The Effect of Private Brands' Service Quality on Brand Attitude

Abstract

Purpose: This study analyzes service quality of Pivate Brand (PB) productsto provide some academic and practical implications. Research design, data, and methodology: The focus is on how service quality of No Brand, which has recently received much attention, affects brand attitude and, to confirm whether consumers' prior knowledge of PB moderates this effect. A total of 167 men and women in their 20s who have experience using No Brand were surveyed. Hypothesis was verified by using hierarchical regression analysis. Results: a) Tangibles, reliability, empathy, and assurance of service quality for No Brand have a positive effect on brand attitude; b) The moderating effect of prior knowledge is only statistically significant in the context of reliability. Conclusion: This study provides academic and practical implications for establishing differentiated PB strategies. It highlights the effects of service quality and consumer prior knowledge on brand attitude. This suggests that the sub-dimension of PB service quality has a discriminatory effect on the brand attitude of No Brand, and that consumer's prior knowledge of the product influences reliability of service quality. Therefore, consumer's prior knowledge is important in order to increase trust.

1. Introduction

Lotte Shopping, whose operating profit has plunged, decided to shut down 200 offline stores. In 2019, E-Mart decided to withdraw from the 'Pierro Shopping' business, and also closed almost half the number of total stores for 'Boots', a health care and beauty specialty store. In light of these occurrences, there has been concern that the retail apocalypse is in full swing for Lotte Shopping and E-Mart, which are commonly referred to as the ―Big 2‖ in the distribution industry, for their restructuring. Some have analyzed that these crises on the large companies in the distribution industry have resulted due to forced closing days or restrictions on creation of new stores due to the rise of small businesses declaring large companies as enemies of the public. But, there are increasing analysts that fault on the complacency of the large businesses that resulted insufficient responses to keep up with the changing trendsfor the distribution industry.

In order to overcome the crisis of these offline retailers, a variety of strategies were examined, such as the creation of private brands (PB) where their characteristic is cost-effectiveness and is attracting attention. In particular, E-Mart's PB, 'No Brand', demonstrated visible results by achieving sales of 100 billion won in one year in the midst of the crises of the on-line retailers (Lee, Cho, & Choi, 2019). However, consumers still have the inclination to see No Brand products as being cost-effective, but also having low quality as a result (Hwang, Lee, & Noe, 2010). Past studies on PB-related research has been conducted mainly to reveal consumers' intentions to purchase PB products or the characteristics of buyers. There have been few studies conducted on the service quality of PB and have not been examined with in-depth (Yoon, Park, & Kim, 2008).

In light of this, several studies have reported on the importance of increasing the quality level rather than the price in order to attain the loyalty of customers for PB (Ye & Jeon, 2010). In the case of E-Mart, PB stores such as No Brand are strategically showcased in differentiated areas of the store, so that the service quality of PB stores will be felt with distinction compared to that of the existing retailers. In addition, it is judged that these effects may show different results depending on the consumer's knowledge of PB. Therefore, this study aimed to present academic and practical suggestions in the distribution industry by examining how service quality perceived by the consumers about PB affects brand attitude and consumer prior knowledge.

2. Review of Literature

2.1. Considerations for PB

PB refers to a brand that carries a retailer's own trademark and plans, manufactures, and commissions products to sell to consumers through the distributor's internal channels (McGoldrick, 1984; Shutte, 1969). It can be said to be a concept that is distinguished from the national brand(National Bran: NB) that is distributed nationwide by securing the financial power and management ability (Ye & Jeon, 2010).

In recent years, the emergence of various large-scale retailers and low-price strategies have influenced the performance of distributors, and as a result, the importance of PBs is increasing. For this reason, it was discussed that it is possible to satisfy the needs of consumers, make a difference from competitive stores, and secure the power of NB and diversify the supply line (Nu, Park, & Go, 2015).

Additionally, PB products are growing rapidly because manufacturers can secure sales through the distribution network of large distributors, distributors can increase profits by reducing the middle distribution stage, and consumers can purchase high-quality products at low prices(Kim, 2016). It has also emerged as a reasonable alternative for both manufacturers and consumers, as well as distributors, and thus the scale of PB is gradually expanding (Kim, Yang, Chae, & Park, 2019).

In the beginning, consumers had a strong prejudice that PB was a ―low price-low quality‖ product. However, in order to increase consumer awareness, efforts are being made to display PB products in the golden zone or to improve the product quality management system (Jin, 2011). Now, PB can be understood as a strategy to secure strategic advantages from a long-term point of view by building a store image and differentiating it from NB, rather than simply providing a cost-effective product to distributors(Quelch & Harding, 1996).

2.2. Service Quality

Service quality is a unique characteristic of service, and it is a concept that is very diversely discussed because it is difficult to measure, define, and evaluate service quality, unlike products (Bae, 2014). In the consumer sector, quality of service refers to how well the level of service meets customer expectations (Hong, Kim, & Oh, 2020).

