Original Article
Consumer choice and preference
for brand categories
Received (in revised form): 6th November 2012
Sanjoy Ghose
is a Professor of Marketing and the Associate Dean of Research and Doctoral Program at the Sheldon B. Lubar School of Business,
University of Wisconsin-Milwaukee. He has a PhD degree in Marketing from Carnegie Mellon University. He also has an MS
(Marketing) from Carnegie Mellon and an MBA degree fromWashington State University. His BTech degree in Electrical Engineering
is from the Indian Institute of Technology (IIT) at Kharagpur in India.
Oded Lowengart
is an Associate Professor at Department of Business Administration and Dean of the Guilford Glazer Faculty of Management,
Ben-Gurion University of the Negev, Israel. He has a PhD degree from the University of Wisconsin-Milwaukee.
Correspondence:
Sanjay Ghose, Sheldon B. Lubar School of Business, University of Wisconsin, PO Box 742, Milwaukee,
WI 53201, USA
E-mail: sanjoy@uwm.edu
ABSTRACT
In this study, we explore how the entrance of new international brands affects
market dynamics in amarket where national, international and private brands are present. The
entire focus of the present research is to understand the phenomena of consumer choice and
preference in the backdrop of such a market. We model consumer choice in the context of
these different categories of brands by using a multinomial discrete choice model. The estimated
model provides us with several diagnostic findings of managerial interest especially
with respect to what kinds of product attributes differentially affect choice probabilities of
different categories of brands – the international, the national and the private.
Journal of Marketing Analytics
(2013) 1, 3–17. doi:10.1057/jma.2012.1
Keywords:
marketing strategy; segmentation; brand categories; multinomial logit choice
model
INTRODUCTION
In growing economies especially for common
frequently purchased products (for example,
soaps, shampoos, toothpastes and so on.),
the market often contains both private and
national brands. A private brand is likely
to come from a small local manufacturer
or a local retail chain. A national brand
on the other hand, is also a domestic brand
but is a much larger player in the country,
and typically spends substantially more on
marketing expenses than a private brand.
As the economy continues to emerge and
consumers prosper along with that, the
market now becomes attractive to global
companies who often possess in their product
lines, brands of international repute; such
a brand if present in an emerging market can
be viewed as an international brand. In the
current research we use a choice modelling
approach to empirically examine the very
interesting dynamics between the categories
of international brands, national brands and
private brands.
Firms are increasingly expanding globally
as they realize that this is a significant source
for potential sales and profits growth. For
instance, the share of global trade has
increased significantly over the recent past at
6 per cent annually between 1990 and 2008
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2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17
www.palgrave-journals.com/jma/
compared with a 3.1 per cent growth in
world GDP (WTO, 2011), indicating the
importance of such activity to firms.
The increased activity of firms in the
global arena has created a challenge for
international marketers as they need to
compete against local products in diverse
consumer markets and segments. Specifically,
once introduced into a new country, an
international brand needs to be positioned
against local operating brands. The task of
identifying appropriate brand positioning
strategies, is a complex one as it involves
different local brands that, in some cases,
have never been considered as competitors by
the company marketing the international
brand. Furthermore, consumers in a different
country are likely to significantly vary in their
preferences and perceptions compared with
those in the home country market of the
international brand. Among other things,
variations in the cultural backgrounds of
consumers in different countries might have
a significant impact on their preferences for
international and local brands.
The increased popularity of global brands,
and the relatively similar big city customer
profiles across countries (Quelch, 1999) are
having an effect on the way marketers view
the attractiveness of international markets. If
marketed well overseas, such brands can not
only be revenue generators in the short run,
but also have the potential to avail of at least
some economies of scale across countries in
the long run. The key to marketing well of
course is to be able to compete well with
others including existing local brands such as
national and private brands.
A typical market is characterized by the
presence of many different kinds of brands
Consumers have to make their own
judgments about the properties of these
brands before making a choice. In consumer
markets, the origin of the brand often
provides cues that help consumers in their
choice-making process. One way to identify
brand origins, for example, is to check
whether it is a manufacturer brand or a
private label brand. Academic researchers
are increasingly studying the dynamics of
these two kinds of brands on actual choice
(for example, Sethuraman, 1996). In
advanced countries, these two types of brands
are major players, and research has brought
out interesting insights into how consumers
react to them.
In other countries, which have been more
recently exposed to international marketing,
the situation is actually more complex. The
presence of international brands, their own
national brands and their own private brands
often characterize such markets. Consumer
perceptions and preferences with respect to
this interesting mix of brand categories, have
received little attention in the academic
research literature.
Exploring of current brand positioning
and preference in such countries where
introduction of international brands occurred
in the relatively recent past, might be a good
approach for getting more insights into the
dynamics of international brands. In other
words, such countries present an opportunity
for academic researchers to examine how the
market changes after some years have elapsed
since the introduction of such international
brands. It would also provide a base to
forecast market dynamics in new similar
markets.
