes 38 price cue experiments, 12 brand name cue studies, 9 store image investigations, and 14 studies in which intrinsic compositional cue effects on quality assessment were examined.' A review of the literature suggests that consumers rely on extrinsic cues such as price (Leavitt 1954), brand name (Allison and Uhl 1962), packaging (McDaniel and Baker 1977), store name (Wheatley, Chiu, and Goldman 1977), and color (Peterson 1977) when making quality assessments. In particular, brand name is frequently used by consumers as an "informational chunk" that represents a composite of information about several attributes of the product, such as price, size, shape, manufacturer, and performance factors (Olson 1976). Intrinsic cues relating to a product category (e.g., taste, texture, aroma) also have been found to have high PVs and CVs (Olson 1972; Olson and Jacoby 1973). Furthermore, research evidence suggests that consumers tend to use both intrinsic and extrinsic cues concurrently when evaluating product quality (Jacoby, Olson, and Haddock 1973; Simonson 1989; Szybillo and Jacoby 1974). Researcti Hypotheses Cue utilization studies provide us with valuable insight for examining possible causes of consumers' unfavorable perceptions of store brand grocery items. Extrinsically, store brands suffer from deficiencies relative to national brands. Store brands are lower priced, are frequently poorly packaged, lack strong brand recognition, and are generally not advertised at the national level (Cunningham, Hardy, and Imperia 1982). These extrinsic cue deficiencies are acknowledged by consumers (Bellizzi et al. 1981). Because consumers rely on extrinsic cues when assessing product quality and store brands suffer from extrinsic cue deficiencies relative to national brands, we hypothesize that when consumers taste grocery products: Hj: Regardless of product ingredients, national brands will be judged to be of superior quality than store brands. Intrinsically, store brand grocery items are judged inferior to national brands in terms of quality of ingredients, taste, texture, and aroma (Bellizzi et al. 1981; Sundel 1974). It is unclear the extent to which these evaluations stem from inferences made on the basis of the negative extrinsic cues that these products display or refiect an unfavorable response to store brand ingredients. Hawes, Hutchens, and Thanopoulos (1982) argue that the former is the case, suggesting that consumers' evaluations of store brand ingredi'Since Purwar's (1982) cue classification was published, there have been four published cue utilization studies by Dodds (1985); Dodds and Monroe (1985); Dodds, Monroe, and Grewel (1991); Rao and Monroe (1989); and Rexeisen (1982).

Cue Utilization Theory

Cue utilization theory may provide an attractive framework through which to assess consumer perceptions of store brand quality. According to this theory, products consist of an array of cues that serve as surrogate indicators of quality to shoppers (Cox 1967; Olson 1972). The particular cues are evoked according to their predictive and confidence values. The predictive value of a cue (PV) is the degree to which consumers associate a given cue with product quality. This is similar to the diagnosticity of the cue, which represents the reliability of a cue and the likelihood that using it would lead to a successful task resolution (Dick, Chakravarti, and Biehal 1990). The confidence value of a cue (CV) is the degree to which consumers have confidence in their ability to use and judge that cue accurately (Cox 1967; Olson 1972). Cues characterized by high CV and high PV assume the greatest weight in the quality assessment process. Cues can be further classified as extrinsic or intrinsic to the product (Olson 1972; Olson and Jacoby 1973). Extrinsic cues are product-related attributessuch as price, brand name, and packagingwhich are not part of the physical product. Conversely, intrinsic cues represent product-related

