Consumer Misinformation and the Brand Premium: A Private Label Blind Taste Test
48 Pages Posted: 17 Oct 2018
Date Written: September 21, 2018
We run in-store blind taste tests between 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 relative 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 find that the intervention increases the preference for the private label brands, but 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: Private Label, Brand, information, demand
JEL Classification: L11, L15, M31, M37
Suggested Citation: Suggested Citation