Paul S. Richardsoii, Alan S. Dick, & Arun K. Jain

Extrinsic and Intrinsic Cue Effects onPerceptions of Store Brand Quality

The authors examine the relative importance of extrinsic versus intrinsic cues in determining perceptions of storebrand quality in an experiment using a sample of 1564 shoppers for five products. Results of the experiment sug-gest that consumers' evaluations of store brand grocery items are driven primarily by the extrinsic cues that theseproducts display rather than intrinsic characteristics. In addition, the authors found that a value for money orienta-tion taken by retailers in the marketing of their private label lines may represent a suboptimal strategy; they rec-ommend a quality orientation.

Store brand grocery items are products owned and brand-ed by organizations wbose primary economic commit-

ment is distribution ratber than production (Scbutte 1969).With the rise of large, well-organized retail chains, storebrands have emerged as a key weapon in the battle wagedbetween manufacturers and retailers over channel controland consumer loyalty (Patti and Fisk 1982). Although retail-ers enjoy advantage in shelf space allocation and in-storepromotion for their private brands, the market share of suchbrands has remained relatively constant at about 14% oftotal supermarket revenue over the last decade (PrivateLabel Manufacturing Association 1993).

The problem facing marketers of private label brands isthat despite lower prices, quality guarantees, and even theadvertising of these products, consumers continue to prefernational to store brand grocery items by a wide margin. It isquite remarkable tbat "even in these days of waning con-sumer loyalty, shoppers haven't become altogether immuneto the pull of well-known names. If the price is rigbt theywill buy big brands" (Shapiro 1993, p. Bl).

Research regarding private label grocery products hasbeen of substantial interest to both marketing academics andindustry practitioners. Since the seminal work of Myers(1966), a variety of studies has been undertaken to investi-gate the characteristics of buyers of private label groceryproducts and the relationship between purchase of private

Paul S. Richardson is an Assistant Professor of Marketing, School of Busi-ness Administration, Loyola University at Chicago. Alan S. Dick is an As-sistant Professor of Marketing and Arun K. Jain is the Samuel P. CapenProfessor of Marketing Research and Chairman, Department of Market-ing, School of Management, State University of New York at Buffalo. Theauthors thank the editor and three anonymous reviewers at the Journal ofMarketing as well as Dipankar Chakravarti (University of Arizona), JohnMyers (University of California, Berkeley), and Brian Ratchford (Universityat Buffalo) for their valuable comments on earlier drafts of this article. Par-tial support for this project was provided by a research grant from a majorsupermarket chain that wishes to remain anonymous. The authors thanktheir present and former students—Pam Grimm, Cindi Privitera, MelanieBainbridge, Frank Koo, and Rohit Chauhan—for assistance during variousphases of the project.

label products and store loyalty. Most of the studies haveidentified sociodemographic and personality characteristicsthat differentiate private label buyers from nonbuyers (e.g.,Bettman 1974; Coe 1971; Frank and Boyd 1965). Althoughthese studies provide useful insights for possible market seg-mentation, they do not address the central managerial ques-tion of why national brands are preferred to store brands.Thus, retailers are left in an uncomfortable position of notknowing what to do to enhance their market share.

In a related stream of research, marketing scholars haveexamined quality perceptions of private label brands. Forexample, in a survey, Bellizzi and colleagues (1981) ob-tained perceptions of national, private label, and genericbrands through a series of Likert-type scales. Subjects in thestudy consistently rated private label brands below the na-tional brands on attributes related to quality, appearance, andattractiveness. Similarly, Cunningham, Hardy, and Imperia(1982) observe that consumers rate national brands as supe-rior to private label and generic brands in terms of taste, ap-pearance, labeling, and variety of choice. Some shoppers ex-hibit aversion to buying store brands regardless of theamount of savings associated with their purchase (Liveseyand Lennon 1978). Invariably, all studies indicate that pri-vate label brands suffer from a low-quality image comparedwith national brands. Conceptually, the problem is tbatproduct positioning and price may be used by consumers asa cue to quality. Consequently, the extent to which percep-tions of poor quality are the result of actual poor levels ofproduct ingredients or the misguided efforts of managementto position private labels as inexpensive altematives to na-tional brands needs to be assessed.

The Private Label Manufacturers Association assertsthat private label ingredients are as good if not better thanthose of national brands! Hence, unfavorable perceptions infact may be fostered by the widespread use of inexpensive-looking packaging and the absence of an attractive brandimage due to poor communication and positioning strate-gies. A focus on quality as opposed to price could producemore favorable perceptions of store brands and increaseconsumers' loyalty toward these products. Because storebrands are only available at their owners' chains, this in-

28 / Store Brand QualityJournat of MarketingVol. 58 (October 1994), 28-36

creased loyalty then could be uniquely transferred to thechains themselves. To accomplish this, however, some deep-seated beliefs about the quality of store brands may have tobe changed. If accomplished, this strategy could representthe basis for a sustainable competitive advantage in the mar-ketplace—an advantage that appears difficult using a price-based approach. Of paramount importance if retailers are to.develop customer loyalty toward store hrands is that theyfirst understand the reasons for current perceptions of theseproducts.