Store Brand Quality / 29

ents derive solely from undue reliance on extrinsic cues in quality assessment. As evidence, these scholars note that by FDA regulation, store brand ingredients must be of a quality that is at least competitive with that of national brands. However, a store brand, while meeting FDA regulations, need not use "fancy" (grade A) or "extra standard" (grade B) ingredients, resulting in perceptible differences in quality. Given the importance of intrinsic cues in quality assessment (Jacoby, Olson, and Haddock 1971; Szybillo and Jacoby 1974), it is unlikely that unfavorable evaluation of store brand ingredients is driven solely by inferences made on the basis of extrinsic cues. Instead, consumers' utilization of and reliance on intrinsic cues in quality assessment suggests that these unfavorable evaluations are based to some extent on consumers' direct response to store brand ingredients. Therefore, we argue that the level of product ingredient quality may be lower for store brand products and that consumers can detect this lower quality level. Hence, we hypothesize that when consumers taste grocery products: H2: Regardless of extrinsic cues, products with national brand ingredients will be judged to be of better quality than products with store brand ingredients. According to cue utilization theory, the relative weight of extrinsic versus intrinsic cues in quality assessment depends on the cues' PVs and CVs. In the context of packaged grocery products, one can make a reasonable argument regarding these effects. First, there is evidence that extrinsic cues, such as price and brand name, are more easily recognized, integrated, and interpreted than are harder-to-process intrinsic cues (Purwar 1982). Thus, one can assert that the CV assigned to extrinsic cues is greater than that assigned to intrinsic cues. Second, for packaged grocery items, it is likely that consumers believe that intrinsic cues such as actual product ingredients, taste, texture, or aroma are more important in determining the real quality of grocery products than are extrinsic cues such as advertising, labeling, or packaging. Thus, it is reasonable to contend that for packaged goods the PV assigned to intrinsic cues is greater than that for extrinsic cues. In other words, whereas extrinsic cues are most likely characterized by high CVs but low PVs, intrinsic cues are most likely typified by low CVs but high PVs. Judging product quality when cues are characterized by either high CV/low PV or high PV/low CV entails the risk of selecting a poor-quality.brand. Schellinck (1980) has suggested that consumers may attempt to alleviate this risk by placing relatively greater reliance on high CV/low PV cues because consumers first must select those cues that they can utilize with some degree of confidence. Similarly, Cox (1967) observed that consumers are more likely to utilize a high CV/low PV cue than a high PV/low CV cue, which cannot be evaluated with a similar degree of certainty. The tendency of some consumers to rely on high CV/low PV extrinsic cues over high PV/low CV intrinsic cues makes possible "mixed brand" strategies, in which manufacturers charge different prices for identical or similar ingredients packaged in national and store brand containers (Morris 1979; Wolinsky 1987). Hence, it is hypothesized that when consumers taste and evaluate grocery products:

H3: Extrinsic cues explain more variance in perceptions of product quality than do intrinsic cues. Consumers' reliance on extrinsic cues in quality assessment presents retailers of store brands with a problem because these products suffer from extrinsic cue inadequacies. To encourage the purchase of these products, retailers typically price store brands 15%-37% lower than national brands (Shapiro 1993). Ironically, to the extent that consumers rely on extrinsic cues in quality assessment, these lower prices may serve only to exacerbate further unfavorable quality perceptions. To overcome this problem, most retailers have chosen to stress a different terminal attribute in the marketing of their private label lines. That is, rather than competing with national brands on the basis of quality, most retailers have taken a "value for money" orientation in the marketing of their private label lines (Davies, Gilligan, and Sutton 1986; Martell 1986; Ody 1987). Value for money implies a price (P)-perceived quality (Q) trade-off (Livesey and Lennon 1978; Myers 1967). By taking a value for money orientation in the marketing of their store brands, retailers hope to instill the purchase of these products not only from those consumers who perceive that store brands are lower priced but of relatively good quality but also from those consumers who perceive that store brands are lower priced and of relatively bad quality as long as savings associated with the price differential provide adequate compensation for purchase. In fact, Myers (1967) found that the latter segment of the market (lower P, lower Q) constitutes 48% of store brand clientele whereas the former segment (lower P, same Q) comprises only 23% of store brand buyers. We hypothesize the following: H4: Perceived value for money of store brands is more strongly correlated with consumer willingness to buy store brands than is perceived quality.

Methodoiogy
Design and Subjects A 3 (extrinsic cue) X 3 (intrinsic cue) x 5 (product) betweensubjects factorial design was used to test the hypotheses. Subjects were shoppers at a major shopping mall in a large northeastern city. The experiment was conducted during morning, afternoon, and evening hours on weekdays and weekends. One of the 45 (3 x 3 x 5) cue and product treatments was randomly selected during each day of the experiment period and data gathered until 35 responses were obtained in each cell. We gathered usable data from 1564 subjects. independent Variabies The level of the extrinsic cue was manipulated by showing each subject a package from one of three different brands. Two were private label brands of the two largest supermarket chains in the region and the third represented an established national brand. Subjects did not actually open the package but were made to believe that the ingredients presented to them came from the package shown. A small display board (7 inches by 7 inches) with the name, package

