Understanding Store Brand Purchase Behavior Across Categories,” Working

One of the most important activities for the supermarket retailers is the creation and maintenance of their store brands. A well-developed private label program could not only contribute directly to retailer profitability but also have positive indirect effects such as better bargaining power with the manufacturer and building store loyalty. Given their strategic importance, it is imperative for retailers to understand the behavior of their store brand buyers. In this paper, we investigate whether store brand preference is cat-egory specific or a general household “trait”. We develop a multi-category brand choice model where the household and category specific brand preferences and marketing mix sensitivities are decomposed into three components: due to observed household factors, unobserved household and category specific factors that uncorrelated across categories, and unobserved household and category specific factors that correlated across categories. Further, to keep the dimensionality of the third component manageable, we impose a factor structure. Besides parsimony, the proposed methodology allows us to elicit the basic latent tendency for a household to buy the store brand while controlling for othe