IN GROCERY, brands are everything. But can developing a sustainable image encourage shoppers to pay a premium? Johan Anselmsson reports.
Sainsbury's recently launched its biggest own-label campaign to date as it looks to build on growth rates that are outstripping branded products by two to one. The emergence and subsequent growth of supermarket brands has provided strong competition to established brands in many categories, but in packaged food the rivalry is particular intense. This changing landscape has prompted a greater belief that brand-related factors – such as sustainability, origin and corporate social responsibility (CSR) – might enable manufacturer brands to distance their offerings from store label goods to secure a price premium. One study found that only one in five consumers are willing to pay a price premium for a certain brand based on perceived product quality alone.
The starting point for our study, published in the Journal of Product and Brand Management, was to develop an understanding of the driving forces behind consumer packaged food and why consumers want to pay more or less: if product quality is losing its strength as a competitive tool, then what else drives purchase decisions? Brands from three consumer packaged food categories were selected: bacon, frozen ready meals and rice. The criteria for this choice were that the items were broad grocery categories with a high likelihood that the households surveyed would have bought at least one item from the category during the previous 12 months. In each category, the market leading brand, the leading “me-too” private label and the leading discount private label were included.
The brand image, brand loyalty and the price premium were then all researched through a survey of household food purchasers aged between 20 and 74. What did we find? While uniqueness and social image were the strongest drivers of a customer’s willingness to pay a price premium in all three categories, sustainability factors – health, environment, working conditions and animal welfare – were increasingly seen as a brand strength. The results also suggested that when consumers perceive that a food brand cares for society, the environment or its employees, the willingness to pay a price premium for that brand is heightened. This suggests that CSR commitments and a favourable CSR image positively influence customers’ loyalty and willingness to pay a price premium.
There is a caveat. CSR, as detailed above, is among the weaker influences on customers’ willingness to pay price premiums, and this should raise some concerns for CSR brands. Due to their higher costs of production and the need to charge more (an assertion they normally use in their main sales arguments) the market share of CSR-branded goods is still only around 3%. Our study was limited to the top brands in each category, so the very niche ultra- premium brands were not included. Although these brands have small market shares, studying them would likely provide even greater insights into how organic and sustainable products can attract price premiums. We have found a new dimension to shopper purchasing, however: the important role of social image in attracting price premiums. It demonstrates that the images that drive loyalty are not necessarily the same as those that drive price premiums. This suggests the importance of distinguishing between sustainable brand associations that drive price premium and others that drive loyalty. Brand managers must therefore be more precise regarding the objective of building a strong brand and whether it’s to obtain a price premium, loyalty or both.
Johan Anselmsson is director of education in marketing and brand management at Lund University, Sweden