30 /Journal of Marketing, October 1994

TABLE 1 Product and Prices Dispiayed

Cheese 12 oz. National brand Store I brand Store II brand Chips 6.5 oz. Dip 8oz. Cookies Jelly 12 oz. 32 oz. $2.49 1.79 1.79 $1.48 1.25 1.38

Procedure Subjects in a shopping mall were randomly intercepted for participation in a taste test. Only primary shoppers residing in the region and not affiliated with any grocery chain were invited to participate. As an incentive for participation, potential subjects were told that they would be included in a drawing for several cash prizes totaling $600. If the shopper agreed to participate, he or she was guided to the taste test tables and invited to sit down. On each of the taste test tables several packages of the relevant product (extrinsic cues) were displayed. The experimenter moved one of the packages and the display board in front of the subject. Subjects could examine the package, read the label, pick it up, or do anything they wanted with it except open it. The board was designed to mimic the information presented on the shelf labels for each brand. It indicated brand name, size, and the actual price being charged for that product at the store. Drawing the subject's attention to the packaging of the product and the display board, the experimenter stated: We would like you to sample (brand nameproduct). Please feel free to pick up and observe the packaging as much as you wish. As you can see from the display board, the price of (brand nameproduct) for a (size of package) is (price). To save you time, we have already prepared a sample of (brand nameproduct) for you to taste. After you are done sampling the product, please complete this taste test survey. Thank you very much for your participation! In actuality, the subjects were presented with the ingredients (intrinsic cue) called for by the experimental cell to which they belonged. These were not necessarily the same ingredients implied by the package. Thus, for example, unbeknownst to subjects, those in the national brand (extrinsic cue) and Store II brand ingredient (intrinsic cue) condition were presented with the ingredients of Store II brand and not the national brand ingredients implied by the displayed package. Each subject evaluated only one product, and the average elapsed time per subject was between two and three minutes. After evaluating the product, subjects completed the questionnaire and were debriefed.^

$2.29 1.79 1.89

$1.39 $.89 .99 .59 .79 1.09

size, and price of the product was placed beside each package. Intrinsic cue levels were manipulated by giving each subject a sample of one of three different ingredients (contents). The ingredients were either from a national brand or from one of the two private label brands. All product ingredients were purchased daily and kept refrigerated prior to sampling. Five products were used in the experiment. Two criteria guided their selection: (1) The products selected must have store brand counterparts to the national brands for each of the grocery chains and (2) The products must be such that their ingredients require no cooking or preparation. After consultation with private label managers, the following five products were selected for the experiment: regular potato chips, french onion chip dip, chocolate chip cookies, cheese slices, and grape jelly. The national brands of these products were Lays, Bison, Nabisco (Chips Ahoy), Kraft (American individually wrapped), and Welch's, respectively. These represented the dominant brands in the sampled market. Store brands of these products were the counterparts of the national brands for each product and the two supermarket chains.^ Chocolate chip cookies and potato chips were poured onto individual plates fi-om snack dispensers. Cheese slices were precut and placed on individual plates in front of the subjects. Jelly and chip dip were placed in individual one-ounce jars. Subjects in the cheese, jelly, and chip dip conditions were also provided with Nabisco Premium Bits and were invited to either dip or spread these products onto the Premium Bits for sampling. The price and size of products used in the experiment are shown in Table 1. Dependent Variables Subjects were given a short taste test questionnaire. Three dependent measures from that questionnaire form the basis for this study. Perceived quality was measured using the following 7-point Likert scale: "All things considered I would say this (product name) has" with end points labeled "poor overall quality" and "excellent overall quality." Value for money was measured using "To me, this (product name) offers," followed by a 7-point scale with end points labeled "poor value for money" and "excellent value for money." Finally, purchase willingness was assessed by "If I were to buy a brand of (product name) I would," followed by a 7-point scale with end points labeled "never buy the brand I just tried" and "definitely buy the brand I just tried."
^A list of ingredients of the various brands can be obtained from the authors on request.

