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Nov 20, 2019 2019-11 Business Administration Faculty

What your preference for name-brand products says about you

Your preference for name-brand products over private-label versions may say a lot about your views on society and your personal values, according to a new study co-authored by Gies College of Business professor Carlos Torelli. In their paper, “The interactive effect of power distance belief and consumers’ status on preference for national (vs. private-label) brands,” Torelli and his colleagues show that consumer preference for national brands may be the result of a person’s own status within society and on that person’s beliefs toward social hierarchy.

Torelli_Carlos (1)While the majority of consumers believe private-label brands have improved over time and offer extremely good value, market share of these “off brands” remains low (10-15%). While this has puzzled marketers for decades, this new research suggests it may come down to what’s called “power distance belief (PDB)” – or the extent to which people accept and endorse societal hierarchy – and where consumers believe they fit within that hierarchy (high-status vs. low-status). Researchers found that among consumers who accept inequality and hierarchy (high PDB), the low-status consumers showed greater preference for national brands than high-status consumers. And that difference was even more pronounced among mundane, utilitarian products that hold low symbolic value.

“Consumers who view themselves as low in status place much higher value on products and brands that they feel can elevate their status,” said Torelli, professor of business administration at Gies College of Business. “Even products that hold low symbolic value, such as an alarm clock or bleach, can serve as signals to others when we reach for them on the store shelf or take them to the checkout lane. More importantly, these national brands serve a psychological purpose, as personal validation for many of these consumers. They feel like their status has been uplifted.”

PDB varies widely between cultures and nations, and in the United States it can fluctuate from state-to-state or region-to-region. Based on this new research, managers of national brands in traditionally high-PDB marketplaces (such as Mexico, Brazil, and China) may find success targeting consumers on the low end of the social hierarchy. However, for products with high symbolic value such as sunglasses or jeans, status-based segmentation will not be as effective because consumers of both low- and high-status overwhelmingly prefer national brands.

“This all sounds like bad news for private label brands, but there are positive steps they can take,” said Torelli, who teaches global marketing and brand management at Gies. “Instead of marketing the low price and good value of their products, these brands may be wise to increase their brand equity and create an upscale image. This could entice low-status consumers because of the perceived status that product provides.”

“The interactive effect of power distance belief and consumers’ status on preference for national (vs. private-label) brands” by Carlos Torelli (University of Illinois), Jessie Wang (Miami University), and Ashok Lalwani (Indiana University) has been accepted for publication by the Journal of Business Research.