The literature has mainly focused on
category competition between local brands
(that is, between national and private brands).
There is relatively little research, however,
that explores the driving forces behind
brand preferences for international brands in
international markets in the backdrop of
consumers’ choice between international
and domestic brands. Issues such as
identification of the salient product
characteristic-types that drive brand
preference and choice, and variations in
such saliencies and effects in the presence of
consumer segment heterogeneity, have not
been fully addressed. The purpose
of this study, therefore, is to fill this void
in the literature by analyzing the preference
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formation and choice between the categories
of international, national and private
brands.
In the present research, we use data
from the Israeli market to examine this
scenario. In Israel, the sequence of brand
introductions was the following: First came
national brands, then private labels and more
recently, international brands. It is logical to
expect that consumers would react differently
to the positioning of these brand classes.
Their perceptions of the brands’ positionings
should also affect consumer choice patterns.
This article explores these aspects.
The characteristics of international
brands have been discussed by Quelch, 1999.
Similarly, Nandan and Dickinson, 1994
have outlined the properties of private brands.
Of course, there is no dearth of articles on
national manufacturer brands. However,
there is very little research on how consumer
choice is affected by the unique qualities
of these different brand categories in an
emerging market. Here, we try to fill this
gap in the literature.
In order to study this problem, we use
a choice modelling approach, employing the
multinomial logit model. We use the choice
model to uncover salient attributes that are
involved in consumers’ choice decisions.
Estimation of the model provides interesting
insights into how different product attributes
drive choices often differently for different
categories of brands. Such diagnostics lead
to useful managerial implications. We also
use a preference regression approach to
uncover the preference drivers for the three
different categories of brands.
In the next section of the article, we
provide a background of our research and
draw on the literature to develop some theory
and a set of hypotheses. The following section
contains a description of our model and the
data used to estimate the model. Next, we
report the results of our empirical analysis.
We end the article by summarizing our
findings and highlighting the managerial
implications.
BACKGROUND
In the marketing literature, there has been
extensive investigation of national brands
and the emergence of private brands and
generics (Blattberg & Wisniewski, 1989;
Mulhern & Leone, 1991; Blattberg
et al,
1995; Sethuraman, 1996). These studies were
mainly concerned with promotional schemes,
price differentials and so on. In addition
researchers have investigated consumers’
perceptions of national, private and generic
brands to better understand the differences
and similarities between them (Bellizzi
et al,
1981; Wilkes and Valencia, 1985; Nandan
and Dickinson, 1994; Prendergast and
Marr (1997)). Using this type of information,
some authors have suggested marketing
strategies for these types of brands (for
example, Lal, 1990). However, relatively little
work has been done on what drives
consumers’ preferences and choices toward
such brands; in particular the issue of how
product attributes affect consumers’
preferences and choice remains less explored.
Yet, another dominant characteristic of
this research stream is the context of this
research. Most of these investigations have
been focused on established markets, such
as the U.S., where most of the dominant
brands are local brands (that is, marketed
mainly in the U.S.), and where there is
presence of private brands and generics
(McGoldrick, 1984, Harris and Strang,
1985). The issue of brands’ preferences
however, is also very relevant in the case
of a changing marketing environment in
emerging markets where the market
experiences an increase in the heterogeneity
of the brand category offerings. This includes
an increase in the variety of the brands’
offering (that is, new international brands),
and an increase in purchasing power
coupled with an increase in media exposure
(that is, more TV channels, international
broadcasting, and so on.), that increases
exposure of consumers to international
brands. It is evident that in markets, like
Consumer choice and preference for brand categories
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2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17 5
the new ‘emerging’ ones, such as in Eastern
Europe and Asia, the activity of international
brands has intensified (for example, Berrell,
1995;Wall Street Journal, 1997; Malik, 1995;
Rosen
et al, 1989). The findings of this
literature highlight the importance of
successful introductions of brands abroad.
The introduction of new international
brands in such an environment needs to be
sensitive to cultural differences among
consumers in a foreign emerging market.
For example, consumers might have different
attitudes with respect to the brands’ country
of origin. In our research we pay special
attention to this issue.
In our study, we model consumers’
perceptions about product attributes in order
to be able to provide insights into the
question of how product attributes affect
consumers’ preferences for different brand
types. Specifically, we consider the case
of the categories of international, national
and private brands.
In order to depict the setting of an
evolving market environment, we consider
the Israeli market that experienced a process
of deregulation and international brands’
introduction relatively recently, and can be
used as an approximation to the expected
behaviour of other markets that may go
through this process in the future. In the
Israeli market, major structural changes
and reforms in the economy occurred to
increase the level of competitiveness in
consumer markets. Additional TV channels
were added, thus greatly increasing
consumers’ exposures to TV commercials
in general, and to international brands in
particular. Until then, there were only
a few TV channels that did not have too many
commercials. These types of de-regulations
simultaneously increased consumers’
awareness of international brands and affected
their choice dynamics.