Analysis and Results

The data were analyzed using standard ANOVA techniques. Table 2 presents the results of the overall ANOVA for perceived quality. Table 3 presents the treatment means. Significant main effects of intrinsic cues, extrinsic cues, and a sig^Because product ingredients are considered intrinsic cues and a list of ingredients is printed in small type on the packages themselves (i.e., as part of the extrinsic cues), there is a potential confounding of extrinsic and intrinsic cues. However, the product ingredients listed were quite similar across the brands within any particular product class. In addition, our own observation is that though subjects had the opportunity to pick up the products and examine the ingredients, the vast majority of subjects did not bother to do so. This would be quite natural given the nature of the task (i.e., a quick taste test involving familiar brands). Moreover, because the betweenbrand differences in product ingredients were different across the five product categories, any impact of the printed product ingredients likely would haveresultedin different results across the product categories. This difference did not materialize in the data. Thus, it would seem unlikely that this potential confound influenced the results in any meaningful way.

Store Brand Quality/31

TABLE 2 Treatment Effects on Perceived Quality

Source Extrinsic (Ext) Intrinsic (Int) Product Extrinsic * intrinsic Extrinsic * product Intrinsic * product Ext * Int * product Residual Total p < .001
*>p < .05

Sum of Squares 106.68 10.59 40.28 16.04 7.11 20.61 19.21 2372.30 2572.30

df 2 2 4 4 8 8 16 1519 1563

Mean Square 53.34 5.29 10.07 4.01 .89 2.58 1.20 1.55

F 34.45a 3.42" 6.50^ 2.59" .57 1.66 .78

TABLE 3 Mean Quality Ratings^

Extrinsic Cues National Store I Store II Marginal Brand Brand Brand Means National Brand Cues Store 1 Brand Store ii Brand Marginai Means 5.95 5.73 5.58 5.75 5.20 5.11 5.24 5.18 5.29 5.01 5.37 5.22 5.48 5.28 5.40

ceived mean quality assessment of 5.95; the same ingredients identified with the extrinsic cues of Store I and Store II brands received mean quality ratings of 5.20 and 5.29, respectively. The contrast comparing mean quality ratings of the two store brands with that of the national brand is significant and as expected (F[l,1519] = 37.93, p < .0001). Similar results were found holding ingredients constant at the Store I brand level. Store I brand ingredients coupled with national brand extrinsic cues received a mean quality rating of 5.73; the same ingredients coupled with the extrinsic cues of Store I and Store n brands received mean quality assessment of 5.11 and 5.01, respectively. The difference in quality ratings between the national brand and average of the store brand extrinsic cue conditions is significant and as expected (F[l,1519] = 33.75, p < .0001). Finally, holding ingredients constant at the Store II brand level produced the same pattem of results. Store II brand ingredients coupled with national brand extrinsic cues received a mean quality assessment of 5.58; the same ingredients coupled with the packaging of Store I and Store II brands received mean quality ratings of 5.24 and 5.37, respectively. Comparing national and average store brand ratings, we again find that the difference is significant and as expected (F[l,1519] = 5.73, p < .02). Our results provide strong support for Hp Regardless of the actual ingredients sampled, ingredients coupled with national brand extrinsic cues received significantly more favorable quality assessment than ingredients identified with store brand extrinsic cues. intrinsic Cue Effects H2 predicted that national brand ingredients would be judged better than store brand ingredients regardless of the extrinsic cue treatment level. Interestingly, in our experiment, the intrinsic cue effects observed depend on the level of the extrinsic cue manipulated. For example, holding extrinsic cues constant at the national brand level, national brand ingredients were assigned mean ratings of 5.95; under the same packaging condition. Store I and Store II brand ingredients received ratings of 5.73 and 5.58, respectively. Comparing these means, we find that national brand ingredients were judged marginally better than those of Store I brand (F[l,1319] = 3.19, p < .07) and significantly better than those of Store U brand (F[l,1319] = 6.14,p < .02). The contrast comparing quality ratings of national brand ingredients with the average of the ratings for the store brand ingredients was also significant and as expected (F[l,1319] = 7.17, p < .02). These results support H2. However, preference for national brand ingredients dissipated when the subjects were presented with Store I brand extrinsic cues. Contrasts comparing quality assessment of national brand ingredients with Store I brand ingredients (F[l,1319] = .46, p > .30), Store H brand ingredients (F[l,1319] = .11, /? > .85), and the average ratings for both store brand ingredients (F[l,1319] = .04, p > .85) were all insignificant. When subjects were presented with Store II brand extrinsic cues, similar but not identical results were found. National brand ingredients were perceived to be superior to

mean in each cell reflects the mean quality ratings for a given combination of extrinsic and Intrinsic cues across all five product categories. For example, the first entry, 5.95, reflects the average quality rating across all five product categories when national brand ingredients were combined with national brand extrinsic cues.