Previous research has relied principally on surveymethodology to ascertain private brand perceptions. This re-search has noted that store brands are judged inferior to na-tional brands on a variety of core (e.g., quality, taste, texture)and augmented (e.g., price, packaging, labeling) productcharacteristics. However, if perceptions regarding storebrand quality are based on inferences grounded in price andproduct positioning, it may be that the poor quality percep-tions of store brands noted in the literature are simply an ar-tifact of reliance on price or brand name in quality assess-ment. Previous survey-based research has not been able todisentangle the "real quality" and "image" effects on con-sumers' perceptions of quality, yet understanding the degreeto which store brands are evaluated on the basis of their realquality or image is essential for successful management ofthese products.

Our objective is to examine in an experimental settingpossible causes of consumers' unfavorable perceptions ofstore brands relative to national brands. Toward this, first wepropose specific research hypotheses based on the literaturein marketing and consumer behavior. Next we describe theexperimental design used to test these hypotheses. Then, theresults, based on an analysis of data collected from 1564households, are presented. Finally, we discuss the implica-tions and limitations of our study and provide directions forfurther research.

Cue Utilization TheoryCue utilization theory may provide an attractive frameworkthrough which to assess consumer perceptions of storebrand quality. According to this theory, products consist ofan array of cues that serve as surrogate indicators of qualityto shoppers (Cox 1967; Olson 1972). The particular cues areevoked according to their predictive and confidence values.The predictive value of a cue (PV) is the degree to whichconsumers associate a given cue with product quality. Thisis similar to the diagnosticity of the cue, which representsthe reliability of a cue and the likelihood that using it wouldlead to a successful task resolution (Dick, Chakravarti, andBiehal 1990). The confidence value of a cue (CV) is the de-gree to which consumers have confidence in their ability touse and judge that cue accurately (Cox 1967; Olson 1972).Cues characterized by high CV and high PV assume thegreatest weight in the quality assessment process.

Cues can be further classified as extrinsic or intrinsic tothe product (Olson 1972; Olson and Jacoby 1973). Extrinsiccues are product-related attributes—such as price, brandname, and packaging—which are not part of the physicalproduct. Conversely, intrinsic cues represent product-related

attributes, such as ingredients, that cannot be manipulatedwithout also altering physical properties of the product. Therelative salience of extrinsic versus intrinsic cues in qualityassessment depends on their PVs and CVs (Olson 1972).

Excellent reviews of the literature on cue utilization the-ory are provided by Monroe and Dodds (1988), Purwar(1982), and Rao and Monroe (1989). Purwar, for example,classified empirical investigations according to the cue(s)manipulated. Using this classification, Purwar summarizes38 price cue experiments, 12 brand name cue studies, 9 storeimage investigations, and 14 studies in which intrinsic com-positional cue effects on quality assessment were exam-ined.' A review of the literature suggests that consumers relyon extrinsic cues such as price (Leavitt 1954), brand name(Allison and Uhl 1962), packaging (McDaniel and Baker1977), store name (Wheatley, Chiu, and Goldman 1977),and color (Peterson 1977) when making quality assess-ments. In particular, brand name is frequently used by con-sumers as an "informational chunk" that represents a com-posite of information about several attributes of the product,such as price, size, shape, manufacturer, and performancefactors (Olson 1976). Intrinsic cues relating to a product cat-egory (e.g., taste, texture, aroma) also have been found tohave high PVs and CVs (Olson 1972; Olson and Jacoby1973). Furthermore, research evidence suggests that con-sumers tend to use both intrinsic and extrinsic cues concur-rently when evaluating product quality (Jacoby, Olson, andHaddock 1973; Simonson 1989; Szybillo and Jacoby 1974).

Researcti Hypotheses

Cue utilization studies provide us with valuable insight forexamining possible causes of consumers' unfavorable per-ceptions of store brand grocery items. Extrinsically, storebrands suffer from deficiencies relative to national brands.Store brands are lower priced, are frequently poorly pack-aged, lack strong brand recognition, and are generally notadvertised at the national level (Cunningham, Hardy, andImperia 1982). These extrinsic cue deficiencies are ac-knowledged by consumers (Bellizzi et al. 1981). Becauseconsumers rely on extrinsic cues when assessing productquality and store brands suffer from extrinsic cue deficien-cies relative to national brands, we hypothesize that whenconsumers taste grocery products:

Hj: Regardless of product ingredients, national brands willbe judged to be of superior quality than store brands.

