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Perils of FDI in Retail: only the big, advertised products will be avbl.

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    http://www.thehindubusinessline.com/features/investment-world/personal-finance/article3666376.ece Why we go for brands in grocery shopping B. Venkatesh Picture
    Message 1 of 1 , Jul 31, 2012
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      Why we go for brands in grocery shopping

      B. Venkatesh
       

      Picture this. You are shopping for your monthly groceries at a supermarket. The supermarket has national brands and the store brand for most products that you want. That is, if you want to buy breakfast cereals, the store has, say, Kellogs Nutri Grain as well as its equivalent store brand, say, Value Choice N Grain. Which one would you buy, considering that the store brand for most products is at least a tenth cheaper than national brands?

      As a typical shopper, you will most likely choose the national brand, even though it is costlier! Why? Choosing the national brand is not about conspicuous consumption. That is, you do not buy a Surf Excel to show off to guests at home. You buy Surf Excel because you think that an equivalent store-brand detergent may be of poorer quality and cause allergies. But why Surf Excel?

      Brand recall

      Your grocery shopping is primarily driven by your brand recall. The more you hear and watch name-brand advertisements on TV, the greater the possibility that you will buy such products. Psychologists call this behaviour recognition heuristics. This behaviour works on a simple logic. If you have to choose between two products, you pick the one that you are familiar with. And national brands are obviously more recognisable than store brands.

      Yet, research in the area of store versus national brands in the US has shown that consumer preferences are not really based on taste or quality. A US consumer study, for instance, shows that store brands are just as good as national brands in most categories. So, the argument that branded choco-chip cookies are better than, say, Great Value’s, Walmart’s store brand, may not be always true.

      In another US study, individuals were offered peanut butter from three different jars. Unknown to the individuals was the fact that each jar contained the same peanut butter. Yet, three-fourths of the participants in the study chose the jar that had a national brand label on it. Clearly, name-brand can change the way you perceive taste. Why?

      Our purchase decision starts with a subconscious effort to rely on recognition. This short-cut to choosing a product reduces post-purchase regret. After all, you choose a product that many consumers buy as well. On the other hand, by choosing to buy a store brand, you are risking the possibility that the product may be of inferior quality.

      So, will you try store brands at all? You would, if you are willing to experiment, given the saving on your grocery bill. And then, too, perhaps, on products that you do not have to consume or apply on your body. Stationery, perhaps?

      (The author is the founder of Navera Consulting. He can be reached at enhancek@....)

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