nificant intrinsic cue by extrinsic cue interaction were found. The main effect of product indicates that subjects perceived different quality levels across the five product categories. Liked best were the jelly, chips, and chip dip and liked least were the cookies and cheese. Because the main effects of intrinsic and extrinsic cues were embedded in an intrinsic by extrinsic cue interaction and Hi and H2 predicted specific contrasts within the interaction, further analysis of the data was based on several preplanned comparisons and contrasts. Extrinsic Cue Effects H] predicted that products identified with national brand extrinsic cues would be judged to be of better quality than products identified with store brand extrinsic cues. Because there was no intrinsic cue by product, extrinsic cue by product, or three-way interaction, the data were pooled across the five products to conduct the contrasts. Regardless of the product category or the actual ingredients sampled, ingredients coupled with national brand extrinsic cues received significantly more favorable quality assessment than the same ingredients coupled with store brand extrinsic cues. For example, holding ingredients constant at the national brand level, national brand extrinsic cues re-

32 /Joumai of Marketing, October 1994

TABLE 4 Correiations of Perceived Quaiity and Perceived Vaiue for iUloney With Wiilingness to Buy
Store I Brand Perceived quality Correlation with wiliingness to buy
^Significant at a < .05

Store II Brand Perceived quality .65 t = 3.433 Value for money .57

National Brand Perceived quality .72 t = 2.736^ Value for money .60

Value for money .54

64 t = 4.69*

TABLE 5 iViean Value for iVioney Ratings"

Extrinsic Cues Nationai Store! Store ii iVIarginai Brand Brand Brand Means National Brand Intrinsic Cues Store 1 Brand Store II Brand Marginai iUleans 5.25 5.02 4.91 5.06 5.61 5.39 5.71 5.57 5.29 5.22 5.31 5.27 5.38 5.21 5.30

ences in ratings of product quality when extrinsic cues were held constant at the store brand level. The intrinsic cues were effective in explaining quality differences when extrinsic cues were held constant at the national brand level. Thus, although extrinsic cues explain greater variance, intrinsic cue effects also assume importance, particularly when subjects were faced with evaluation of what purportedly was a national brand. Perceived Quaiity Versus Perceived Vaiue for iVioney H4 predicted that perceived value for money is more strongly correlated with willingness to buy store brands than is perceived quality. To test this hypothesis, the correlation of perceived quality and perceived value for money with purchase willingness was calculated at each of the extrinsic cue level treatments for each product. Tests of differences between these dependent correlations were then calculated (Bruning and Kintz 1968, p. 193). The Pearson correlations are shown in Table 4, where it can be seen that all correlations are positive, large, and statistically significant (p < .01). For each of the store brands, as well as the national brands, perceived quality is more strongly associated with willingness to buy the products than is perceived value for money. These results do not support H4. In fact, they support the opposite of what is predicted by the hypothesis; that is, consumers by and large seem to be more interested in quality than value for the money even for store brands. Although this finding may have been to some degree the result of the task (i.e., subjects did not actually have to buy the products), these results are provocative in terms of managerial implications. A preference for quality rather than value may suggest that positioning store brands as high-quality altematives to national brands may induce greater consumer willingness to buy these products. Perceived Vaiue for Money and Purctiase Wiiiingness Across the five products, store brands enjoy an average price advantage of 21% relative to the national brands. Lower store brand prices should create favorable value for money perceptions of these products. In fact. Table 5 shows that products associated with store brand rather than national brand extrinsic cues receive higher value for money judgments. Interestingly, however, value for money ratings of store brands are not as favorable as one would expect on the basis of the size of the price discount. For example, although store brand prices are 21% lower, mean value for money

mean in each cell reflects the mean value for money ratings for a given combination of extrinsic and intrinsic cues across all five product categories. For exampie, the first entry, 5.25, refiects the average value for money rating across all five product categories when national brand ingredients were combined with national brand extrinsic cues.