Intrinsically, store brand grocery items are judged infe-rior to national brands in terms of quality of ingredients,taste, texture, and aroma (Bellizzi et al. 1981; Sundel 1974).It is unclear the extent to which these evaluations stem frominferences made on the basis of the negative extrinsic cuesthat these products display or refiect an unfavorable re-sponse to store brand ingredients. Hawes, Hutchens, andThanopoulos (1982) argue that the former is the case, sug-gesting that consumers' evaluations of store brand ingredi-

'Since Purwar's (1982) cue classification was published, there have beenfour published cue utilization studies by Dodds (1985); Dodds and Monroe(1985); Dodds, Monroe, and Grewel (1991); Rao and Monroe (1989); andRexeisen (1982).

Store Brand Quality / 29

ents derive solely from undue reliance on extrinsic cues inquality assessment. As evidence, these scholars note that byFDA regulation, store brand ingredients must be of a quali-ty that is at least competitive with that of national brands.However, a store brand, while meeting FDA regulations,need not use "fancy" (grade A) or "extra standard" (grade B)ingredients, resulting in perceptible differences in quality.Given the importance of intrinsic cues in quality assessment(Jacoby, Olson, and Haddock 1971; Szybillo and Jacoby1974), it is unlikely that unfavorable evaluation of storebrand ingredients is driven solely by inferences made on thebasis of extrinsic cues. Instead, consumers' utilization of andreliance on intrinsic cues in quality assessment suggests thatthese unfavorable evaluations are based to some extent onconsumers' direct response to store brand ingredients.Therefore, we argue that the level of product ingredientquality may be lower for store brand products and that con-sumers can detect this lower quality level. Hence, we hy-pothesize that when consumers taste grocery products:

H2: Regardless of extrinsic cues, products with nationalbrand ingredients will be judged to be of better quali-ty than products with store brand ingredients.

According to cue utilization theory, the relative weightof extrinsic versus intrinsic cues in quality assessment de-pends on the cues' PVs and CVs. In the context of packagedgrocery products, one can make a reasonable argument re-garding these effects. First, there is evidence that extrinsiccues, such as price and brand name, are more easily recog-nized, integrated, and interpreted than are harder-to-processintrinsic cues (Purwar 1982). Thus, one can assert that theCV assigned to extrinsic cues is greater than that assigned tointrinsic cues. Second, for packaged grocery items, it is like-ly that consumers believe that intrinsic cues such as actualproduct ingredients, taste, texture, or aroma are more im-portant in determining the real quality of grocery productsthan are extrinsic cues such as advertising, labeling, or pack-aging. Thus, it is reasonable to contend that for packagedgoods the PV assigned to intrinsic cues is greater than thatfor extrinsic cues. In other words, whereas extrinsic cues aremost likely characterized by high CVs but low PVs, intrin-sic cues are most likely typified by low CVs but high PVs.

Judging product quality when cues are characterized byeither high CV/low PV or high PV/low CV entails the riskof selecting a poor-quality.brand. Schellinck (1980) has sug-gested that consumers may attempt to alleviate this risk byplacing relatively greater reliance on high CV/low PV cuesbecause consumers first must select those cues that they canutilize with some degree of confidence. Similarly, Cox(1967) observed that consumers are more likely to utilize ahigh CV/low PV cue than a high PV/low CV cue, whichcannot be evaluated with a similar degree of certainty. Thetendency of some consumers to rely on high CV/low PV ex-trinsic cues over high PV/low CV intrinsic cues makes pos-sible "mixed brand" strategies, in which manufacturerscharge different prices for identical or similar ingredientspackaged in national and store brand containers (Morris1979; Wolinsky 1987). Hence, it is hypothesized that whenconsumers taste and evaluate grocery products:

H3: Extrinsic cues explain more variance in perceptions ofproduct quality than do intrinsic cues.

Consumers' reliance on extrinsic cues in quality assess-ment presents retailers of store brands with a problem be-cause these products suffer from extrinsic cue inadequacies.To encourage the purchase of these products, retailers typi-cally price store brands 15%-37% lower than nationalbrands (Shapiro 1993). Ironically, to the extent that con-sumers rely on extrinsic cues in quality assessment, theselower prices may serve only to exacerbate further unfavor-able quality perceptions. To overcome this problem, mostretailers have chosen to stress a different terminal attributein the marketing of their private label lines. That is, ratherthan competing with national brands on the basis of quality,most retailers have taken a "value for money" orientation inthe marketing of their private label lines (Davies, Gilligan,and Sutton 1986; Martell 1986; Ody 1987).

Value for money implies a price (P)-perceived quality(Q) trade-off (Livesey and Lennon 1978; Myers 1967). Bytaking a value for money orientation in the marketing oftheir store brands, retailers hope to instill the purchase ofthese products not only from those consumers who perceivethat store brands are lower priced but of relatively goodquality but also from those consumers who perceive thatstore brands are lower priced and of relatively bad quality aslong as savings associated with the price differential provideadequate compensation for purchase. In fact, Myers (1967)found that the latter segment of the market (lower P, lowerQ) constitutes 48% of store brand clientele whereas the for-mer segment (lower P, same Q) comprises only 23% of storebrand buyers. We hypothesize the following:

H4: Perceived value for money of store brands is morestrongly correlated with consumer willingness to buystore brands than is perceived quality.