Because service quality is evaluated based on an intangible concept of customer satisfaction, discussions on service quality have been conducted around the SERVQUAL model (Parasuraman, Zeithaml, & Berry, 1985). The initial ten characteristics of the SERVQUAL model revealing differences in customer perceptions and expectations, which were based on Oliver's (1980) expectation discrepancy model, have been shortened to five characteristics of tangibles, reliability, responsiveness, assurance and empathy (Parasuraman, Zeithaml, & Berry, 1988).

Tangibles refers to the physical facilities and equipment necessary to provide actual services, and reliability is related to whether the service will keep its promise. Responsiveness is about whether the service provider can meet the consumer's needs and provide the service promptly, and empathy means that the provider of the service understands the consumer's individual context and provides the service accordingly. Finally, assurance means that the service provider has the knowledge or attitude to meet consumer wants or needs (Tabash, Albugami, Salim, & Akhtar, 2019).

Several previous studies have revealed that the five service quality dimensions positively affect brand attitude, customer satisfaction, revisit intention, and word of mouth intention (Bae, 2014; Lee, Choi, & Ryu, 2015; Tran, 2020). That is, considering that the retailer plans, develops and releases PB products on its own, and is sold only to consumers through stores in the retailer, consumer evaluation of the quality of the PB service will affect the attitude of the PB brand. Accordingly, the following hypotheses were established to verify the influence of the main sub-dimensionality of the SERVQUAL model.

H 1: The higher the tangibles, the more positive No Brand‘s brand attitude will be.

H 2: The higher the reliability, the more positive No Brand‘s brand attitude will be.

H 3: The higher the responsiveness, the more positive No Brand‘s brand attitude will be.

H 4: The higher the empathy, the more positive No Brand‘s brand attitude will be.

H 5: The higher the assurance, the more positive No Brand‘s brand attitude will be.

2.3. Moderation effect of prior knowledge

The consumer's prior knowledge is the content that an individual has accumulated in relation to his or her consumption life (Alba & Hutchinson, 1987). This refers to information that is recalled from consumer knowledge prior to the consumer's search for a brand or product to be purchased (Kim et al., 2019; Brucks, 1985). Consumer prior knowledge has an important effect on consumer purchasing decisions. When the familiarity with a product or brand increases by experience, various information about the product or brand accumulates in the consumer's memory, and the level of knowledge increases, thereby increasing professional judgment (Park & Chae, 2013; Hwang, 1997).

Even in the consumer context, consumers with high prior knowledge levels are immediately recalling from the evaluation criteria for decision making, and purchase choices are made based on that criteria (Feldma & Lynch, 1988). In other words, consumers with low prior knowledge do not have the existing knowledge structure for brands, products, and services, so they have difficulty understanding and interpreting related information and complicate related information, making it difficult to make purchase decisions.

Because of the lack of experience in the product, it is difficult to evaluate the target, which increases their tendency to rely on peripheral cues or external evaluations (Selnes & Grønhaug, 1986). On the other hand, consumers with a lot of prior knowledge have various knowledge structures for brands, products, and services, and it is easy to understand and interpret related information.

In addition, it is possible to make quick purchase decisions by determining that product evaluation is easier and the risk through purchase is lower (Bettman & Park, 1980). Son, Han, and Lim (2009) suggested that the effect of the quality of service can be controlled by various adjustment variables such as cultural differences, consumer orientation, and service provider differences. Different levels of prior knowledge of consumers can influence different decisions. Therefore, when this is applied to this study, it can be expected that No Brand's brand attitude may vary depending on the consumer's prior knowledge of PB products. Therefore, the following research question was set up, and the research model was observed, as is shown in Figure 1.

Figure 1: Research Model

RQ 1: Does the consumer's prior knowledge control the effect of PB store's service quality on No Brand's brand attitude?

3. Methodology

3.1. Research subject and design

The current study has selected E-Mart's No Brand for study. This is because E-Mart's No Brand utilized the concept, image, and characteristics of PB discussed earlier as a marketing method and was thus judged as a good case because it is a brand launched by a retailer called 'E-Mart'. Therefore, the survey was conducted over a week from November 7 to 14 for men and women in their twenties who had experience using No Brand. The participants who were in their twenties were chosen as the subject of the study because it was an age group who used No Brand products the most compared to other age groups (Lee & Sung, 2018). A total of 187 respondents participated in the survey, but 20 unfaithful respondents were excluded for a total of 167 respondents measured.

3.2. Definition and measurement of key variables

As an independent variable, service quality is a concept in which not only the quality of the service itself but also the quality of the service delivery process must be considered, and it can be said to be an overall judgment or attitude toward the service itself (Parasuraman et al., 1988). In this study, among the SERVQUAL questions proposed by Parasuraman et al. (1988), some items were used in accordance with this study, and each item used a 7-point Likert scale of 'strongly disagree‘ to 'strongly agree‘.

