Price and quality competition between brands and own brands: A value systems perspective

The selling prices to consumers of similar products vary considerably within the same retail outlet and between different types of retail outlet. Applying a value systems framework, the cost structures behind the selling prices of products in five product categories are identified using primary and secondary data. The quality of the competing products is also compared using conjoint analysis of the ratings given by consumers for the edible products and available chemical analysis in the case of detergents. The main explanation for the differences observed in selling prices and cost structures of competing value systems lay not in the interface costs between value chains such as logistics, as expected, nor only in advertising costs, but in the internal costs of individual value system members. In particular, the internal costs of brand manufactures are shown to be the main source of their cost disadvantage against own brands. Only in one product category was there a quality justification for the higher prices charged by the leading manufacturer brand.