MethodoiogyDesign and Subjects

A 3 (extrinsic cue) X 3 (intrinsic cue) x 5 (product) between-subjects factorial design was used to test the hypotheses.Subjects were shoppers at a major shopping mall in a largenortheastern city. The experiment was conducted duringmorning, afternoon, and evening hours on weekdays andweekends. One of the 45 (3 x 3 x 5) cue and product treat-ments was randomly selected during each day of the exper-iment period and data gathered until 35 responses were ob-tained in each cell. We gathered usable data from 1564subjects.

independent Variabies

The level of the extrinsic cue was manipulated by showingeach subject a package from one of three different brands.Two were private label brands of the two largest supermar-ket chains in the region and the third represented an estab-lished national brand. Subjects did not actually open thepackage but were made to believe that the ingredients pre-sented to them came from the package shown. A small dis-play board (7 inches by 7 inches) with the name, package

30 /Journal of Marketing, October 1994

TABLE 1Product and Prices Dispiayed

Cheese Chips Dip Cookies Jelly12 oz. 6.5 oz. 8oz. 12 oz. 32 oz.

National brandStore I brandStore II brand

$2.291.791.89

$1.39.99

1.09

$.89.59.79

$2.49 $1.481.79 1.251.79 1.38

size, and price of the product was placed beside eachpackage.

Intrinsic cue levels were manipulated by giving eachsubject a sample of one of three different ingredients (con-tents). The ingredients were either from a national brand orfrom one of the two private label brands. All product ingre-dients were purchased daily and kept refrigerated prior tosampling.

Five products were used in the experiment. Two criteriaguided their selection: (1) The products selected must havestore brand counterparts to the national brands for each ofthe grocery chains and (2) The products must be such thattheir ingredients require no cooking or preparation. Afterconsultation with private label managers, the following fiveproducts were selected for the experiment: regular potatochips, french onion chip dip, chocolate chip cookies, cheeseslices, and grape jelly. The national brands of these productswere Lays, Bison, Nabisco (Chips Ahoy), Kraft (Americanindividually wrapped), and Welch's, respectively. These rep-resented the dominant brands in the sampled market. Storebrands of these products were the counterparts of the na-tional brands for each product and the two supermarketchains.^ Chocolate chip cookies and potato chips werepoured onto individual plates fi-om snack dispensers. Cheeseslices were precut and placed on individual plates in front ofthe subjects. Jelly and chip dip were placed in individualone-ounce jars. Subjects in the cheese, jelly, and chip dipconditions were also provided with Nabisco Premium Bitsand were invited to either dip or spread these products ontothe Premium Bits for sampling. The price and size of prod-ucts used in the experiment are shown in Table 1.

Dependent Variables

Subjects were given a short taste test questionnaire. Threedependent measures from that questionnaire form the basisfor this study. Perceived quality was measured using the fol-lowing 7-point Likert scale: "All things considered I wouldsay this (product name) has" with end points labeled "pooroverall quality" and "excellent overall quality." Value formoney was measured using "To me, this (product name) of-fers," followed by a 7-point scale with end points labeled"poor value for money" and "excellent value for money." Fi-nally, purchase willingness was assessed by "If I were to buya brand of (product name) I would," followed by a 7-pointscale with end points labeled "never buy the brand I justtried" and "definitely buy the brand I just tried."

A list of ingredients of the various brands can be obtained from the au-thors on request.

Procedure

Subjects in a shopping mall were randomly intercepted forparticipation in a taste test. Only primary shoppers residingin the region and not affiliated with any grocery chain wereinvited to participate. As an incentive for participation, po-tential subjects were told that they would be included in adrawing for several cash prizes totaling $600.

If the shopper agreed to participate, he or she was guid-ed to the taste test tables and invited to sit down. On each ofthe taste test tables several packages of the relevant product(extrinsic cues) were displayed. The experimenter movedone of the packages and the display board in front of thesubject. Subjects could examine the package, read the label,pick it up, or do anything they wanted with it except open it.The board was designed to mimic the information presentedon the shelf labels for each brand. It indicated brand name,size, and the actual price being charged for that product atthe store. Drawing the subject's attention to the packaging ofthe product and the display board, the experimenter stated:

We would like you to sample (brand name—product).Please feel free to pick up and observe the packaging asmuch as you wish. As you can see from the display board,the price of (brand name—product) for a (size of package)is (price). To save you time, we have already prepared asample of (brand name—product) for you to taste. Afteryou are done sampling the product, please complete thistaste test survey. Thank you very much for yourparticipation!