Store I brand ingredients (F[l,1319] = 4.51, p < .04) but comparable to Store II brand ingredients (F[l,1319] = .35, p > .55). The contrast comparing quality ratings of national brand ingredients with averaged ratings assigned to the store brand ingredients was also insignificant (F[l,1319] = .78, p > .38). Thus, subjects in our experiment were much more likely to indicate differences between national and store brand ingredients when these ingredients were coupled with national rather than store brand extrinsic cues. Support for H2 is therefore mixed. These results suggest that expectations created by the extrinsic cues influenced consumers' judgments of product quality. Relative Importance of Extrinsic Versus Intrinsic Cues H3 suggested that extrinsic cues explain greater variance in perceived quality of store brands than intrinsic cues. We tested this hypothesis with a direct test of the variance explained by the extrinsic versus intrinsic cues respectively (F[2,2] = 53.34/5.29 = 10.08, p < .10). The extrinsic by intrinsic cue interaction discussed previously provides additional support for this hypothesis and offers some refinement. As discussed in the test of Hi, strong extrinsic cue effects were observed regardless of the level of the intrinsic cue manipulated. However, as discussed regarding H2, intrinsic cues were largely ineffectual in explaining differ-

Store Brand Quality / 33

TABLE 6 Mean Willingness to Buy Ratings^ Extrinsic Cues

National Store i Store ii iVIarginal Brand Brand Brand iVIeans Nationai Brand Intrinsic Cues Store i Brand Store ii Brand iUiarginal Means 6.06 5.66 5.41 5.71 5.22 5.03 5.10 5.15 4.88 5.10 5.01 5.00 5.39 5.27 5.21

The mean in each cell reflects the mean willingness to buy ratings for a given combination of extrinsic and intrinsic cues across all five product categories. For example, the first entry, 6.06, reflects the average value for money rating across all five product categories when national brand ingredients were combined with national brand extrinsic cues.

perceptions are only 7% higher than those assigned to the national brands. It appears that the poor perceived quality of store brands partially offsets the otherwise favorable reactions to their lower prices. The mean scores relating to purchase willingness lends further support to this explanation. In Table 6, purchase willingness is substantially higher under the national brand than either of the store brand extrinsic conditions. This pattern of results is similar to that reported for perceived quality.

Discussion and Managerial Implications

Our results indicate that consumers' unfavorable reactions to store brand grocery items are largely the result of consumers' propensity to rely on extrinsic cues when assessing product quality. For example, regardless of the product category or real ingredient differences manipulated, ingredients disclosed to be of national manufacture received significantly more favorable quality assessment than ingredients disclosed to be of store brand origin. Real differences in ingredients between national and store brands had less impact and, interestingly, were more likely to affect consumers' judgments when the ingredients were disclosed to be sponsored by a national manufacturer. In this case, national brand ingredients were judged superior to store brand ingredients, as expected. However, when ingredients were disclosed to be sponsored by retailers, little discrimination between national and store brand ingredients was found. This pattern of interaction can be explained within the context of prospect theory (Tversky and Kahneman 1981). According to prospect theory, losses loom larger than gains. One could speculate that subjects who sampled store brand ingredients disguised as national brand ingredients encoded the outcome as a loss (as compared with sampling national brand ingredients coupled with national brand extrinsic cues). This could account for the significantly lower ratings of national brands when store brand ingredients rather than

national brand ingredients were provided. Conversely, one might argue that when subjects sampled national brand ingredients coupled with store brand extrinsic cues, the outcome may have been encoded by subjects as a gain (compared with sampling store brand ingredients coupled with store brand extrinsic cues). However, because losses loom larger than gains, this gain may have been perceived as insignificant and therefore had little effect on quality assessment of ingredients in this condition. This could explain the greater likelihood of ingredient effects when national rather than store brand extrinsic cues were employed. There are substantial managerial implications of our findings. Marketers of national brands may note that success depends on not only maintaining a high level of intrinsic product quality but also making investments to develop a strong brand image. National brands that are not backed by an effective communication strategy may not enjoy any advantages relative to store brands. On the other hand, development of a strong brand image without delivering a correspondingly high level of real product quality may result in disconfirmation and depress the perceived quality of national brands. This makes national brand marketers especially vulnerable if quality control systems fail or internal cost cutting measures lead to quality variation. When there is no difference from a performance point of view, consumers may be less willing to pay the premium for national brands. With respect to store brands, as long as expectation levels are low, product quality may be less critical. Retailers may implicitly recognize this in their value for money promotion efforts. A value for money approach has the advantage that it can avoid direct competition with national brands. However, it may be time to question the wisdom of such an approach. Correlational evidence in this study suggests that consumers may care less about value than they do about quality. Retailers who market high-quality store brands and use a value for money promotional focus may be signaling "lower quality for lower prices" rather than "very good quality for lower prices" as hoped. Thus, we find that retailers' value for money promotion efforts may do little to alleviate problems associated with the poor perceived quality of store brands.'' Private labels need not be at a disadvantage relative to national brands in the marketplace. For example. President's Choice, originally a nondescript private label brand sponsored by Canada's Loblaws, now comprises over 1000 items with annual sales of over $65 million (Liesse 1993), and its Decadent Chocolate Chip Cookie is already the number one seller in Canada. Similarly, the French retailer Carrefour has been extremely successful with its private label line, which is responsible for over 25% of the giant chain's turnover (Ody 1987). To achieve this penetration, Carrefour matches or even beats the quality of the category leader and actively communicates quality infonnation to consumers through instore information boards and an aggressive public relations campaign. Prices for Carrefour's store brands compare fa''However, for store brands in which there may be detectable quality differences, a value for money positioning may make more sense to attract price-driven market segments.

