Positioning of store brands

In this dissertation, we examine the retailer\u27s store brand positioning problem using a game theoretic approach. Specifically, we consider a product market consisting of two national brands that may differ in strength. Position of the store brand determines the extent to which it will compete with each of the national brands. From the point of view of the retailer, the optimum position for the store brand is the one that maximizes the category profits. Our theoretical analysis suggests that the retailer should position the store brand next to the leading national brand, as opposed to targeting the weaker brand or positioning in between. Our analysis also indicates that the stronger the leading national brand, the more profitable is this positioning strategy. Further, even if the national brands are equal in terms of strength, the store brand should target one or the other of them. We conducted two empirical studies to test the implications of the analysis. The first study provides evidence that if the store brand follows a targeting strategy, the target is the leading national brand. In addition, the higher the market share of the leading national brand, the higher the probability of being targeted by the store brand. The second study provides mixed support for our theoretical results. We find that the demand for the store brand is affected more by the price of the leading national brand than of the secondary one, and this is consistent with our analysis. Also consistent with our analysis is the finding that the leader\u27s price has a larger effect on store brand demand than on the secondary brand\u27s demand. However, price of the store brand affects the secondary brand\u27s demand more than the leader\u27s demand. Our theoretical analysis does not predict this relationship