In actuality, the subjects were presented with the ingredients(intrinsic cue) called for by the experimental cell to whichthey belonged. These were not necessarily the same ingredi-ents implied by the package. Thus, for example, unbe-knownst to subjects, those in the national brand (extrinsiccue) and Store II brand ingredient (intrinsic cue) conditionwere presented with the ingredients of Store II brand and notthe national brand ingredients implied by the displayedpackage. Each subject evaluated only one product, and theaverage elapsed time per subject was between two and threeminutes. After evaluating the product, subjects completedthe questionnaire and were debriefed.^

Analysis and ResultsThe data were analyzed using standard ANOVA techniques.Table 2 presents the results of the overall ANOVA for per-ceived quality. Table 3 presents the treatment means. Signif-icant main effects of intrinsic cues, extrinsic cues, and a sig-

^Because product ingredients are considered intrinsic cues and a list ofingredients is printed in small type on the packages themselves (i.e., as partof the extrinsic cues), there is a potential confounding of extrinsic and in-trinsic cues. However, the product ingredients listed were quite similaracross the brands within any particular product class. In addition, our ownobservation is that though subjects had the opportunity to pick up the prod-ucts and examine the ingredients, the vast majority of subjects did not both-er to do so. This would be quite natural given the nature of the task (i.e., aquick taste test involving familiar brands). Moreover, because the between-brand differences in product ingredients were different across the five prod-uct categories, any impact of the printed product ingredients likely wouldhave resulted in different results across the product categories. This differ-ence did not materialize in the data. Thus, it would seem unlikely that thispotential confound influenced the results in any meaningful way.

Store Brand Quality/31

TABLE 2Treatment Effects on Perceived Quality

Source

Extrinsic (Ext)Intrinsic (Int)ProductExtrinsic * intrinsicExtrinsic * productIntrinsic * productExt * Int * productResidual

Total

Sum ofSquares

106.6810.5940.2816.047.11

20.6119.21

2372.302572.30

df

224488

1615191563

MeanSquare

53.345.29

10.074.01

.892.581.201.55

F

34.45a3.42"6.50^2.59"

.571.66.78

«p < .001*>p < .05

TABLE 3Mean Quality Ratings^

Extrinsic Cues

Cues

National Store I Store II MarginalBrand Brand Brand Means

5.48

5.28

5.40

NationalBrand

Store 1Brand

Store iiBrand

5.95

5.73

5.58

5.20

5.11

5.24

5.29

5.01

5.37

MarginaiMeans 5.75 5.18 5.22

mean in each cell reflects the mean quality ratings for a givencombination of extrinsic and Intrinsic cues across all five product cat-egories. For example, the first entry, 5.95, reflects the average qual-ity rating across all five product categories when national brand in-gredients were combined with national brand extrinsic cues.

nificant intrinsic cue by extrinsic cue interaction werefound. The main effect of product indicates that subjectsperceived different quality levels across the five product cat-egories. Liked best were the jelly, chips, and chip dip andliked least were the cookies and cheese. Because the maineffects of intrinsic and extrinsic cues were embedded in anintrinsic by extrinsic cue interaction and Hi and H2 predict-ed specific contrasts within the interaction, further analysisof the data was based on several preplanned comparisonsand contrasts.

Extrinsic Cue Effects

H] predicted that products identified with national brand ex-trinsic cues would be judged to be of better quality thanproducts identified with store brand extrinsic cues. Becausethere was no intrinsic cue by product, extrinsic cue by prod-uct, or three-way interaction, the data were pooled acrossthe five products to conduct the contrasts.

Regardless of the product category or the actual ingredi-ents sampled, ingredients coupled with national brand ex-trinsic cues received significantly more favorable quality as-sessment than the same ingredients coupled with store brandextrinsic cues. For example, holding ingredients constant atthe national brand level, national brand extrinsic cues re-

ceived mean quality assessment of 5.95; the same ingredi-ents identified with the extrinsic cues of Store I and Store IIbrands received mean quality ratings of 5.20 and 5.29, re-spectively. The contrast comparing mean quality ratings ofthe two store brands with that of the national brand is sig-nificant and as expected (F[l,1519] = 37.93, p < .0001).

Similar results were found holding ingredients constantat the Store I brand level. Store I brand ingredients coupledwith national brand extrinsic cues received a mean qualityrating of 5.73; the same ingredients coupled with the extrin-sic cues of Store I and Store n brands received mean quali-ty assessment of 5.11 and 5.01, respectively. The differencein quality ratings between the national brand and average ofthe store brand extrinsic cue conditions is significant and asexpected (F[l,1519] = 33.75, p < .0001).

Finally, holding ingredients constant at the Store IIbrand level produced the same pattem of results. Store IIbrand ingredients coupled with national brand extrinsic cuesreceived a mean quality assessment of 5.58; the same ingre-dients coupled with the packaging of Store I and Store IIbrands received mean quality ratings of 5.24 and 5.37, re-spectively. Comparing national and average store brand rat-ings, we again find that the difference is significant and asexpected (F[l,1519] = 5.73, p < .02).

