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The Journal of Human Resource and Adult Learning Vol. 4, Num. 2, December 2008 221

Use of the 4Ps Model to Examine Differences between Generic

and Brand Marketing Strategies

Yu-ping Lee, Lecturer, Shu-Te University, Taiwan

Dr. Shih-I Cheng, Assistant Professor, Shu-Te University, Taiwan

Dr. Ching-Yaw Chen, Professor, Shu-Te University, Taiwan

ABSTRACT

This study employed literature analysis in conjunction with McCarthy's 4Ps marketing mix model to

investigate the differences between generic and national brand product marketing strategies. The findings

of this study reveal that while economic downturns provide opportunities for generic products, they are

times of danger for national brands. Furthermore, when retail merchants are strong, consumers tend to

purchase low-priced generic products that possess the retailer's guarantee. At that time, national brand

manufacturers face relatively great threats. As a consequence, national brand manufacturers should strive

to establish strong brands that have the basic competitive advantages of differentiation and low cost as

proposed by Porter, which enable their national brand products to avoid responding to the threat from

generic products or other competitors.

Keywords: generic, national brand, marketing strategy, 4Ps

RESEARCH BACKGROUND AND GOAL

Generally speaking, customers tend to reduce their consumption when economic conditions are

poor and inflation is significant, and also tend to pay more attention to messages concerning generic

products (Wheatley 1980). When customers have low confidence in the consistently of product quality,

however, the frequency of purchase of private brands decreases (Hoch and Banerji 1993). Generic

products offering real economic benefit begin to find favor with consumers when economic downturn

reduces wealth, and consumers may reduce their purchase of generic products only after economic

conditions improve (Moutinho 1987).

At the current stage of the global economy, economic recession is not necessarily due to inflation,

as in the past, and may in fact be due to the rarer deflation. A deflation-driven economic downturn will

induce customers to foresee that commodity prices will continue to fall, which will cause them to

postpone their purchases. This will lead to a recession, and cause the unemployment rate to rise sharply.

The wealth of poor and middle class consumers will shrink as the unemployment rate rises, and their

consumer behavior will become more conservative. This may include a shift towards the purchase of

more inexpensive products, causing growth in low-price product markets. We can therefore assume that

there will be demand for generic products whenever there is an economic downturn, regardless of

whether the downturn is associated with inflation or deflation.

While there is certainly demand for generic products, there has been very little marketing research

on these products. Most past research on generic products, including Murphy and Laczniak (1979),

Wheatley (1980), Granzin (1981), and Prendergast and Marr (1997), sought chiefly to investigate

consumers' perceptions of generic products and relevant consumer behavior. For its part, most domestic

The Journal of Human Resource and Adult Learning Vol. 4, Num. 2, December 2008

222

research has emphasized the importance of brands, and suggests that brands can increase product added

value and create maximal profit for a company. While brand research has consequently been a popular

topic among both academic and practical researchers in recent years, research on marketing strategies for

generic products has been very scanty.

In spite of the growing demand for generic products, there have been very few studies of generic

marketing strategies in Taiwan. This study therefore seeks to investigate generic product marketing

strategies, investigate how these strategies differ from brand marketing strategies, and thereby gain an

understanding of the generic product niche in consumer markets and the response strategies of branded

products. It is hoped that this information help industry engage in multi-dimensional marketing thinking.

LITERATURE REVIEW

Definition of Brand

While there are numerous definitions of brand, most are similar to the following four types: (1) A

brand is a recognizable image that can be used to create differentiation from competitors; (2) a brand is a

promise and guarantee of consistent quality; (3) a brand is a means of projecting self-image, the important

function of a brand can be interpreted from the point of view of consumers' perceptions; (4) a brand helps

consumers make purchase decisions, and is a shorthand method for product-related attributes such as

positioning, quality consistency, and other functions (Chernatony and McWilliam 1989). In other words, a

brand can help consumers identify a product, and facilitates more efficient purchase decision making.

From the point of view of marketing, Aaker (1994) suggested that a brand can transmit the

following six types of meaning to consumers:

(1) Attribute: the inherent function of the branded product.

(2) Benefit: derived from the attributes, the benefit consists of the advantage and help that the brand can

provide to consumers.

(3) Value: the purchase value and psychological value that a brand gives to consumers.

(4) Culture: the brand's incorporation of the manufacturer's corporate culture.

