The consumer behavior of young Slovak consumers (under the age of 25) in the private label market

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The consumer behavior of young Slovak consumers (under the age of 25) in the private label market

Consumer behavior, factors affecting the purchasing process of consumers, the process of consumer decision-making, etc. have been the subject of matter of several research projects, papers and studies, but in the field of private labels, this issue has been quite recent. The aim of the present paper was to find out how respondents under 25 years perceive private labels, whether they buy them, are their final users, etc., while we focused mainly on the segment of milk and dairy products. An anonymous questionnaire survey was chosen as the main research method, which was attended by a total of 549 respondents aged under 25 years across Slovakia, which was subsequently supplemented by statistical verification of the formulated hypotheses (a total of twelve hypotheses). Statistical tests such as Pearson Chi-square test, Phi coefficient, Kruskal-Wallis test and Cramer´s V coefficient were used for this verification and they were calculated in the statistical programs of XL Stat and SAS Enterprise Guide. At the end of the paper, there are presented both – the key findings of our research and possible recommendations for the practice.

Introduction

The current retail revolution, which as it is reported by the Nielsen Report (2018), has and it will have a significant impact on the food industry around the world is characterized primarily by the development of one global phenomenon, namely private labels (Herstein and Gamliel 2004, Smith and Bashaw 2009, Kakkos et al. 2015) which, very simply explained, represent a strategy of branding traditional brand products with a retailers´ brand (note- private label) using both, his own name or the name/brand he owns (Košičiarová and Nagyová 2014). Despite the fact that private labels do not represent a complete „novelty“ that has been on the market for only the last few years (note- their history dates back to the end of the 19th century (Nagyová and Košičiarová 2014), in the current competitive market environment, characterized by great dynamism and intensified competition (Polakevičová 2015, Džupina et al. 2016, Mach et al. 2018, Lorincová et al. 201, Balcarová et al. 2014).
Consumers are currently in an increasingly competitive and dynamic market environment (Mach et al. 2018, Balcarová et al. 2014), where the brand itself is either losing its weight or strengthening it. Here can be seen the possibility for private labels, which can become a perfect alternative to traditional brands, bringing several benefits not only to the consumer and retailer, but also to the supplier himself, especially in increasing his sales volume, lower communication and logistics costs and options to entry new markets (Corstjens and Lal 2000, Collins-Dodd and Lindley 2003, Richardson et al. 1996). While the main advantage for the consumer is the easy identification of private label products, the lower price, respectively the guarantee of authenticity, origin and standard, as well as of comparable quality (Tvrdoň and Přibyl 2004), for the retailer it is the strengthening of image (Liu and Wnag 2008), expanding supply, increasing demand and strengthening customer loyalty (Cheng et al. 2007, Huang et al. 2007, Kita et al. 2013) as well as minimizing the risks associated with the introduction of new products (Baltas et al. 1997, Sethuraman and Cole 1999) and consolidating its position in the retail market (Lukić 2011). Other possible benefits of private labels for retailers include reduction in advertising costs, the ability to decide on their own pricing policy, the ability to search for and change manufacturers as well as the possibility of achieving higher margins (Hoch and Banerji 1993, Garretson et al. 2002, De Wuif et al. 2005, Ailawadi et al. 2008, Machková 2009), which was also confirmed by Heijn’s analysis of 2012.
The mentioned analysis proved the untrue nature of the claim that private labels are not able to earn as much money as a traditional brands (Mills 1995). The opposite is true – the distribution of the average final prices of all products sold in the retail chain to the costs spent on research and development, production costs, marketing and packaging costs, VAT, respectively on producer and merchant margins, the traditional brand product, with a retail price of 5.87 €, earns the retailer 0.5 €, while in the case of a private label where multiple costs are lost, especially the cost of research, marketing and more expensive packaging material, earnings are more than double (Dulíková 2012).
The present paper deals with the issue of private labels, especially in the segment of milk and dairy products, where we have focused on a selected segment of customers, namely consumers under 25 years. The aim of our research is to show what benefits private labels bring, how they can serve as an alternative to the purchase and what important group of customers are consumers under the age of 25 years.