Our results provide strong support for Hp Regardless ofthe actual ingredients sampled, ingredients coupled with na-tional brand extrinsic cues received significantly more fa-vorable quality assessment than ingredients identified withstore brand extrinsic cues.

intrinsic Cue Effects

H2 predicted that national brand ingredients would bejudged better than store brand ingredients regardless of theextrinsic cue treatment level. Interestingly, in our experi-ment, the intrinsic cue effects observed depend on the levelof the extrinsic cue manipulated. For example, holding ex-trinsic cues constant at the national brand level, nationalbrand ingredients were assigned mean ratings of 5.95; underthe same packaging condition. Store I and Store II brand in-gredients received ratings of 5.73 and 5.58, respectively.Comparing these means, we find that national brand ingre-dients were judged marginally better than those of Store Ibrand (F[l,1319] = 3.19, p < .07) and significantly betterthan those of Store U brand (F[l,1319] = 6.14,p < .02). Thecontrast comparing quality ratings of national brand ingre-dients with the average of the ratings for the store brand in-gredients was also significant and as expected (F[l,1319] =7.17, p < .02). These results support H2.

However, preference for national brand ingredients dis-sipated when the subjects were presented with Store I brandextrinsic cues. Contrasts comparing quality assessment ofnational brand ingredients with Store I brand ingredients(F[l,1319] = .46, p > .30), Store H brand ingredients(F[l,1319] = .11, /? > .85), and the average ratings for bothstore brand ingredients (F[l,1319] = .04, p > .85) were allinsignificant.

When subjects were presented with Store II brand ex-trinsic cues, similar but not identical results were found. Na-tional brand ingredients were perceived to be superior to

32 /Joumai of Marketing, October 1994

TABLE 4Correiations of Perceived Quaiity and Perceived Vaiue for iUloney With Wiilingness to Buy

Store I Brand Store II Brand National Brand

Correlation withwiliingness to buy

Perceived Value forquality money

64 .54

t = 4.69*

Perceived Value forquality money

.65 .57

t = 3.433

Perceived Value forquality money

.72 .60

t = 2.736^

^Significant at a < .05

TABLE 5iViean Value for iVioney Ratings"

IntrinsicCues

NationalBrand

Store 1Brand

Store IIBrand

MarginaiiUleans

Extrinsic Cues

NationaiBrand

5.25

5.02

4.91

5.06

Store!Brand

5.61

5.39

5.71

5.57

Store iiBrand

5.29

5.22

5.31

5.27

iVIarginaiMeans

5.38

5.21

5.30

mean in each cell reflects the mean value for money ratingsfor a given combination of extrinsic and intrinsic cues across all fiveproduct categories. For exampie, the first entry, 5.25, refiects theaverage value for money rating across all five product categorieswhen national brand ingredients were combined with nationalbrand extrinsic cues.

Store I brand ingredients (F[l,1319] = 4.51, p < .04) butcomparable to Store II brand ingredients (F[l,1319] = .35,p > .55). The contrast comparing quality ratings of nationalbrand ingredients with averaged ratings assigned to the storebrand ingredients was also insignificant (F[l,1319] = .78,p > .38).

Thus, subjects in our experiment were much more like-ly to indicate differences between national and store brandingredients when these ingredients were coupled with na-tional rather than store brand extrinsic cues. Support for H2is therefore mixed. These results suggest that expectationscreated by the extrinsic cues influenced consumers' judg-ments of product quality.

Relative Importance of Extrinsic Versus IntrinsicCues

H3 suggested that extrinsic cues explain greater variance inperceived quality of store brands than intrinsic cues. Wetested this hypothesis with a direct test of the variance ex-plained by the extrinsic versus intrinsic cues respectively(F[2,2] = 53.34/5.29 = 10.08, p < .10). The extrinsic by in-trinsic cue interaction discussed previously provides addi-tional support for this hypothesis and offers some refine-ment. As discussed in the test of Hi, strong extrinsic cue ef-fects were observed regardless of the level of the intrinsiccue manipulated. However, as discussed regarding H2, in-trinsic cues were largely ineffectual in explaining differ-

ences in ratings of product quality when extrinsic cues wereheld constant at the store brand level. The intrinsic cueswere effective in explaining quality differences when extrin-sic cues were held constant at the national brand level. Thus,although extrinsic cues explain greater variance, intrinsiccue effects also assume importance, particularly when sub-jects were faced with evaluation of what purportedly was anational brand.