(5) Personality: the personality that a brand would possess if regarded as a person.

(6) User: the brand's reflection of the characteristics of consumers who use that product.

This reveals that a brand is a very complex symbol, and that a firm that only regards its brand solely

as a name may overlook many important connotations. Because of this, a major challenge in brand

decision-making is to develop a set of deeper connotations.

It can be known from this that the main goal of a brand is not only to help customers identify a

product and differentiate it from other products, but also to provide an assurance of quality and help

consumers make purchase decisions. A brand provides a means of communication between the

manufacturer and consumer, and also offers guidance when consumers make buying choices. Because of

this, the foregoing elements should be taken into consideration when formulating brand marketing

strategies.

Definition of Generic

Generic products referred to no-name, generic, or no-frill products. Because these products come in

very plain and simple packaging, and do not have brand names (Faria 1979), they generally have only

very simple labels (Wheatley 1980). As a consequence, these no-frill, generically named, low-cost

products usually are identified by the product categories to which they belong. To obtain a deeper


explanation of these products, it is usually necessary to read the printed explanation on their packages

(Lambert et al. 2000). In accordance with the retail brand classification scheme proposed by Ghosh

(1990), generic products also constitute private brands owned by retailers.

Generally speaking, these private brands are owned, controlled, and exclusively sold by retailers

(Raju, Sethuraman and Dhar, 1995). Kotler and Armstrong (1996) stated that private brands are owned,

controlled, and exclusively sold by retailers, which is to say that a private brand consists of products that

are sold bearing the retailer's own label, and do not bear the manufacturer's brand name. One result of this

situation is that generics are known as no-frills or plain label products in Britain, and no-name or

unbranded products in the US; these names are all used to describe generic products (Hawes 1982).

McEnally and Hawes (1984) feel the strictest definition of generic should refer to generic brand grocery

products. For the sake of clarity, this study refers to all such products as generic products.

It is obvious that generic products are chiefly characterized by simplicity. Due to legal requirements,

however, all product packaging must have a detailed account of the product's ingredients and

manufacturer, etc., which restricts the definition of generic. Nevertheless, experts have reached a

consensus that all unbranded products can be referred to as generic products.

Brand Marketing MIX Theory

E. St. Elmo Lewis proposed his famous AIDA model in 1898: This marketing model starts with the

establishment of brand Awareness, continues to the creation or initiation of consumer Interest, excites the

Desire to purchase the brand in order to satisfy certain real or imagined needs, and finally induces

consumers to take Action. While AIDA model was widely accepted as a rule of thumb for marketing for

many years, the increasingly rapid changes in today's world have made this model obsolete.

Furthermore, some workers assert that, from the point of view of the seller, brands are particularly

important in connection with the following marketing activities (Kotler 1991; Keller 1998):

(1) Market control: A brand can enable a company's product to capture a large market share. When a

product is already accepted by consumers, having a prominent brand name will help the product

maintain its market status.

(2) Basis for pricing: A brand provides a basis for determination of price, and allows a company to obtain

prices higher than those of comparable competitors.

(3) Product introduction: A brand name is a factor that can induce consumers to pay attention to or

purchase new products.

(4) Sales promotion advantage: Advertising using good brand name can readily establish an image in

consumers' minds, and can serve as an advertising subject when conducting sales promotions.

(5) Positioning: A brand name can facilitate the positioning of a certain product.

The so-called 4Ps marketing mix model proposed by McCarthy (1960)—which includes the

elements of Product , Price , Place, and Promotion—is closely connected with the five brand marketing

activities listed above. A marketing mix strategy refers to a mix of marketing activities used to meet the

needs of consumers within the target market. The following is an explanation of the marketing mix

elements:

(1) Product strategy

Product strategies include product mix decisions, product line decisions, product attribute decisions,

brand decisions, label decisions, and new product decisions, etc.

The product is the foundation of the brand; a brand cannot last long without a fine product. In other

words, there is an inseparable relationship between the brand and product. Product strategies are typically


224

examined from the two angles of quality (Doyle 1990, Day 1990, Farquhar 1990) and packaging (Keller

1998).

(2) Price strategy

Price strategies include pricing methods, new product positioning, price adjustments, discounts,

payment deadlines, and credit term decisions. Increasing competition in recent years has resulted in very

little differentiation between products; as a result, price changes have remained the sale effective means

of attracting customers (Roger, Gamans&Grassi1992) (Keller 1998).