In different foreign markets, there are many
cultural differences among consumers that can
influence the success of international brand
introduction in these countries. Although
marketers consider these differences, they are
not fully explored (Roth, 1995). There is a
thought that the broad main core attributes
of brands can be kept across countries, and
their execution can be adapted to local tastes
(De Chernatony
et al, 1995). Standardization
and adaptation approaches should consider
potential differences in preferences and
attitudes toward local products.
Concentrating on the Israeli market
enables us also to explore types of cultural
differences among consumers that can be
found in other markets, too, in terms of the
level of importance of buying local products.
Long ago, it had been advocated and
promoted in Israel that buying is a ‘good’
thing to do. Even recently the ministry of
industry and trade had launched a campaign
that advocated the buying of local products
(Chen, 2009). Along with an increased
demand for local products, this act also
alleviated some of the potential pressures to
allow for the importing of foreign products.
On the basis of this background, we believe
that consumers will have quite a different
perceptual perspective of the three brand
types. We expect choice and preference
differences between the low importance of
buying local products segment and the high
importance segment.
Theory & Hypotheses
In the present research, we will employ both
choice modelling and preference regression
approaches. In the choice modelling portion
we will endeavour to identify the drivers that
consumers use to choose between brands
belonging to the categories of international,
national and private. In the preference
regression approach, the goal is to identify the
cues that consumers may use to determine
how much they like an international (or
national or private) brand. Thus, the choice
modelling results would indicate what cues
brand managers should focus on when they
are competing for market shares between
international, national and private brand
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categories. The preference regression results
would indicate how a manager for an
international (or national or private) brand
should manage the brand drivers/cues such
that consumer preferences for this brand
independently or in comparison to other
brands of the same category is enhanced;
results from this would enable the manager of
a new international brand to get an idea of
how to manage the brand cues such that this
new brand gets a higher preference than an
existing international brand in the market.
Choice modelling and preference modelling
together would provide very useful
complementary information for the brand
manager.
Given the complementary, but different
thrusts of choice modelling and preference
modelling, we expect
Hypothesis 1:
The drivers that show
up as salient for the choice modelling
would be different from those that
get indicated by the preference
analysis.
Cue utilization theory provides some
insights about what kinds of drivers/cues
affect consumer judgments of product
quality. Richardson
et al, 1994 use this
knowledge to develop their hypotheses on
consumer evaluations of national and store
brands; we draw from their discussions to
hypothesize the nature of cues that may affect
choice and preference for the categories of
brands we are examining in our current
research.
Cues are usually classified as extrinsic
or intrinsic (Olson and Jacoby, 1973) in
nature. Extrinsic ones are external to the
physical product itself, and examples would
include packaging, price, brand reputation or
brand equity. Intrinsic cues are those product
attributes which when changed, will alter
the physical properties of the product. Since
these physical properties of the product
are expected to be the some of the actual
drivers of choice and preference, we focus
on these and term them intrinsic drivers
or core attributes for the purpose of our
present research. In the context of our study,
we would like to separate the traditional
extrinsic cues into the categories of brand
equity or reputation, price or distinct value
and packaging, and investigate their roles
as drivers of choice and preference.
The choice model analyzes the
competitive dynamics between the categories
of international, national and private
brands. Richardson
et al, 1994 mention
that extrinsically store brands suffer from
deficiencies relative to national brands. This
is too well known to consumers and therefore
we believe that consumers would not use
the obvious to choose between the three
brand types; thus extrinsic cues are unlikely to
drive brand category choice at the aggregate
market level. The difference in the qualities of
the intrinsic attributes across the three brand
categories however may not be that obvious
a-priori
to the consumer; we therefore believe
that consumers would draw from marketing
communications and other similar
information to develop notions about the
intrinsic attributes, and some of these
intrinsic attributes would emerge as salient
drivers of aggregate market level choice in the
choice model based analysis.
Hypothesis 2:
The choice model analysis
for the aggregate market should indicate
that some intrinsic cues are the primary
drivers of brand category choice
between the categories of international,
national, and private; extrinsic cues
should not affect choice substantially.
The preference analysis indicates what
attributes consumers use to develop a degree
of preference for a particular brand category;
naturally different drivers could be salient
for each of the three brand categories. We
conduct our empirical analysis with data from
an emerging market with relatively recent
entries of international brands compared with
the longer existence of national and private
brands. Hence, we believe the consumer
will expend some effort to cognitively judge
Consumer choice and preference for brand categories
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2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17 7
the nature of the international brand, and
therefore we expect that she/he will use
a number of different cues ranging from the
intrinsic to extrinsic to identify her/his
preference level for the international brand
category. The private brand category is at the
other end of the spectrum from international
brands. When consumers assess a particular
private brand independently or as compared
with other private brands, it does not make
sense for them to focus on packaging or price
for this evaluation; it would make sense for
them though to use some heuristics about
their overall notion about the brand
reputation or equity to make a preference
judgment. Given that private brands typically
would not put out informative type of
advertising, consumers would not be aware
much about the intrinsic cues of the private
brand; hence intrinsic cues are unlikely
to be used for the preference judgment
within the private brand category.