The tangible category had four items (α = .74): 'The interior of the store is attractive', 'The outer appearance of the store is attractive', 'The products and facilities of the store fit well with the overall image', and 'The appearance of the store staff is polished'. Reliability category included three items (α = .87): 'The store employee's service is reliable', 'Employees of the store tries to solve the customer's problem from the perspective of the customer', 'Employees of the store fulfills the promise with the customer'. Responsiveness category included items such as 'Employees at the store execute services quickly to the customers', 'Employees at the store inform customers accurately about the service delivery and contents', 'Employees at the store immediately respond to customer needs', 'Employees are willing to help customers kindly', using 4 items (α = .82). Empathy category also had 4 items (α = .75): 'Employees pay attention to customers', 'Employees at the store have sufficient work knowledge', 'Employees at the store know what the customers‘ needs are', and 'Employees at the store are sincere to the customers‘.

The assurance included 4 categories of 'You can buy and trust the products recommended by the store staff', 'The store staff gives you assurance about the product information', 'The store is open to customers at a convenient time', 'It is convenient to locate the store‘, (α = .83).

As a control variable, consumer prior knowledge refers to the contents that an individual has accumulated in relation to his or her consumption life, and is information that is drawn out from consumer knowledge, and the recognition of the brand can be called brand knowledge (Park & Chae, 2013; Brucks, 1985). In this study, items used by Kan et al.(2016) were referenced to include the 4 following items: 'PB products are familiar to me', 'I know about the function of PB products well', 'Others ask me about PB products‘, and 'I know comparatively more about PB products than those around me‘ (α=.76).

Brand attitude as a dependent variable is a favorable or unfavorable attitude that consumers perceive overall about the brand, and is a comprehensive evaluation factor of consumers for the brand (Keller & Aaker, 1992). Some of the scales of Jeon and Yoon (2001) were modified to consist of three items: 'I like No Brand,' 'I prefer No Brand,' and 'No Brand is appealing' (Α =. 90). The reliability coefficient (Cronbach's α) of all variables was found to be reasonable.

4. Results

4.1. User and usage characteristics

The demographic characteristics of survey respondents are as follows. Gender consisted of 75 males (44.9%) and 92 females (55.1%), and the average age of the respondents were 23.34 years old (SD = 2.21). In addition, looking at the behavior of respondents using No Brand, the average number of times it had been used in a month was 1.93 times(SD = .83), and the average amount used everytime they went to No Brand was 2.13 million won (SD = 1.65).

In this study, hierarchical regression analysis was conducted to verify the effect of various levels of service quality factors on No Brand's brand attitude. Gender and age, average number of times per month used, and average amount of use per visit were used as control variables. Variance inflation factor (VIF) was checked to identify the multi-collinearity problem among independent variables, and it was determined that there was no multi-collinearity problem because the VIF of all variables did not exceed the standard value of 10 (Burton, Lichtenstein, Netemeyer, & Garretson, 1998).

The hierarchical regression analysis was conducted in a total of three stages: demographic variables in the first stage, and all independent variables of service quality in the second stage (tangibles, reliability, responsiveness, empathy, assurance), and in the third step, an adjustment variable(prior knowledge and independent variables as well as adjustment terms of prior knowledge) was set and put into the model. The regression model for each step was found to be significant (see Table 1). Thus, it can be said that the influence of the independent variables set in this study and the moderating effect of prior knowledge both affect consumer‘s brand attitude toward No Brand.

Table 1: Results of hierarchical regression analysis on brand attitude

^*p<.05, ^**p<.01

In terms of quality of service, tangibles (β = .21, p <.01) and reliability (β = .19, p <.01), empathy (β = .17, p <.05), and assurance (β = .17, p <.05) showed a positive influence on the attitude of No Brand, supporting Hypothesis 1, Hypothesis 2, Hypothesis 4, and Hypothesis 5. However, Hypothesis 3 was rejected because there was no statistically significant difference in responsiveness among service quality. When examining the relative influence, it was found that tangibles among No Brand's service quality had the most influence on brand attitude, as well as reliability, empathy, and assurance, in this order.

As a result of analyzing the moderating effect of prior knowledge, only the moderating effect between reliability and prior knowledge was found to be statistically significant (β = .23, p <.01). This means that the higher the prior knowledge of PB, the more prominent the influence of reliability on the No Brand brand attitude. The results of each research hypothesis and research question verification are as shown in [Figure 2].