Larréché, Jean-Claude and Gatignon, Hubert (1990) suggests that, apart from consideration of the

product itself, pricing strategies are most commonly used in conjunction with sales promotion strategies.

Randall (2000) believes that pricing is a strategic decision. Brand pricing standards must simultaneously

take into consideration manufacturing and financial issues, and the prices of market-leading brands must

reflect a full-scale assessment of market positioning.

(3) Place strategy

Place strategies include decisions concerning distribution, agent type, storage, and transportation

systems. Kotler (1991) suggests that place includes various activities performed by a company in order to

put its products in the hands of target customers. In addition, product flow begins with production by a

manufacturer and ends with sale to a customer by a retailer. As a consequence, retailers selling to

consumers can be considered intermediaries between the manufacturers and consumers. Keller (1998)

believes that product transport methods can have a far-reaching effect on a brand's ultimate sales success.

(4) Promotion strategy

In 1998 the US American Association of Advertising Agencies (4A) first defined integrated

marketing communications as "a type of marketing communications planning concept," and emphasizes

the added value brought by this form of comprehensive planning. This comprehensive planning can be

used to assess the strategic roles of all kinds of communications methods, including advertising, direct

marketing, and public relations, and integrate these methods in order to provide clear and consistent

communications, and enhance the impact of a marketing plan (Percy 2000). In addition, integrated

marketing communications incorporates all sources of information concerning products or services in the

management process, ensuring that consumers and potential consumers will come into contact with

integrated information, which will induce purchases and promote brand loyalty (Schultz 1997). Marketing

communications tool include the five types of advertising, sales promotions, public relations, in-person

sales, and direct marketing. These are collectively termed the marketing communications mix or

promotional mix (Huang Chun-ying 2003).

Generic Marketing Mix

Generally speaking, generic product marketing strategies are constructed from the three elements of

product, promotion, and price (Hawes & Crittenden 1984). Place, or channel, is seldom mentioned in the

literature, and in practical situations the place usually depends on the brand channel. The following is an

overview of the generic marketing mix:

(1) Product

a. Packaging: In order to reduce packaging costs, in the 1970s the packaging of generic products had no

pictures and was limited to one or two colors; labels were typically very small (Faria 1979). Usually

only one quantity was available (Fitzell 1982). Yucelt (1987), however, suggested that packaging with

different capacities should be introduced in response to changes in the family structure and types of

consumption.


b. Quality: Bellizzi et al. (1981) discovered that, in contrast with private brands and national brands, most

generic products have indifferent quality. Because of this, Ross and Kraft (1983) suggest that retailers

strictly control the quality of generic products in order to avoid poor consumer satisfaction and

encourage continued purchases. Szymanski & Busch (1987) suggest that quality is the decisive factor

if generic products seek to compete directly with national brands. Prendergast and Marr (1997) believe

that manufacturers can facilitate consumer acceptance if they can produce standardized generic

products ensuring consistent quality.

(2) Promotion

Promotion strategies for generic products mainly employ the following seven types of methods:

a. Advertising: Apart from when they have been recently acquired by a store, generics usually do not

employ advertising, and do not use discount coupons or other promotional activities (Faria 1979).

Bellizzi et al. (1981) suggest that generic products must conduct advertising activities in order to

attract some customers of national brands.

b. Sales promotions for generic products should take the form of in-store window displays, ceiling

banners, shelf displays, or other point of purchase methods (Hawes & Crittenden 1984).

c. Short-term sales promotions (buy one, get one free), contests, or free sample activities may be held to

induce consumers who like to purchase generic product to increase their purchases of particular

products, and encourage consumers who tend to purchase branded products to switch to generic

products (Prendergast & Marr 1997).

d. Issuing free sample products will encourage consumers to try generic products, educate consumers

about the advantages of generics, and reduce consumers' dissatisfaction with generic products

(Prendergast & Marr 1997).

e. Sale of generic products for ultra-low prices will increase the inventory turnover rate. In contrast,

raising the prices of generic products will lead to low inventory turnover and a sharp decrease in sales

volume (Moutinho 1987).

f. The media or an in-store catalog can be used to induce consumers to compare the prices of generic and

national brand products (Szymanski & Bush 1987), and thereby encourage them to purchase generic

products.