Hypothesis 3:
The aggregate market
preference model analysis for the
international brand category should
indicate that consumers use a variety
of both intrinsic and extrinsic cues to
make preference judgments; for the
private brand category, preference
judgments should be driven mainly
by brand equity and reputation type
attributes.
METHODOLOGY
Our analysis is conducted on international,
national, and private brands of shampoo.
We selected this category as it is one of the
earlier categories to include all the three
brand categories in this market.
Our modelling approach is based on two
different methods. In order to examine
consumers’ choice’ we used a multinomial
logit model (MNL) and for preference
formation analysis, a linear regression was
used. Logit type models are appropriate
to use when the dependent variable is
categorical (for example, Roy and Ghose,
2006)
The MNL model is based on choice
theory and falls within the category of
random utility models (McFadden, 1974).
We derive a probabilistic description of
brand preference on the basis of product
attributes for the three brand categories.
In order to capture consumers’ heterogeneity
in terms of familiarity and usage levels
among other things, and in terms of their
cultural differences, we apply the model to
two different segmentation schemes. The
first is capturing the differences between
males and females and the second is between
different levels of importance of buying local
products.
Data
To examine the differences in perceptions,
choice and preference between the three
different brand categories, we use data that
was collected in a large southern town in
Israel where we sampled individuals who
were familiar with these three brand
categories. This was done to avoid any
possible biases because of respondent
unfamiliarity. The respondents were asked to
rate their perceptions of 9 different attributes
for the categories of international, national,
and private brands on a scale of 1 to 7, where
1 is very low and 7 is very high. The attributes
used were: Scent level (very low to very
high), Foam level reflecting – how bubbly it is
(very low to very high), After use reflecting –
how the hair feels after shampoo use (very
low pleasantness to very high pleasantness),
Packaging (very unattractive to very
attractive), Variety reflecting multiple options
like ‘for normal hair’ or ‘for dry hair’ (very
low variety to very high variety), Texture of
the shampoo (very low smoothness to very
high smoothness), Price perception (very
inexpensive to very expensive), perception
of Vitamin content that would nurture the
hair (very low content to very high content)
and Reputation of that shampoo (very
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& 2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17
low reputation to very high reputation).
Respondents were also asked to make a
choice from the three different brand types.
In addition, the respondents were asked to
state their preference levels separately for
brands in these three different categories;
a 7 point scale (do not prefer at all to prefer
very much) was used for this. The attribute
rating task, the choice task and the preference
rating task were randomized across the
respondents in our sample. Overall, our
sample included 243 respondents.
The Model
The multinomial logit (MNL) model is
a simultaneous compensatory attribute choice
model incorporating the concepts of
thresholds, diminishing returns to scale and
saturation levels. The MNL estimates for
each individual the individual’s probability
of choosing each alternative in the choice
set. In addition, it allows for diagnostic
information regarding the salient attributes
involved in the choice formation
process.
The MNL assumption is that the
consumer’s overall liking for an alternative
is a function of the perceived relative utility
of the alternative, as evaluated by the
consumer. In addition, it is assumed that the
utility function can be separated into: (1)
a deterministic component (measured in
terms of perceived value of the attributes of
the alternative), and (2) a random error,
which is independent and identically
distributed (iid) across all individuals with a
Weibull distribution.
Let
Uij ¼Vij þeij denote the utility of
individual
i (i¼1,2,yn) from choosing
alternative
j ( j¼1,2,ym), whereVij – is the
deterministic component of utility and
eijt – is
the random component of utility.
Thus, the probability,
Pij that an alternative
j
will be chosen from a set of alternatives j
depends only on the deterministic
component of the utility function, such that
P
ij ¼ Pr½Uij¼J XUij 6¼J ; 8; 2 Cj, and
P
ij ¼
exp
ðVijÞ
P
j¼m
j
¼1 expðVijÞ
ð
1Þ
where
Vij ¼ PK
k
¼1 akxijk, ak is the
importance of the
kth attribute in the utility,
and
xijk - is the rating of consumer i of
attribute
k for alternative j.
Thus, the deterministic part of the utility
in our case is:
V
ij ¼ a1Scentj þa2Foamj þa3Afterusej
þ
a4Packagej þa5Varietyj
þ
a6Texturej þa7 Pr icej
þ
a8Vita min sj þa9Reputationj ð2Þ
and one needs to estimate the parameters
a0
k
s.
The preference regression model utilizes
the same product attributes but estimates the
relative importance of th e different attributes
in forming preference for the different brand
categories separately as follows.
Pref
j ¼ b1 Scentj þb2 Foamj
þ
b3 Afterusej þb4 Packagej
þ
b5 Varietyj þb6 Texturej
þ
b7 Pricej þb8 Vitaminsj
þ
b9 Reputationj ð3Þ
where Pr
efj – is the preference for the j th
brand category where
j¼1,2,3 and b0
k
s –
parameters to be estimated for
k¼1,y,9.