Aim and methodology

The aim of the paper was to find out how respondents under 25 years perceive private labels, whether they buy them, are their end users, etc., while we focused mainly on the milk and dairy products segment. An anonymous questionnaire survey was chosen as the main research method, in which a total of 549 respondents from all over Slovakia have participated (Table 1). The sample of respondents can be considered as representative on the 95% confidence level and 5% error margin as n ≥ 384. The questionnaire survey consisted of a total of 15 questions formulated as closed ones with the possibility of one, respectively multiple responses, one open question where respondents were free to express their opinion and six classification questions.

Table 1: Characteristics of respondents
Source: Authors

Scientific hypothesis

For a deeper analysis of the research objectives, the following hypotheses were formulated:
Hypothesis 1: We assume that there is a correlation between buying private labels and the gender of respondents.
Hypothesis 2: We assume that there is a correlation between buying private labels and the net money income of households.
Hypothesis 3: We assume that there is a correlation between buying private labels and the number of household members.
Hypothesis 4: We assume that there is a correlation between the frequency of private labels´ purchase and the gender of respondents.
Hypothesis 5: We assume that there is a correlation between the frequency of private labels´ purchase and the net money income of households.
Hypothesis 6: We assume that there is a correlation between the frequency of private labels´ purchase and the number of household members.
Hypothesis 7: We assume that there is a correlation between the frequency of buying private labels in the category of milk and dairy products and the gender of respondents.
Hypothesis 8: We assume that there is a correlation between whether the respondent is the end user of the purchased private label products and his gender.
Hypothesis 9: We assume that there is a correlation between what private labels evoke in the respondent and his gender.
Hypothesis 10: We assume that there is a correlation between what would lead the respondents to the purchase of private label products and the gender of respondents.
Hypothesis 11: We assume that there is a correlation between the decisive factor in the purchase of private labels and the gender of respondents.
Hypothesis 12: We assume that there is a correlation between what discourages respondents from the purchase of private labels and the gender of respondents.

Statistical analysis

The results of the questionnaire survey were verified by means of statistical verification of formulated dependencies, using mainly the methods of Pearsons’ Chi-Square Test, Phi Coefficient, Kruskal-Wallis test, Cramer´s V Coefficient, which were calculated in the statistical programs XL Stat and SAS Enterprise Guide. In hypothesis testing, if p-value is lower than significant level, in our case 0.05, null hypothesis is rejected and its alternative is confirmed.

Results and discussion

As it was indicated in the introduction, in many cases private labels are considered to be more profitable not only at lower production costs but also at lower costs of research and development, promotion, sales promotion, advertising and physical distribution alone (Kotler and Keller 2007), which is possible mainly due to the use of branded products as their „model“ or inspiration (Tvrdoň and Přibyl 2004), which subsequently translates into a price and means that a private label trader can charge a lower price for his product while achieving a higher profit margin (Hoch and Banerji 1993, Hanf et al. 1994, Cotterill and Putsis 2000, Nagyová and Košičiarová 2014), respectively which subsequently translates into consumer behavior, as it is often that a lower price attracts more customers.
This is also true for private labels, and especially those on the Slovak market, whose consumption has been steadily increasing, respectively is slightly fluctuating, as it can be seen from the Figure 1 – purchases of private labels by Slovak consumers has recently increased, respectively they have fluctuated, which in our opinion is largely due not only to the lower price of these products, but also to higher confidence in them, eather their ever-increasing quality, which in many cases becomes not only comparable, but also higher than those of traditional brands.
In the present paper, we have focused on the issue of private labels in the segment of milk and dairy products and especially in a selected segment of customers, namely consumers under 25 years, because according to several researches (e. g Polakevičová and Uhríková 2015, Šedík et al. 2018a, Šedík et al. 2018b), they represent potential customers, which can by the time become loyal customers who will prefer the given brand.

