Generic Brands’ Effects on Organizational Sales

There has been a proliferation of generic brands in the United States of America and other markets around the world in the recent past. Discount stores such as Walmart and others have taken into offering their clients generic products that are relatively cheaper than their brand name counter parts. There are several reasons why retail out lets and manufacturers offer generic brands for existing branded products. The major one is to increase the sales volume of fast moving brands such as drugs and utility items. However, there has been a raging debate on whether these generic products really increase organizational sales. This is especially so given that they are made for fast moving products as earlier stated. This is a proposal for the study that will address this question. The proposed study will try to unravel whether the generic products increase organizational sales. Explanations for this increase, or lack of it thereof, will be provided by the findings of the study. The proposed study is going to take the form of a quantitative survey. Five generic products will be randomly selected in a Walmart store. A survey will be carried out for a period of one month to determine the sales of these generics as compared to their branded counter parts.

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The Effects of Generic Brands on Organizational Sales: Research Proposal

Introduction

A generic can be described as an item that is structured along the lines of another item that can be considered as the original. There are several reasons that justify the existence of a generic. The generic product may be aimed at promoting the sales of the original and branded item. Consumers also go for the generic products because they are cheaper than the branded and original product, despite the fact that the quality might be more or less the same.

According to Fischer (2006), most generic brands are to be found in the consumer products sector. This scholar is of the view that there are certain characteristics that clearly distinguish a generic brand from the branded or original item. This is given the fact that generic products do not have a brand name (Hirst, 2009).

However, Sugden & Napoli (2005) contradict Fischer’s distinction. They are of the view that taking generic brands as lacking in a brand name is fallacious and erroneous. This is because the generic brands are themselves branded despite differently from the original items (Sugden & Napoli, 2005). The difference between conventional branding and branding in generic products is that the latter are branded with the name of the store that is retailing them. Alternatively, they may be given the brand name of an inconspicuous brand name that, unlike conventional brands, are not aggressively marketed or advertised to the consumer (Larson, 2004).

Most discount outlets retail generic products at significantly lower prices that their brand name counter parts (Hirst, 2009). This is the trend in majority of discount stores like Walmart in the United States of America and elsewhere. The reason behind this is to increase the sales volume of high sales products (Grahame, 2010). It is important to note that generics are made for fast moving and fast selling products that are popular with the consumers. These are products such as toilet paper, medicine and canned corn among others (Gilpin, 2002).

However, a question arises whether these generic products really increase organizational sales. In other words, the raging debate revolves around whether generic products really increase the sales volume for the manufacturer of the branded items. For example, does the sale of generic Cola in Walmart stores increase the sales volume of braded Cola from Coca Cola?

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The proposed research is going to address this question. The researcher will examine whether the sale of generic products increases the sales volume for the branded products. The proposed research will take the form of a qualitative study.

Problem Statement

As stated earlier, generic brands are made to imitate the branded and more popular items in the market. Given that they lack in aggressive marketing campaigns like their branded counter parts, consumers identify generic brands more by their product traits and characteristics (Bengtsson, 2008).

Another factor that sets generic brands apart from the branded products has to do with their manufacturing and processing. Cox (2001) is of the opinion that these brands may be produced by manufacturers that are less prominent and less conspicuous. For example, a generic cola brand is more likely than not to be the product of a manufacturer that is not as prominent as Coca Cola.

Alternatively, the generic brands may be produced along similar production line as the branded product after which they take (Grahame, 2010). This can be explained using the case of the generic cola drink given above. This generic may be manufactured by the Coca Cola Company just like the conventional and branded Cola drink. However, the company fails to brand the Cola and sells it as a generic.

To reiterate a point, generic brands imitate fast selling and popular branded items. Along the same lines, these generics are designed in such a way that they will themselves sell fast. To this end, retail outlets sell the generics at significantly lower prices than the branded products (Reyes, 2006). Also, the out lets sell them cheaply than the products retailed by the out lets under their own brand (Boyle, 2006). For example, Walmart may be selling a Cola drink under their name. This is what Rahim (2003) calls a store brand or an own brand. This being the case, Walmart will sell the generic Cola from Coca Cola Company at a lower price than their own brand.

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According to Berthon, Capon, Hulbert, Mungolo-Poore, Napoli, Pitt & Keating (2008), generic brands imitate the more expensive branded items. More often than not, the product has the same quality with the branded product it imitates (Berthon et al, 2008). However, Larson (2004) cautions that the quality of a generic brand can not be guaranteed. It can improve or deteriorate suddenly, albeit the fact that the packaging may remain constant. This fluctuation is attributed to several factors, one of them being the change in the supplier and manufacturer of the generic.

Herz (2001) is of the view that generic products can also be sold under he calls private labeling. This is whereby a store retailing in generic products owns the brand it is selling. However, the name of the brand is not similar to that of the store owning the brand and selling it. This privately labeled product can be sold to other retail outlets. A case in point is the line of supermarkets owned by Safeway Inc. This company has a line of dairy products that it has labeled Lucerne. This means that Lucerne products can be found in other retail out lets been sold under the same name brand.