Table 1
: Multinomial logit choice model coefficients:
Aggregate sample
Variable Parameter Significance
level
Scent 0.402 0.001
Foam
0.238 0.034
After use 0.384 0.001
Package 0.030 0.738
Variety 0.055 0.598
Texture 0.132 0.167
Price 0.037 0.603
Vitamins
0.113 0.254
Reputation 0.246 0.006
Log likelihood
function
Consumer choice and preference for brand categories
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2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17 9
RESULTS
In this section, we present the results of the
MNL model for choice and the regression
analysis for preference formation for the three
different brand categories. In Table 1, the
results of the MNL for the total sample are
presented.
We can evaluate the results by dividing the
different attributes into core and extrinsic
attributes (De Chernatony
et al (1995)). This
type of analysis enables us to determine what
component of the product has how much
impact on the preference formation of
consumers. Thus, we separated the product’s
attributes into: (1) brand equity (that is,
reputation), (2) distinct value (that is, price),
(3) core attributes or intrinsic cues (that is,
shampoo-related attributes such as foam,
scent, texture, and so on.) and (4) purely
external attributes (that is, packaging).
Items 1, 2 and 4 are different kinds of
extrinsic cues.
It can be seen that scent, foam, after
use, and reputation are significant at least
at the 0.05 level. In other words, the core
attributes of the product and its brand equity
are salient in the choice process of the whole
sample. In terms of goodness of fit, the model
was able to classify correctly 71.2 per cent
of the observations with respect to their
chosen brand category.
Next, we analyze differences between
males and females as presented in Table 2.
The results indicate that scent and foam
are salient in the choice process of the male
segment whereas scent, after use, texture,
vitamin content and reputation are salient
in the females’ consumer segment. That is,
males use only two core product attributes
in their choice process for shampoo where
women use multiple core product attributes
as well as the brand equity attribute in their
choice process. These differences clearly
indicate that different marketing strategies
can be effectively constructed for these two
segments which will, for example, focus on
the scent and foam of the shampoo for men
(that is, highlighting the core benefits),
whereas for women more sophisticated
marketing communication strategies could
highlight the branding and soothing aspects
of shampoos.
The model was able to classify correctly
74.7 per cent of the observations with
respect to their chosen brand category. To
verify whether this segmentation scheme
is meaningful (that is, whether separating
the sample into males and females result
in a better data fit than would an aggregate
sample), we conducted log-likelihood
tests, –2 log
l, where l¼(LLsegments –
LLaggregate) (Gensch, 1985). The
log-likelihood test,
2 log l¼ 49.70 is
significant at the 0.001 level. This
segmentation scheme, therefore, is
meaningful in the sense that it was able
Table 2
: Multinomial logit choice model coefficients: Male and female segments
Attribute Males Females
Parameter Significance level Parameter Significance level
Scent 0. 506 0.002 0.454 0.019
Foam
0.352 0.046 0.289 0.139
After use 0.949 0.579 0.783 0.001
Package 0.305 0.839 0.082 0.568
Variety 0.501 0.729 0.078 0.713
Texture
0.926 0.466 0.692 0.001
Price
0.591 0.520 0.009 0.954
Vitamins 0.110 0.400
0.508 0.010
Reputation 0.903 0.442 0.682 0.001
Log likelihood function
89.1846 — 58.5276
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to statistically significantly improve the
model fit.
In the next step of the analysis, we analyze
the effects of culture from a local buying
perspective. As consumers in many countries
vary in the degree to which they are accepting
of international products into their market
(Holt
et al, 2004), it is important to
understand this potential source of consumer
heterogeneity. This type of segmentation has
been used to examine heterogeneity among
consumers in other emerging markets such as
China (Kwok
et al, 2006) and across countries
(Hsieh, 2004). We operationalized this
variable by asking respondents to rate on a
scale of 1 to 7 how important it was for them
to purchase local products. We grouped the
respondents into three groups such that those
respondents who rated importance as low
were grouped into the low importance of
buying local products (that is, those
respondents who rated this variable below 3),
those who rated this importance high on the
scale were grouped into the high importance
of buying local products group (that is, those
consumers who rated this variable above 5)
and those who rated this importance in the
middle of the scale were grouped into the
medium importance of buying local products
group (that is, those consumers who rated this
variable at 3, 4 or 5 on this scale). The results
of this segmentation scheme are presented in
Table 3.