34 /Joumai of iMariceting, October 1994

vorably with national brands but are not always the cheapest altemative available. Retailers have a choice. They can view themselves either as passive distributors of manufacturers' brands or as active marketers of their own proprietary store brands. The former strategy has been the prevalent one adopted by American retailers until recently (Liesse 1993). This strategy has involved retailer competition on the basis of distribution efficiencies relating to store size, location, and price because product offerings are identical across chains. The problem with this strategy is obvious: Chains become little more than warehouses of manufacturers' products. As one private label manager noted, "A can of Campbell's soup is a can of Campbell's soup everywhere" (Liesse 1993, p. 4). The latter strategyactive marketing of retailers' own store brandsmay provide a viable altemative to the passive approach of the past. Active marketing of store brands implies investments in creating a high-quality image for these products and a commitment to offering a level of real quality that is equal to or surpasses that of national brands. Such a strategy entails use of imaginative and aesthetically pleasing package designs that differentiate store brands from the competition and prompt impulse purchase. In addition, active marketing of store brands necessitates greater emphasis on promotional campaigns that focus on the real intrinsic product benefits associated with these brands. For example, retailers might conduct in-store taste tests and publicize the results to overcome any negative perceptions of store brand quality. Retailers such as Wal-Mart, A&P, and Safeway are pursuing some of these tactics in revamping and reformulating their private label lines. The desired outcome of such marketing efforts is to build demand for products that are available only at the sponsoring chain or, as a Safeway executive stated, "to create products so that customers will say, 'I want this, and Safeway is the place to buy it'" (Liesse 1993, p. 4). This will require that marketers of private label lines be aware of customer requirements and actually benchmark their offerings against category leaders to ensure acceptable or superior quality levels.

Limitations We recognize that, because of resource limitations, it was not possible to identify the relative importance of specific extrinsic cues (e.g., package design, price, level of advertising) that influence consumers' evaluations of store brand grocery items. Researchers in the future could manipulate such extrinsic cues independently to assess their relative importance. In our experiment, the intrinsic cues had not been objectively rated as being of high, medium, or low quality. In further replications, such information would permit stronger tests of the various research hypotheses proposed. A particularly interesting extension would be to include brand pairs (a national brand and a store brand) that are similarly configured intrinsically along with brand pairs that are not similarly configured intrinsically and test for differences in quality judgments. A finding that national brands are rated better than store brands even when store brand ingredients are superior to those of national brands would offer strong evidence that extrinsic cues dominate intrinsic cues in the quality assessment process of these respective brands. Generalizability of the results presented here must be tempered with the realization that our analysis is based on five product categories. However, the size of our product sample compares favorably with that employed in past cue utilization research, in which two or three product categories typically have been used (Purwar 1982). Moreover, the lack of an interaction of product with any of the other experimental factors speaks for the robustness of the findings. Although we used private label brands sponsored by supermarket chains that dominate the study region and claim highly innovative packaging and branding strategies, it is possible that there are other store brands sponsored by different chains that are marketed with even greater attention to packaging and other extrinsic cues. Hence, a replication of our experiment using store brands sponsored by a chain known for highly sophisticated advertising or packaging strategies might provide supporting evidence of our findings and offer additional insights.

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36 /Journal of Marketing, October 1994