Perceived Quaiity Versus Perceived Vaiue for iVioney

H4 predicted that perceived value for money is more strong-ly correlated with willingness to buy store brands than isperceived quality. To test this hypothesis, the correlation ofperceived quality and perceived value for money with pur-chase willingness was calculated at each of the extrinsic cuelevel treatments for each product. Tests of differences be-tween these dependent correlations were then calculated(Bruning and Kintz 1968, p. 193). The Pearson correlationsare shown in Table 4, where it can be seen that all correla-tions are positive, large, and statistically significant (p <.01).

For each of the store brands, as well as the nationalbrands, perceived quality is more strongly associated withwillingness to buy the products than is perceived value formoney. These results do not support H4. In fact, they supportthe opposite of what is predicted by the hypothesis; that is,consumers by and large seem to be more interested in qual-ity than value for the money even for store brands. Althoughthis finding may have been to some degree the result of thetask (i.e., subjects did not actually have to buy the products),these results are provocative in terms of managerial impli-cations. A preference for quality rather than value may sug-gest that positioning store brands as high-quality altemativesto national brands may induce greater consumer willingnessto buy these products.

Perceived Vaiue for Money and PurctiaseWiiiingness

Across the five products, store brands enjoy an average priceadvantage of 21% relative to the national brands. Lowerstore brand prices should create favorable value for moneyperceptions of these products. In fact. Table 5 shows thatproducts associated with store brand rather than nationalbrand extrinsic cues receive higher value for money judg-ments. Interestingly, however, value for money ratings ofstore brands are not as favorable as one would expect on thebasis of the size of the price discount. For example, althoughstore brand prices are 21% lower, mean value for money

Store Brand Quality / 33

TABLE 6Mean Willingness to Buy Ratings^

Extrinsic Cues

National Store i Store ii iVIarginalBrand Brand Brand iVIeans

NationaiBrand

Intrinsic Store iCues Brand

Store iiBrand

iUiarginalMeans

6.06

5.66

5.41

5.71

5.22

5.03

5.10

5.15

4.88

5.10

5.01

5.00

5.39

5.27

5.21

°The mean in each cell reflects the mean willingness to buy ratingsfor a given combination of extrinsic and intrinsic cues across all fiveproduct categories. For example, the first entry, 6.06, reflects theaverage value for money rating across all five product categorieswhen national brand ingredients were combined with nationalbrand extrinsic cues.

perceptions are only 7% higher than those assigned to thenational brands. It appears that the poor perceived quality ofstore brands partially offsets the otherwise favorable reac-tions to their lower prices. The mean scores relating to pur-chase willingness lends further support to this explanation.In Table 6, purchase willingness is substantially higherunder the national brand than either of the store brand ex-trinsic conditions. This pattern of results is similar to that re-ported for perceived quality.

Discussion and ManagerialImplications

Our results indicate that consumers' unfavorable reactions tostore brand grocery items are largely the result of con-sumers' propensity to rely on extrinsic cues when assessingproduct quality. For example, regardless of the product cat-egory or real ingredient differences manipulated, ingredientsdisclosed to be of national manufacture received significant-ly more favorable quality assessment than ingredients dis-closed to be of store brand origin. Real differences in ingre-dients between national and store brands had less impactand, interestingly, were more likely to affect consumers'judgments when the ingredients were disclosed to be spon-sored by a national manufacturer. In this case, nationalbrand ingredients were judged superior to store brand ingre-dients, as expected. However, when ingredients were dis-closed to be sponsored by retailers, little discrimination be-tween national and store brand ingredients was found.

This pattern of interaction can be explained within thecontext of prospect theory (Tversky and Kahneman 1981).According to prospect theory, losses loom larger than gains.One could speculate that subjects who sampled store brandingredients disguised as national brand ingredients encodedthe outcome as a loss (as compared with sampling nationalbrand ingredients coupled with national brand extrinsiccues). This could account for the significantly lower ratingsof national brands when store brand ingredients rather than

national brand ingredients were provided. Conversely, onemight argue that when subjects sampled national brand in-gredients coupled with store brand extrinsic cues, the out-come may have been encoded by subjects as a gain (com-pared with sampling store brand ingredients coupled withstore brand extrinsic cues). However, because losses loomlarger than gains, this gain may have been perceived as in-significant and therefore had little effect on quality assess-ment of ingredients in this condition. This could explain thegreater likelihood of ingredient effects when national ratherthan store brand extrinsic cues were employed.

There are substantial managerial implications of ourfindings. Marketers of national brands may note that successdepends on not only maintaining a high level of intrinsicproduct quality but also making investments to develop astrong brand image. National brands that are not backed byan effective communication strategy may not enjoy any ad-vantages relative to store brands. On the other hand, devel-opment of a strong brand image without delivering a corre-spondingly high level of real product quality may result indisconfirmation and depress the perceived quality of nation-al brands. This makes national brand marketers especiallyvulnerable if quality control systems fail or internal cost cut-ting measures lead to quality variation. When there is no dif-ference from a performance point of view, consumers maybe less willing to pay the premium for national brands.

