Traditionally, private labels have been seen as inferior quality alternatives at value prices. Now most national brand manufacturers usually think of private labels as they would any other national brand — a tough source of competition. But private labels are not simply a generic competitor, because the retailer that sells them is also the national brand's customer. The author considers alternative strategies for national brands to respond to private label encroachment, including doing nothing, distancing themselves through quality innovations, fighting back by reducing price gaps, and establishing several "me-too" strategies. He presents empirical evidence to show the viability of each strategy.
Stephen J. Hoch is a professor of marketing at the Wharton School, University of Pennsylvania.
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