Another major product that is retailed as generic brands in the United States of America and elsewhere is drugs. After a new drug is invented, the inventor enjoys patent rights for a given period of time. This means that during the patent period, no one else, apart from the inventor, is allowed to manufacture the drug. However, on expiry of the patent, other manufacturers are allowed to manufacture and sell generics. The generic drug has the same quality with the branded one. But it is sold at a discount. The selling price is determined after the manufacturer of the generic takes into consideration the patent royalties and expenses incurred during the marketing, if at all marketing was carried out.

The effects of a generic brand on the organizational sale of the branded product may depend on several factors. For example, it may depend on the attitudes of the consumers towards the generic product and the branded item. When the consumer feels that the utility derived from a generic is the same as that of the branded item, they may go for the latter (Sugden & Napoli, 2005). A consumer may be of the view that a generic tissue paper gives them similar services with the branded tissue paper. This being the case, they will buy the generic, given that the latter retails at a lower price. As such, the customer would have saved on expenses.

The sales of the generic or branded item may also depend on the frequency of use of the item. Routinely used items such as paper tissues, foils and kitchen sponges may be retailed as generics. This is given the fact that consumers prefer to buy the generics of these products at lower prices to save on expenses.

Research Design

Introduction to Research

As earlier stated elsewhere, the proposed study is going to take the form of a survey. The research will be quantitative in nature. This means that statistics will be widely used. Collection of data and analysis of the same will also assume a quantitative design. The researcher will select five generic brands in a retail store. The sales of the generic products will be compared with those of the branded items. This comparison will reveal the effects of generics on the sales of the branded items.

Research Population

Target Population

According to Laura & Leahey (2008), target population is the larger population within which a study is carried out. The target population for this study is generic brands in the market in the United States of America and elsewhere in the world.

Sample Population

The sample population of any study, according to Malinowski (2009), is the smaller population drawn from the target population and on which actual study is carried out. Sample population should be representative of the target population to increase the accuracy of the findings. The sample population for this study is five generic brands of items sold at Walmart discount stores. These are Cola, Aspirin, Kleenex, Saran Wrap and Cheetos. These brands were randomly selected as will be explained later.

Unit of Observation

Atkinson (2007) defines a unit of observation as those characters that the researcher will observe to carry out the study. For this study, the unit of observation will be the five generic brands and their branded counter parts in Walmart stores.

Unit of Analysis

Unit of analysis for this study is the effects that generic brands have on organizational sales.

Sampling Technique

The researcher will use a combination of random and stratified sampling techniques. The survey will be carried out in a single retail out let. This will be selected through the stratification technique. All the stores in the researcher’s city will be stratified in accordance to their sales volume. The researcher will select that store which has high volume of sales. The stores will also be stratified into those that sell generic brands along side the branded counterparts and those that do not. Those stores selling generic brands together with the branded counter parts will be selected for the study.

After the store is selected, the researcher will then randomly select the generic brands that are sold there. A list of all the generic brands in the store will be made, and random selection will be made from this list. Five items will be selected as explained earlier.

Data Collection

As stated earlier, this study is going to take the form of a quantitative survey. The researcher will keep record of the sales of the generic brands and their branded counter parts. This observation will be carried out for a period of one month. The data collected will then be analyzed.

Data Analysis and Presentation

Statistical methods will be used to analyze the data. Means, percentages and fractions will be used among others. A comparison will be made between the sales volume of generic brands and that of the branded items. The relationship between the two will then be analyzed.

Assumptions Made in the Study

Several assumptions will be made for this study. The researcher will assume that consumers are aware of the existence of both the generic brands and the branded items. It will also be assumed that consumers make rational decisions to buy either the generic brands or the branded items. The researcher will assume that the staff at Walmart discount store do not, deliberately or otherwise, try to influence the decisions of the consumers in selecting between the generic and branded items.

Significance of the Study

The findings of the proposed study will go a long way in providing a link between the generic brands and organizational sales. From the findings, the organization manufacturing branded products will be able to know whether generic products for their branded items are a boost to their sales or not. As such, the organizations will be able to make informed decisions regarding whether to produce generic products or not.

Review of Literature

Generic Brand vs. Branded Product

According to Koliopoulos, Hung, Pollack & Grehan (2009), many consumers are faced with the dilemma of whether to buy the branded item or to go for the generic brand. The decision of whether to buy a generic brand or a name brand boils down to personal preference (Koliopoulos et al, 2009). A majority of consumers are of the view that once they make the decision to buy a generic product, this should be extended to all purchases made. But Fischer (2006) is of the view that this assumption on the part of the consumer is erroneous.

Hirst (2009) is of the view that most consumers buy generic brands of items that they do not have a personal preference for. When the consumer has no personal preference for the brand, this means that they are not loyal towards the same. This being the case, the consumer is under no obligation to purchase the item on the basis of brand. These are items such as aluminum foils, eggs and such others.

The satisfaction that the consumer derives from the product will determine whether they go for the generic or for the branded item. The consumers compare the level of satisfaction they derive from a branded item with that which they derive from a generic, and make their decision on this basis. For example, if the consumer is allergic to a generic drug, then they may opt to buy the branded one instead.