The results from Table 3 provide insights
about a cultural difference impact in such an
emerging market. Those consumers who
placed a low importance on the buying of
local products, utilized scent, variety,
vitamins, and reputation in their choice
process and to a certain degree the after use
feel as well. Those who placed a high
importance on the buying of local products,
used scent as a salient attribute in their
choice process and to a certain degree,
the foam of the shampoo. The medium level
of importance segment, utilized the after use
feel, and price in the choice process. It is
interesting to note that the low importance
consumers exhibit a more complex choice
process with core and brand equity attributes
being salient in the choice process whereas
the high importance segment uses only a
fraction of the core attributes. The medium
importance segment reveals the salience
of a new attribute in the choice process,
that is, price. By using cultural differences,
we are able to gain more insights into
the choice process for shampoos in
different consumer groups; usage of such
a segmentation scheme is somewhat unique
in the context of these brand categories
in an emerging market. The model was
able to classify correctly 74.7 per cent
of the observations with respect to their
chosen brand category. The log-likelihood
test, -2 log
l¼ 25.032 indicating that
Table 3
: Multinomial logit choice model coefficients: Importance of buying local products’ segments
Attribute Low importance Medium importance High importance
Parameter Significance
level
Parameter Significance
level
Parameter Significance
level
Scent 0.492 0.028 0.2877 0.232 0.344 0.035
Foam
0.205 0.403 0.109 0.655 0.375 0.067
After use 0.392 0.075 0.606 0.015 0.247 0.167
Package
0.215 0.296 0.060 0.771 0.172 0.275
Variety 0.532 0.054
0.132 0.584 0.514 0.726
Texture 0.197 0.270 0.159 0.526 0.119 0.401
Price
0.075 0.636 0.355 0.033 0.107 0.347
Vitamins
0.641 0.006 0.055 0.829 0.081 0.597
Reputation 0.579 0.002 0.298 0.127 0.094 0.538
Log likelihood
function
Consumer choice and preference for brand categories
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2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17 11
the segmentation scheme used here is
statistically significant and meaningful.
The next phase of our analysis is
preference formation modelling. We
separately estimated the regression
parameters, as in Equation (3), for each
brand category – international, national
and private, following the same type of
analysis in terms of aggregation and
segmentation. The results of the aggregate
analysis are presented in Table 4.
From Table 4 it can be seen that the
preference formation for the international
brand category is very complex and involves
many product attributes. Core (scent, foam,
after use and vitamins), brand equity
(reputation) and distinct value (price) are
significant in this analysis. It appears that
consumers are presuming that a higher priced
international brand signals higher quality
and thus prefer a higher rather than a lower
priced international brand. The national
brand preference formation is based on core
(scent and after use) and to a certain degree
on brand equity (reputation). The private
brand preference is solely based on brand
equity (reputation). These results might
be expected, intuitively, as they represent
different types of products in terms of
positioning, complexity and branding.
Only a single significant attribute exists in
the case of the private brand category. This is,
in a sense, a non-compensatory preference
formation process where only the brand
equity characteristic (that is, reputation)
matters in forming preference for that brand.
This result overall, is consistent with previous
literature in preference formation for food
commodities (for example, chicken, beef) –
which in general as a generic category is
conceptually close to that of private brands –
where also only a single variable was
significant (Heiman and Lowengart, 2008).
Such a preference formation process might
be the result of a halo effect. Consumers
could be using a global evaluation in
their mind for such a brand and do not
discriminate between its attributes to form
their preference, but rather use this global
evaluation to determine their behaviour.
Next, we analyze preference formation for
males and females and present the results in
Tables 5 and 6.
The results of the gender segmentation
scheme reveal some similarities and
differences between the three different brand
categories compared with the aggregate
analysis and within the different brand
categories for each segment. The degree
of complexity is similar to the one in
Table 4 for the aggregate analysis such that
the international brand category preference
formation is driven by multiple attributes,
and for the national and private ones less
number of attributes is involved in this
process.