(3) Prices

Cunningham et al. (1982) state that 80% of consumers feel that their most important reason for

buying generic products is lower prices. It is evident that low prices are the main competitive advantage

of generic products (Szymanski & Busch 1987). As a result, pricing strategies should be considered first

when formulating marketing strategies for generic products. Hawes and Crittenden (1984) suggest that

the retail prices of generic products should be set in accordance with the following three pricing

guidelines:

(1) Retail prices should be less expensive than those from the leading competing manufacturer.

(2) Retail prices should be 10% less expensive than those of private brand products in the store.

(3) Retail prices should be at least 30% less expensive than those of national brand products in the store.

The every day lowest price can be used as a sales promotion method when generic products are sold

over a long period of the time. On the other hand, the prices of generic products should not be temporarily

reduced; low prices are one of the most important reasons why consumers buy generic products.


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RESEARCH METHODS

Proposed by McCarthy in 1964, the 4Ps marketing mix model is still an important theory in the

field of marketing, and is still frequently directly (Liu Teng-ho 1994; Chen Chih-lai 2001; Wen

Cheng-chung 2003) or indirectly (Lin Wen-chang 2000; Huang Wen-yao 2002; Ho Chung-cheng 2002)

invoked in many areas of research and discussion. This study has attempted to use McCarthy's 4Ps model

as an analytical framework in investigating differences between generic and branded product marketing

strategies.

This study's research framework, which was derived from a retrospective of the literature, is shown

in Fig. 1. The sections below explain the research method and data collection method.

Research Framework

This study employs the 4Ps model to explore differences between generic and branded product

marketing strategies. After reviewing the handling of marketing mix variables from the angles of generic

and branded products, the study compares generic and brand marketing strategies, and examines their

differences.

Figure 1: Research Framework

Research Method

With regard to the research methods used in conjunction with the 4Ps marketing mix model, Harris

and Strang (1985) and Moutinho (1987) used literature analysis to study generic product marketing

Marketing Strategy Analysis

Branded product Generic product

Analysis of generic product

positioning

Analysis of brand positioning

Marketing mix

● Product

● Price

● Place

● Promotion

Marketing mix

● Product

● Price

● Place

● Promotion

Brand Marketing Strategy Generic Brand Marketing Strategy


strategies, and Lin Chin-cheng (2000) used literature analysis and case studies to research marketing mix

strategies in the Shanghai department store market. Nevertheless, Huang Yu-ching (2001) employed a

qualitative research method in conjunction with empirical observations and interviews to gain an

understanding of how a private brand product can survive among manufacturers' brands. Chen Ching-yaw

(2006) used literature analysis together with a traditional 4Ps marketing outlook to analyze structural

differences between online marketing and traditional marketing models. It can be seen from this that the

literature analysis method is widely used in marketing research. Motivated by its research characteristics

and goals, this study employs literature analysis as its primary research method.

ANALYSIS OF DIFFERENCES BETWEEN GENERIC AND

BRAND MARKETING STRATEGIES

1 Generic and Branded Product Strategies

According to the literature, most thinking about product strategies focuses on quality and packaging.

This is discussed as follows:

1.1 Analysis of Generic Product Strategies

(1) Generic quality

Generic products do not have as good quality control as national brand products. Some consumers

shun generics, regardless of how inexpensive, because they question the quality of generic products (Faria

1979; Cunningham, Hardy and Imperia 1982). Sometimes only a very few consumers are willing to buy

certain generic products, because of dissatisfaction with product quality (Strang, Haeeis & Hernandes

1979). While high-quality brands usually find it easy to attract consumers by cutting prices, poor-quality

brands cannot do this (Allenby & Rossi, 1991). Another aspect is that since prices are important signals of

product quality, generic products with low-price strategies tend to be associated with poor-quality

products (Rosen 1984), and may not be judged on the basis of their actual product attributes (Newman &

Becknell 1970). As a result, some consumers will choose to buy high-price branded products in order to

reduce the risk that they may end up with poor-quality products (Shapiro 1968). Prices are the most

important external clues used by consumers to judge quality, and are signals of product benefit and quality.

High-price brands are consequently often perceived as possessing the characteristics of high quality

(Blattberg & Wisniewski, 1989; Dodds, Monroe & Grewal, 1991; Kamakura & Russell, 1993; Milgrom

& Roberts, 1982). Most studies indicate that generics chiefly attract consumers via low-price strategies. In

their purchase behavior, these consumers minimize other factors, and focus primarily on the item of price

(Burton, Lichtenstein, Netemeyer & Garretson, 1998).