Figure 1: Percentage of purchases of branded products and products sold under private labels in Slovakia
Source: Authors processing according to available sources

As it can be seen from Table 1, the majority of respondents were represented by women (66.3% of respondents), respondents with first degree of higher education (39.2% of respondents), students (67.94% of respondents; note – this was not surprising, as our focus group was under the age of 25 years), households with four members (34.97% of respondents) and net family income over 1.501 € (25.87% of respondents), respectively residents in the city (62.84% of respondents).
As the aim of the paper was to find out how respondents under 25 years perceive private labels, whether they buy them, are their end users, etc., while we focused primarily on the segment of milk and dairy products (note- we have focused on milk and dairy products because of the fact, that many of different studies have shown that private labels are mainly purchased in the categories of milk and dairy products (e.g. research by Košičiarová et al. 2014, Retailmagazin.sk 2018, GfK 2018, Košičiarová et al. 2018 etc.), several questions focused on the issue were formulated in the questionnaire survey.
In terms of purchasing private labelled products, the current situation between potential loyal customers and private label consumers in Slovakia (i.e. among respondents under the age of 25 years, that we have focused on them in the given paper) is favourable, as out of a total number of 549 respondents, 24.41% of respondents buy these products regularly and 57.92% of respondents buy them sporadically. In the case of a exact frequency of purchase, it is possible to say that our respondents buy private labels mainly once a month (31.06% of respondents), respectively multiple times a week (23.19% of respondents); they buy mainly milk and dairy products, respectively mineral waters, lemonades and juices and at least in the categories of frozen semi-finished products, prepared meals and alcoholic beverages (Table 3); whereas in the category of milk and dairy products they buy them on a weekly basis (40.66% of respondents).

Table 3: Results of Kruskal-Wallis test
Source: Authors calculations, XL STAT OUTPUT

Our results largely correspond to the results of TNS Slovakia (TNS 2015) and GFK Slovakia (TASR 2010), respectively our previous studies on the subject, as e.g. Nagyová and Košičiarová (2014), or Košičiarová et al. (2017), which show that Slovaks buy private labels primarily several times a week, respectively once a week; they buy them mainly because of their cost-effectiveness, quality and confidence; and that every Slovak household has „favourite brands” in its regular and regular purchases (TASR 2010).
As the consumer is considered to be the end user, respectively the consumer of the give product (note – unlike the customer, who is considered to be a person who buys goods or services but does not consume them himself) (Bulanda et al. 2018a, Bulanda et al. 2018b, Pilar et al. 2018), the questionnaire survey also looked at whether our respondents are the end users of purchased private label products. Here, it can be unambiguously confirmed that our respondents are consumers of the given products, as they have stated mostly the possibility of yes (up to 39.06% of the respondents) and therefore it is true that respondents, better said the given focus group can really represent potential loyal customers of private labels. Attracting customers is the primary goal of any business, as the customer creates a demand for goods and services and is very likely to become a loyal consumer who will become loyal to the given business or brand. In doing so, companies compete mainly by promoting and lowering prices to attract the largest customer base (Broučková et al. 2019, Sieglová 2019, Liesková, Petrovčíková 2018, Kenton 2018, Světlík, Bulanda 2019, Kaliji et al. 2014).
Consumer purchasing behavior is a complex process, underpinned by a number of seemingly unrelated variables. Understanding this process is important for the marketing of all supply-side actors, as their incentives can decide in a given situation whether the consumer chooses their product (Vokounová 2019).
Based on the above written, it is necessary to realize what works in the given customer segment, respectively does not work. The results of our research show that while the decisive factor leading to the purchase of private labels is the combination of reasonable price and quality (47.72% of respondents), the decisive factor discouraging from the purchase of private labels is their price, low quality and lack of information about the exact manufacturer (20.04%, 17.12% and 13.84% of respondents), what would influence our respondents to the purchase of private labels is mainly the recommendation from their families and friends (40.62% of respondents), respectively tastings (16.21% of respondents), free samples or more interesting form of promotion (in both cases 15.12% of respondents).

