Consumer Misinformation and the Brand Premium: A Private Label Blind Taste Test

51 Pages Posted: 5 Nov 2018

See all articles by Bart Bronnenberg

Bart Bronnenberg

Tilburg University; Centre for Economic Policy Research (CEPR)

Jean-Pierre Dubé

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Robert E. Sanders

University of California, San Diego (UCSD) - Rady School of Management

Date Written: October 2018

Abstract

We run in-store blind taste tests with a retailer's private label food brands and the leading national brand counterparts in three large CPG categories. In a survey administered during the taste test, subjects self-report very high expectations about the quality of the private labels relative to national brands. However, they predict a relatively low probability of choosing them in a blind taste test. Surprisingly however, an overwhelming majority systematically chooses the private label in the blinded test. During the week after the intervention, the tested private label product market shares increase by 15 share points, on top of a base share of 8 share points. However, the effect diminishes to 8 share points during the second to fourth week after the test and to 2 share points during the second to fifth month after the test. Using a structural model of demand, we show these effects survive controls for point-of-purchase prices, purchase incidence, and the feedback effects of brand loyalty. We also find that the intervention increases the preference for the private label brands, and that it decreases the preference for the national brands, relative to the outside good. The findings are consistent with a treatment effect of information on demand where the memory for this information decays slowly over time. Alternative explanations to the information treatment are ruled out.

Keywords: brands and branding, consumer information, market structure, private label

JEL Classification: L11, L15, M31, M37

Suggested Citation

Bronnenberg, Bart and Dube, Jean-Pierre H. and Sanders, Robert E., Consumer Misinformation and the Brand Premium: A Private Label Blind Taste Test (October 2018). CEPR Discussion Paper No. DP13283. Available at SSRN: https://ssrn.com/abstract=3278658

Bart Bronnenberg (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jean-Pierre H. Dube

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://gsb.uchicago.edu/fac/jean-pierre.dube

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert E. Sanders

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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