Table 4
: Preference regression analysis – Aggregate level for the three brand categories
Attributes International brand category National brand category Private brand category
Parameter Significance level Parameter Significance level Parameter Significance level
Constant
1.298 0.028 0.181 0.751 0.381 0.335
Scent 0.308 0.001 0.375 0.001 0.063 0.452
Foam 0.309 0.001
0.014 0.898 0.074 0.430
After use 0.281 0.003 0.241 0.031 0.161 0.131
Packaging 0.045 0.586 0.051 0.632
0.039 0.656
Variety
0.091 0.391 0.010 0.931 0.133 0.172
Texture 0.071 0.424 0.137 0.181 0.052 0.603
Price 0.181 0.001 0.022 0.778 0.111 0.107
Vitamins
0.179 0.058 0.133 0.241 0.030 0.756
Reputation 0.275 0.002 0.196 0.075 0.282 0.004
R
2 0.420 — 0.273 — 0.220
Ghose and Lowengart
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& 2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17
The preference formation basis for the
international brand category for the female
consumer segment is very rich and complex
and involves core, distinct value and brand
equity attributes. Surprisingly, variety has a
negative effect on preference towards this
brand type. This process shows that a small
number of attributes are important when it
Table 5
: Preference regression analysis – Disaggregate level for the three brand categories – Female
segmentation scheme
Attributes International brand category National brand category Private brand category
Parameter Significance level Parameter Significance level Parameter Significance level
Constant
2.964 0.000 1.867 0.020 0.238 0.676
Scent 0.390 0.001 0.281 0.113 0.060 0.557
Foam 0.260 0.015 0.088 0.635 0.003 0.984
After use 0.355 0.005 0.350 0.013 0.231 0.086
Packaging 0.091 0.299
0.113 0.437 0.036 0.803
Variety
0.430 0.002 0.037 0.801 0.204 0.127
Texture 0.376 0.002 0.304 0.022 0.238 0.073
Price 0.232 0.001 0.157 0.223 0.005 0.957
Vitamins 0.003 0.977
0.063 0.680 0.045 0.723
Reputation 0.252 0.019 0.248 0.102 0.279 0.054
R
2 0.619 — 0.427 — 0.253
Table 6
: Preference regression analysis – Disaggregate level for the three brand categories – Male segmentation
scheme
Attributes International brand category National brand category Private brand category
Parameter Significance level Parameter Significance level Parameter Significance level
Constant 0.364 0.704 1.674 0.051 0.499 0.384
Scent 0.314 0.042 0.515 0.003 0.148 0.323
Foam 0.321 0.036
0.075 0.651 0.137 0.330
After use 0.396 0.007
0.055 0.787 0.028 0.880
Packaging
0.368 0.054 0.119 0.453 0.043 0.732
Variety 0.276 0.105 0.306 0.125 0.037 0.803
Texture
0.206 0.119 0.026 0.875 0.230 0.165
Price 0.122 0.164
0.129 0.225 0.307 0.007
Vitamins 0.435 0.006
0.195 0.268 0.159 0.329
Reputation 0.426 0.008 0.020 0.900 0.424 0.005
R
2 0.327 — 0.221 — 0.268
Table 7
: Preference regression analysis – Disaggregate level for the three brand categories – Low importance of
buying local products
Attributes International brand category National brand category Private brand category
Parameter Significance level Parameter Significance level Parameter Significance level
Constant
1.909 0.013 0.805 0.293 0.488 0.308
Scent 0.532 0.001 0.344 0.041 0.060 0.613
Foam 0.264 0.031 0.298 0.072 0.021 0.884
After use 0.391 0.006 0.217 0.143 0.119 0.408
Packaging 0.009 0.932 0.203 0.233 0.068 0.594
Variety
0.226 0.133 0.089 0.577 0.115 0.404
Texture 0.099 0.404
0.054 0.747 0.007 0.960
Price 0.159 0.031
0.042 0.729 0.102 0.254
Vitamins -0.396 0.004
0.076 0.658 0.065 0.623
Reputation 0.475 0.000 0.155 0.348 0.195 0.127
R
2 0.585 — 0.380 — 0.209
Consumer choice and preference for brand categories
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2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17 13
comes to the national and private brand
categories as only a few core product
attributes are significant in addition to the
variable reflecting brand equity for the private
brand.
The preference formation of the male
segment did not include price in its
preference formation for the international
brand category quite unlike that for the
female segment. There are no major
differences between male and females when
it comes to the national and private brands
except that for the national brand category,
males used slightly fewer core attributes than
the females,
The last analysis we present, looks at
a cultural difference effect on preference
formation. For expository purposes
and conciseness, we do not present the
medium level. The results are presented in
Tables 7 and 8.
Analyzing the results from the tables
above, it can be seen that the ‘low importance
of buying local product segment’ uses
a complex preference formation process
when forming preference for international
brands with core, brand equity and the
price attributes involved in this process.
The ‘high importance group’ is influenced by
foam and price only for the international
brand category. It is interesting to note that
the private brand category has no significant
variables.
SUMMARY AND
CONCLUSIONS
Our analysis reveals that within a product
category (shampoo in our case) international,
national and private brands categories have
very distinct identities. They affect consumer
preferences and choice in various ways.
The impacts at the aggregate market level
also vary from those at some segment levels,
suggesting the varying utility of different
types of marketing strategies.
We have considered two kinds of
segmentation variables, one demographic
(gender) and the other cultural (one which
emphasizes importance of buying local or
not) in nature. At the segment levels as
well as at the overall market level, the brands
have been characterized by extrinsic and
intrinsic product attributes as well as
attributes reflecting value and brand equity.
Our preference regression runs identify
the drivers that are important in moulding
how consumers develop a liking for a specific
brand type, when the brand is considered
in an independent context. Our choice
modelling reveals what drivers are important
when international, national and private
brands compete with one another for
market share.