It is very common and it can be said also misconception that the low price is also an indicator of poor quality (Sproles 1977, Völckner and Hofmann 2007, Gabrielsen and Sørgard 2007, Asker and Cantillon 2010). As it was mentioned in the introduction, private labels are often characterized by a low price, which could mean their lower quality. Up to the results of few dTests (4/2020, 2/2020, 11/2019, 9/2019, 9/2017), which have tested the quality of chosen victuals (e.g. chocolate, nuts, tea, preserves and nutrition), the quality of private labels products is in many cases equal to the quality of traditional label products. For this reason, we have asked our respondents how they perceive private label products, what they suggest about them, what is their quality, respectively whether they prefer them on the basis of their purchase and if so, in which product categories this happens.
The results of our research show that young consumers perceive private labels as a suitable alternative to purchase (58.29% of respondents), private labels evoke in them a sense of adequate quality at a reasonable price (59.74% of respondents), they perceive their quality as good or adequate (47.18% of respondents), the quality of private labels is up to their opinion comparable with the quality of traditional brands (16.76% of respondents think so exactly and up to 42.08% of respondents think so rather), up to 26.55% of respondents exactly prefer them in their purchase, and this is particularly the case of categories such as milk and dairy products, food in general and cosmetics.
The last questions in our questionnaire survey focused on the issue, whether our respondents would recommend private label products to other consumers and what they would change on them, if they had that chance. According to our findings, young Slovak consumers would recommend private label products to other consumers (20.95% of respondents has declared the possibility of certainly yes and 46.99% respondents rather yes) and if they had the possibility, they would in particular increase the quality of private label products (28, 96% of respondents), they would change their packaging and made it more attractive and lower their price (in both cases 15.49% of respondents).

Evaluation of tested dependencies

Hypothesis 1: We assume that there is a correlation between buying private labels and the gender of respondents – rejected.
Hypothesis 2: We assume that there is a correlation between buying private labels and the net money income of households – rejected.
Hypothesis 3: We assume that there is a correlation between buying private labels and the number of household members – rejected.
Hypothesis 4: We assume that there is a correlation between the frequency of private labels´ purchase and the gender of respondents – rejected.
Hypothesis 5: We assume that there is a correlation between the frequency of private labels´ purchase and the net money income of households – confirmed.
Hypothesis 6: We assume that there is a correlation between the frequency of private labels´ purchase and the number of household members – rejected.
Hypothesis 7: We assume that there is a correlation between the frequency of buying private labels in the category of milk and dairy products and the gender of respondents – rejected.
Hypothesis 8: We assume that there is a correlation between whether the respondent is the end user of the purchased private label products and his gender – confirmed.
Hypothesis 9: We assume that there is a correlation between what private labels evoke in the respondent and his gender – confirmed.
Hypothesis 10: We assume that there is a correlation between what would lead the respondents to the purchase of private label products and the gender of respondents– rejected.
Hypothesis 11: We assume that there is a correlation between the decisive factor in the purchase of private labels and the gender of respondents – confirmed.
Hypothesis 12: We assume that there is a correlation between what discourages respondents from the purchase of private labels and the gender of respondents – rejected.

In addition to the tested dependencies, it can be stated that although the dependencies 5, 8, 9 and 11 were confirmed, they are weak but statistically still significant (Tables 3 to 6) – the results of Phi Coefficient and Cramer´s V coefficient were in the case of the fifth hypotheses equal to 0.2611 and 0.1306, in the case of eight hypotheses to 0.1950, in the case of ninth hypotheses to 0.1187 and in the case of eleventh hypotheses to 0.1742, which means that even if there is a statistically significant correlation, this correlation is very weak.

Table 3: Correlation between the frequency of private labels´ purchase and the net money income of households
Source: Results of the research, SAS Enterprise guide output

Table 4: Correlation between whether the respondent is the end user of the purchased private label products and his gender
Source: Results of the research, SAS Enterprise guide output

Table 5: Correlation between what private labels evoke in the respondent and his gender
Source: Results of the research, SAS Enterprise guide output

Table 6: Correlation between the decisive factor in the purchase of private labels and the gender of respondents
Source: Results of the research, SAS Enterprise guide output