Figure 2: Research hypothesis and research question verification result

5. Discussion and Conclusion

Recently, the crisis of the Mart, which is a traditional offline distribution channel, is becoming a reality as large retailers, including Coupang, monopolize market issues withthe release of "lowest price" products daily. In this 'mart crisis', PB is attracting attention as one that will be able to compete with online retailers. In particular, E-Mart's rapidly growing PB, No Brand's products, has demonstrated considerable performance in competition with e-commerce companies. Accordingly, this study conducted a study by setting No Brand's various service qualities (tangibles, reliability, responsiveness, empathy, and assurance) as independent variables and setting consumer prior knowledge as a moderating effect.

The main findings and theoretical implications of this study are as follows. First, the relationship between PB service quality and brand attitude, which is actively researched in the field of management, was applied to No Brand for research. As a result of the study, tangibles, reliability, empathy, and assurance were found to be variables that influenced the attitude of the No Brand brand, and among them, tangibles was shown to be the most influential variable. Responsiveness, on the other hand, was shown to have no direct effect on the No Brand brand.

Thus, it was confirmed that not all dimensions of service quality affect brand attitude, but only specific quality dimensions. Kim (2019), who researched the service quality of coffee shops, and Nu et al. (2015), who analyzed the effect of retailer reliability on attitudes toward PB products and purchase intentions, also showed that the dimensions did not all confer the same effect. This study has academic significance in that the sub-dimensionality of service quality, which has been recognized for its explanatory power in various management-related fields, has a different influence on the brand attitude of distributors, and has found applicability in the context of PB products.

Second, it revealed that prior knowledge regulates the influence of reliability on brand attitude among service quality of No Brand. This showed the same result as other previous studies that reported that prior knowledge regulates the effects of various independent variables in the consumer's information processing and purchasing processes (Park & Chae, 2013). This can be said to be a meaningful result in that the influence of reliability becomes stronger when the prior knowledge of No Brand is high. Even in the context of retailers, the prior knowledge of consumers is a result that suggests that service quality needs to be considered as a variable that can control the effect of brand attitude.

Meanwhile, the practical implications are as follows. In this study, we intend to propose the use of color marketing considering that the tangible effect is the greatest among service quality of PB stores. Color marketing aims to generate purchasing desire by using colors that consumers think positively as corporate identity. Even in the context of PB, color marketing has been considered as one of the means to build a favorable brand image (Jung & Lee, 2019). In addition, the research results show that consumers are most influenced by the visual sense (87%) among the five senses when choosing a product or service, which also supports the effect of color marketing (Singh, 2006). Just as the color red is thought when imagining Coca-Cola, and green when thinking of Starbucks, color serves as a key element of brand identity. Therefore, a consistent brand image can be delivered to consumers if the packaging of the products as well as the interior of the store is yellow, ingraining in the consumers that the symbol of No Brand is yellow.

Next, it was shown that No Brand‘s reliability served as a major factor in determining brand attitude. This is a result consistent with the study of Lee and Sung (2018), which said that the No-brand value proposition elements(functional, emotional, self-expressional, and comparative price) are the main factors that can increase brand satisfaction and reliability. In other words, in order for the domestic PB product market to grow, efforts are needed to not only raise the quality of the products, but also to fulfill the company‘s promises with customers, to increase trust in the entire staff service. In addition, an educational program that can improve this should be developed.

In addition, it is necessary to increase empathy and assurance as a sub-factor of service quality. Kim (2019) confirmed the influence of empathy in a coffee shop, observing that not only the physical environment of the coffee shop, but also the communication with employees greatly influences the relaxation of the consumers. In addition, various attempts should be made assess what the needs of the consumers are. One way is to create a customer care manual, such as providing incentives to employees who have been highly evaluated for customer response through evaluation from consumers. Kindness to customers is not only an internal motivation but also an external driver through incentives.

Lastly, it is necessary to increase consumers' prior knowledge of No Brand. Given that the number of No Brand stores is still low, there are many consumers who are unfamiliar with what products are sold in No Brand. Therefore, if the accessibility is expanded by increasing the number of offline stores, the notifying consumers about No Brand would be easier. It would also be necessary to make the product available on the app or the web. Taken together, it suggests that domestic distributors need to focus on exploring the hidden needs of consumers and delivering differentiated values unique to PB, rather than simply securing price competitiveness to improve service quality for PB products.

This study has several limitations despite its significance. First, the questionnaire was limited to the consumers in their twenties. In this study, the scope of the study was limited to people in their twenties based on the findings that the majority of people in this age range purchased PB products. However, Lee and Sung (2018) predicted that the demand for PB will continue to increase in the domestic distribution market through the fact that the share of PB will increase in major developed countries such as the US, Europe, and Japan, and the demand for PB will increase when the economic recession continues. Therefore, future studies may yield more useful results when considering a wider range of demographic characteristics than specific age groups.

Second, this study only measures brand attitude as a dependent variable. Therefore, in future studies, it is considered that more meaningful results will be obtained if the attitude toward PB products and purchase intentions are further examined.