Choice modelling is closely in synch
with our main objective – to understand
how international, national brand and
Table 8
: Preference regression analysis – Disaggregate level for the three brand categories – High importance of
buying local products
Attributes International brand category National brand category Private brand category
Parameter Significance level Parameter Significance level Parameter Significance level
Constant
0.671 0.449 0.855 0.319 0.578 0.387
Scent 0.188 0.177 0.355 0.033 0.061 0.615
Foam 0.352 0.005
0.425 0.008 0.111 0.397
After use 0.188 0.164 0.344 0.051 0.144 0.369
Packaging 0.092 0.505
0.098 0.507 0.142 0.252
Variety
0.089 0.576 0.175 0.300 0.179 0.213
Texture 0.030 0.830 0.244 0.070 0.177 0.242
Price 0.225 0.004 0.010 0.925 0.099 0.366
Vitamins
0.081 0.559 0.104 0.493 0.056 0.705
Reputation 0.182 0.197 0.194 0.193 0.278 0.074
R
2 0.332 — 0.257 — 0.196
Ghose and Lowengart
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& 2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17
private brands vie with each other to get the
mind share of consumers in an emerging
market. The preference analysis provides
complementary information. For instance,
the latter analysis could indicate what kinds
of attributes might a new international
brand (possibly a future entrant) want to
stress if its goal is to gain the preference of
consumers within that category. Let us next
consider an example related to the choice
analysis: For an international brand to
compete with a national brand and a private
brand, the international brand should not
waste any resources utilizing any price
based strategy; this is based on the aggregate
level choice analysis. The reason is that the
price variable was not significant in the
choice modelling (see Table 1). However,
in preparing for the future entry of a new
international brand, the existing international
brands need to absolutely think of
considering a premium pricing policy today;
this deduction follows from the positive
and significant price coefficient for the
international brand category at the aggregate
market level in the preference analysis (see
Table 5). In the following paragraphs, we
discuss and summarize our other main results
and their implications.
The analyses of consumers’ preferences
and choice for international, national and
private brands, allow us to get a greater
understanding of product positioning and
targeting issues in an emerging market.
Our results indicate that there were
interesting patterns with respect to attributes
that were salient in consumers’ preference
and choice formations. In general, at the
aggregate level, the shampoo’s scent, foam,
after use feeling, and reputation were
significant in the choice process. Different
consumers’ groups, however, did not equally
value these attributes. In particular for the
male group, only the shampoo’s foam and
scent had significant effects on preferences,
while for the female group, scent, the after
use feeling, texture, vitamins and reputation
of the shampoo had significant impacts on
choice. Capturing the heterogeneity among
consumers with respect to the importance
of buying local products, it seems that
the low importance segment valued scent,
variety, vitamins and reputation in forming
preferences. The medium importance
segment valued the price and after use
feeling attributes, and the high importance
segment valued scent and foam. These
differences support our general research
expectation of differences in consumers’
attribute evaluations in affecting choice.
A result coming out from this study is
the possible identification of consumers
who halo in a choice or preference task. By
this we mean that some consumers do not
consider many attributes, and the outcome
of their behaviour is based probably on some
global evaluation of the brand. Further
research in exploring this issue through an
exploratory study might reveal the driving
forces behind such potential behaviour.
Future research can also benefit from two
types of extensions. The first is extending
this analysis to other non-durable product
categories with a similar market structure
and the second is to examine similar markets
that may go through this process at a different
point in time. Creating a longitudinal type
of study where perceptions, preferences and
choice are analyzed at various time periods
after an international brand is introduced,
will also be of use. This will provide a path
towards understanding steady-state-like
conditions.
Managers can get a better view of the
appropriate marketing strategies for different
brands categories (international, national
and private) by understanding what drives
consumers’ preferences and choice in general,
and different consumer groups in particular.
Our study shows that gender differences
are mainly reflected in that in the female
segment, choice is driven by brand equity and
core shampoo attributes (the physical aspects
of the product), whereas the male segment’s
choice is not driven by brand equity aspect of
the product, but only by the intrinsic aspects
Consumer choice and preference for brand categories
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2013 Macmillan Publishers Ltd. 2050-3318 Journal of Marketing Analytics Vol. 1, 1, 3–17 15
(core attributes) of the product. For those
consumers who are valuing locally produced
products, choice is driven by a few intrinsic
product attributes, whereas those consumers
who have low importance for locally
produced products have their choice driven
by both intrinsic and brand equity attributes.
Finally, we would like to compare our
analysis findings with the theoretical
hypotheses
that we had identified in section 2
of the article. Hypothesis 1 is supported
indicating that the choice process is quite
distinct from the formation process for
preference assessments, as indicated by the
clearly different patterns of drivers that show
up as salient in the two types of analyses.
We found partial support for Hypothesis 2.
As expected, intrinsic cues were significant
drivers of aggregate market level choice
between the three brand categories. In
contrast to our expectation though, one
extrinsic cue, namely brand reputation
turned to be a salient variable also. Hypothesis
3 was supported. At the aggregate market
level, the preference judgment for the
international brand category was formed
by a complex compensatory judgment
process involving a variety of intrinsic and
extrinsic cues; for the private brand category,
the extrinsic cue of brand reputation was the
sole salient determinant of preference
judgment.
Our research has brought out several
findings of managerial significance for these
brand categories in the context of an
emerging market. These findings could
be the platform from which future researchers
can plan to explore other competitive
aspects that may affect consumer choice and
preference in emerging markets.
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