As stated earlier, generic brands are usually cheaper than their branded counter parts. As such, the motivation to save, especially during hard economic times, makes consumers go for the generics (Rahim, 2003). Branded products are usually marketed aggressively through advertisement campaigns and such other strategies. Give the fact that most people are aware of these brands, consumers may think that they are better than the generics. But this is not always true given that thee generics may have equal quality. Branded items are priced higher than the generics to cover for the expenses incurred during the marketing campaigns. Furthermore, discount stores may commission the manufacturers of the branded items to make the generics for them.

Generic Brands and Marketing in Retail Outlets

Berthon et al (2008) is of the view that apart from the consumers, retail out lets also benefit from the presence of generic items in the market. Retailers use these items, especially the store brands, as a marketing strategy. They use them to distinguish themselves from their competitors in what Fischer (2006) terms as a crowded market. There are many retailers out there, and each of them wants to stand out from the rest. They use store brands to achieve this. If the store brands offered by the retail out let satisfy the consumers greatly, the consumers may develop a loyalty towards the store. Reyes (2006) gives the case of Safeway line of stores. These stores have perfected the art of using store brands as a marketing strategy. To this end, store brands account for about a quarter of all the sales made in these stores (Reyes, 2006).

Generic Brands in the United States of America: A Historical Context

Generic brands in the United States of America can be traced back to the 1970’s. They are credited to one Al Williams (Hirst, 2009). This individual was a private label products manager employed by Albertsons Stores (Hirst, 2009). He left this position in mid 1970, and went ahead and founded his own outfit. He founded a Private Label consulting company and came up with twenty generic products. The company was called Keynote Marketing, and specialized in No-Name generic brands.

Al Williams placed his products in several retail outlets in the country. One of Albertsons Stores was even a client to his company. This was the Skaggs-Albertson that was operating from Texas (Gilpin, 2002).

Noting the success made by Keynote Marketing, a number of large chain stores in the United States of America borrowed the idea (Grahame, 2010). The stores started to offer their customers several white labeled items that can only be described as generics. These were imitations of products manufactured by various companies in the country. This trend continued until most stores had their own generics that were clearly identified with them.

Sale of generic brands in supermarkets in the United States of America can be traced back to the year 1977 (Sugden & Napoli, 2005). This appeared on the shelves of Jewel Companies line of supermarkets. The packaging of the generic products was devoid of any pictures or names (Rahim, 2003). The writings were limited to the contents of the package and a code for the same (Rahim, 2003).

In the early years of the 1980 decade, generic brands in the country were clearly distinguishable from their branded counter parts. For example, they carried labels that were plain and white (Grahame, 2010). The font stating the contents of the package was either blue or black (Gilpin, 2002). This can be described as the genesis of generic products in America.

References

Atkinson, K. J. (2007). Survey as a quantitative research method. New York: Free Press.

Bengtsson, A. (2008). Co-branding and the impact on inter-organizational relationships. Web.

Berthon, P. R., Capon, N., Hulbert, J. M., Mungolo-Poore, M., Napoli, J., Pitt, L., & Keating, S. (2008). Organizational and customer perspectives on brand equity: Issues for managers and researchers. Web.

Boyle, M. (2006). Brand killers store brands aren’t for losers anymore. In fact, they’re downright sizzling. Fortune, 2(1), 9-11.

Cox, K. K. (2001). The effect of shelf space upon sales of branded products. Journal of Marketing Research, 7(6), 55-58.

Fischer, B. W. (2006). Effects of generic brands on branded items in contemporary society. Long Beach: Prentice Hall.

Gilpin, H. L. (2002). Generic and branded products: The raging debate. Long Beach: Prentice-Hall.

Grahame, I. P. (2010). Case studies on impacts of generic brands in the American market. New York: Free Press.

Herz, G. L. (2001). A historic walk down the aisles of the supermarket. Milwaukee Journal, 4(1), 19-22.

Hirst, O. A. (2009). Myth and facts about generic brands. Journal of Marketing Research, 2(4), 92-99.

Koliopoulos, S., Hung, T., Pollack, A., & Grehan, S. (2009). Providing an enhanced perspective on brand erosion by generics: 5 cases modeling the impact on Rx brands. Web.

Larson, V. C. (2004). Generic brands in America in the 21st Century. New York: McGraw-Hill.

Laura, H., & Leahey, E. (2008). Collaborative research in sociology: Trends and contributing factors. American Sociologist, 3(9), 290-306.

Malinowski, X. N. (2009). Quantitative research methods. New York: McGraw-Hill.

Rahim, H. L. (2003). Generic brands save consumers money, even when they don’t buy them. Journal of Marketing Research, 3(7), 15-17.

Reyes, S. (2006). Study: Wal-Mart private brands are catching on. Brandweek, 3(8), 3-8.

Sugden, Y. O., & Napoli, Q. A. (2005). A comparison of generic and branded items in the American market. Journal of Marketing Research, 29(8), 82-89.

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