With respect to store brands, as long as expectation lev-els are low, product quality may be less critical. Retailersmay implicitly recognize this in their value for money pro-motion efforts. A value for money approach has the advan-tage that it can avoid direct competition with nationalbrands. However, it may be time to question the wisdom ofsuch an approach. Correlational evidence in this study sug-gests that consumers may care less about value than they doabout quality. Retailers who market high-quality storebrands and use a value for money promotional focus may besignaling "lower quality for lower prices" rather than "verygood quality for lower prices" as hoped. Thus, we find thatretailers' value for money promotion efforts may do little toalleviate problems associated with the poor perceived quali-ty of store brands.''

Private labels need not be at a disadvantage relative tonational brands in the marketplace. For example. President'sChoice, originally a nondescript private label brand spon-sored by Canada's Loblaws, now comprises over 1000 itemswith annual sales of over $65 million (Liesse 1993), and itsDecadent Chocolate Chip Cookie is already the number oneseller in Canada. Similarly, the French retailer Carrefour hasbeen extremely successful with its private label line, whichis responsible for over 25% of the giant chain's turnover(Ody 1987). To achieve this penetration, Carrefour matchesor even beats the quality of the category leader and activelycommunicates quality infonnation to consumers through in-store information boards and an aggressive public relationscampaign. Prices for Carrefour's store brands compare fa-

''However, for store brands in which there may be detectable quality dif-ferences, a value for money positioning may make more sense to attractprice-driven market segments.

34 /Joumai of iMariceting, October 1994

vorably with national brands but are not always the cheapestaltemative available.

Retailers have a choice. They can view themselves eitheras passive distributors of manufacturers' brands or as activemarketers of their own proprietary store brands. The formerstrategy has been the prevalent one adopted by American re-tailers until recently (Liesse 1993). This strategy has in-volved retailer competition on the basis of distribution effi-ciencies relating to store size, location, and price becauseproduct offerings are identical across chains. The problemwith this strategy is obvious: Chains become little more thanwarehouses of manufacturers' products. As one private labelmanager noted, "A can of Campbell's soup is a can ofCampbell's soup everywhere" (Liesse 1993, p. 4).

The latter strategy—active marketing of retailers' ownstore brands—may provide a viable altemative to the pas-sive approach of the past. Active marketing of store brandsimplies investments in creating a high-quality image forthese products and a commitment to offering a level of realquality that is equal to or surpasses that of national brands.Such a strategy entails use of imaginative and aestheticallypleasing package designs that differentiate store brandsfrom the competition and prompt impulse purchase. In addi-tion, active marketing of store brands necessitates greateremphasis on promotional campaigns that focus on the realintrinsic product benefits associated with these brands. Forexample, retailers might conduct in-store taste tests and pub-licize the results to overcome any negative perceptions ofstore brand quality. Retailers such as Wal-Mart, A&P, andSafeway are pursuing some of these tactics in revampingand reformulating their private label lines. The desired out-come of such marketing efforts is to build demand for prod-ucts that are available only at the sponsoring chain or, as aSafeway executive stated, "to create products so that cus-tomers will say, 'I want this, and Safeway is the place to buyit '" (Liesse 1993, p. 4). This will require that marketers ofprivate label lines be aware of customer requirements andactually benchmark their offerings against category leadersto ensure acceptable or superior quality levels.

Limitations

We recognize that, because of resource limitations, it wasnot possible to identify the relative importance of specificextrinsic cues (e.g., package design, price, level of advertis-ing) that influence consumers' evaluations of store brandgrocery items. Researchers in the future could manipulatesuch extrinsic cues independently to assess their relative im-portance. In our experiment, the intrinsic cues had not beenobjectively rated as being of high, medium, or low quality.In further replications, such information would permitstronger tests of the various research hypotheses proposed.A particularly interesting extension would be to includebrand pairs (a national brand and a store brand) that are sim-ilarly configured intrinsically along with brand pairs that arenot similarly configured intrinsically and test for differencesin quality judgments. A finding that national brands arerated better than store brands even when store brand ingre-dients are superior to those of national brands would offerstrong evidence that extrinsic cues dominate intrinsic cues inthe quality assessment process of these respective brands.

Generalizability of the results presented here must betempered with the realization that our analysis is based onfive product categories. However, the size of our productsample compares favorably with that employed in past cueutilization research, in which two or three product categoriestypically have been used (Purwar 1982). Moreover, the lackof an interaction of product with any of the other experi-mental factors speaks for the robustness of the findings.

Although we used private label brands sponsored by su-permarket chains that dominate the study region and claimhighly innovative packaging and branding strategies, it ispossible that there are other store brands sponsored by dif-ferent chains that are marketed with even greater attention topackaging and other extrinsic cues. Hence, a replication ofour experiment using store brands sponsored by a chainknown for highly sophisticated advertising or packagingstrategies might provide supporting evidence of our findingsand offer additional insights.

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