Conclusion

Consumer behavior, factors leading and discouraging to and from the purchase, purchasing and decision-making process of consumers etc. have been of interest to several researchers, but very few research works are aimed at consumers under the age of 25 years, not to mention in the case of private labels. The present paper focused on the issue of private labels, but in a specific segment of customers, namely the young generation of Slovak consumers, i.e. consumers under the age of 25 years who represent potential loyal customers of the given labels, resp. focused on the issue of private labels in the segment of milk and dairy products, as several research work has shown that private labels are mainly purchased in the category of milk and dairy products.
An anonymous questionnaire survey was chosen as the main research method, in which 549 respondents aged under 25 years have participated. The results of our research point to many key findings in the given issue, where it has been shown that our respondents are indeed the end users of the private label products and therefore it is highly likely that they will become loyal customers, on which retailers should focus. Next, that:
 the decisive factor leading to the purchase of private labels in our focus group is the combination of reasonable price and quality,
 the decisive factor discouraging from the purchase of private labels is their price, low quality and lack of information about the exact manufacturer,
 what would influence our respondents to the purchase of private labels is mainly the recommendation from their families and friends, tastings, free samples or more interesting form of promotion.
 young consumers perceive private labels as a suitable alternative to the purchase, as well as
 private labels evoke in them a sense of adequate quality at a reasonable price,
 they would recommend private label products to other consumers and if they had the possibility, they would in particular increase the quality of private label products, change their packaging and made it more attractive and lower their price.
Up to the written, we can conclude, that the quality of private labels products is from day to day increasing, as well as that the boundaries between them and traditional labels are gradually blurring. Customers (not just the young generation) begin to realize that the private label products are a suitable alternative to their purchase. Possibilities of increasing the attractiveness of these products could be based in raising awareness about private labels and their real producers, as well as based on better promotion of these products – mainly by the traditional forms of marketing communication (e.g. tasting, free samples etc.).

In many cases, we have found out, that Slovak consumers still hesitate to buy the private label products, because they do not have any experience with these products, respectively they do not know their real producer. For this reason, the submitted paper can also serve as a tool to raise awareness of both the professional and general public, especially about the existence of private labels, their meaning, advantages and potential pitfalls, as well as it can serve as an example/basis for another research in the given field.

Poznámky/Notes

This work was supported by the GA research project no. 8/2019 „Private labels as the alternative to purchase“, which are solved at the Department of Marketing and Trade, Faculty of Economics and Management, Slovak University of Agriculture in Nitra.

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Kľúčové slová/Key Words

private labels, respondents under 25 years, milk and dairy products
privátne značky, respondenti vo veku do 25 rokov, mlieko a mliečne produkty

JEL klasifikácia/JEL Classification

M31, M39

Résumé

Spotrebiteľské správanie mladých slovenských spotrebiteľov (vo veku do 25 rokov) na trhu privátnych značiek

Spotrebiteľské správanie, faktory ovplyvňujúce nákupný proces spotrebiteľov, proces spotrebiteľského rozhodovania a pod. boli predmetom záujmu viacerých výskumných prác a štúdií, avšak v oblasti privátnych značiek sa tejto problematike dostáva za dosť až v poslednom období. Cieľom predloženého príspevku bolo zistiť, ako vnímajú respondenti vo veku do 25 rokov privátne značky, či ich nakupujú, sú ich konečným užívateľom a pod., pričom sme sa zamerali predovšetkým na segment mliečnych produktov. Za hlavnú výskumnú metódu bola zvolená metóda anonymného dotazníkového prieskumu, ktorého sa zúčastnilo celkovo 549 respondentov vo veku do 25 rokov v rámci celého Slovenska, ktorá bola následne doplnená o štatistické verifikovanie nami naformulovaných hypotéz (celkovo dvanásť hypotéz). Na uvedenú verifikáciu boli využité štatistické testy, ako Pearsonov Chi-kvadrát test dobrej zhody, Phi koeficient, Kruskal-Wallisov test a Cramerov kontingenčný koeficient V, ktoré boli vyrátané v štatistických programoch XL Stat a SAS Enterprise Guide. V závere príspevku sú prezentované tak kľúčové zistenia vyplývajúce z nášho výskumu, ako i možné odporúčania do praxe.

Kontakt na autorov/Address

Ing. Ingrida Košičiarová, PhD., Slovak University of Agriculture in Nitra, Faculty of Economics and Management, Department of Marketing and Trade, Trieda A. Hlinku 2, 949 76 Nitra, Slovakia, e-mail: [email protected]

Ing. Zdenka Kádeková, PhD., Slovak University of Agriculture in Nitra, Faculty of Economics and Management, Department of Marketing and Trade, Trieda A. Hlinku 2, 949 76 Nitra, Slovakia, e-mail: [email protected]

Recenzované/Reviewed

15. March 2020 / 31. March 2020