Because consumers who purchase generic products usually do so due to prices or sales promotions

(Faria 1979), they tend to compare prices with similar branded products, and are relatively insensitive to

quality. However, reducing the quality of generic products will severely lessen the appeal of these

products (Business Week 1981). Furthermore, a consumer who has had a bad experience when trying a

generic product will usually not buy the product again (Moutinho 1987). Generic products should

therefore maintain acceptable quality standards (Granzin 1981), or should stay within the legally required

quality scope. For instance, generic foods in the United States must comply with FDA requirements

(Cunningham, Hardy and Imperia 1982). In summary, generic products must offer inexpensive prices

without abandoning reasonable quality if they are to maintain their appeal.


228

(2) After-sales service and quality assurance

The main risk faced by retailers who stock low-quality generic products is that they will lose their

goodwill when customers become dissatisfied with the quality of generic products (Faria 1979), and the

customers may associate the retailer's image with the inferior-quality generics. A bad purchase experience

may influence a consumer's attitude toward generic products, and may also affect the consumers' attitude

toward the store, which may cause the store to lose customers (Harris & Strang 1985). To avoid this

situation, retailers must exercise strict quality control over generic products, and must offer after-sales

service including warranties and service of products returned due to quality-related issues.

A guarantee is a pledge given by the seller to the buyer in an effort to improve the buyer's

confidence in the company's products (McCarthy & Perreault 1999). A guarantee can therefore enhance

the perceived quality of a generic product and thereby increase purchase opportunities.

(3) Packaging strategy

One basic strategy used by generic products is to reduce packaging costs, such as by only using a

simple label to identify the product. Generic products still often try to eliminate packaging materials.

Wheatley (1980) suggests that consumers will pay greater attention to generic products in the face of an

economic downturn, and that packaging is therefore quite important. Wheatley implies that even more

attention should be paid to packaging design during economic downturns. Since the present is a time of

recession, this study believes that the best strategy is to return to the original generic concept by

eliminating excess packaging costs and focusing on low prices. This study feels that the proposal of

Wheatley (1980) does not take display factors into consideration; generic products are usually placed in

certain areas in retail stores, where large numbers of different products are displayed together. The display

process should highlight the low prices of generic products, and there should be no need for elaborate

packaging to attract consumers. Secondly, the generic product development process has many similarities

with that of private brand products; usually product functions and packaging are modeled after those of a

leading brand in an effort to create visual confusion among consumers. In short, the manufacturers of

generic products need have no special R&D or packaging strategies, and should use imitation to cut R&D

and design costs.

1.2 Analysis of Branded Product Strategies

(1) The brand quality outlook

Successfully brands become synonymous with high quality (Livesey & Lennon 1978). Faria (1979)

suggests that product quality is a basic element needed to maintain brand prestige. Brand prestige

consequently not only possesses a quality assurance function, but also facilitates branded product sales

(Chen Shih-fen 2002).

Chen Shih-fen (2002) feels that an effective brand requires not only recognizability, but also that

consumers understand and acknowledge its quality. As a consequence, slapping a brand on a product

while its quality is still uncertain will not help improve sales, and may even cause harm. The reason is

that most consumers who buy a branded product for the first time use the brand as a purchase signal. If

the branded product proves to have poor quality, this will not only injury any existing brand image, but

also cause consumers to not purchase the product again. Brand manufacturers should therefore strive to

steadily improve quality, introduce even higher quality products, strictly control quality throughout all

processes from production to sales, and transmit an image of superior quality to consumers in an effort to

improve consumers' perceived quality (Bearden, Ingram & LaForge 2002). For instance, P&G's products

are designed to have higher quality than ordinary products, and the company continuously strives to


improve product quality (Randall 2000). This reveals that the basic key to success for a national brand is

to provide superior quality.

(2) Differentiation strategy

Product differentiation strategies can focus on features, performance, consistency, sturdiness, design,

styling, or packaging; in particular, the elements of features and design allow effective differentiation

(Kotler 2000). Brand-new features in branded products can generally be protected with patents (Keller

1998; Kotler 2000). Distinctive product or packaging visual designs can create differentiation; although

competitors can copy product features and packaging, the creator can still enjoy short-term leadership

(Kotler 2000). In contrast, a product with a low degree of differentiation does not provide a suitable basis

on which to establish a brand. When there is little differentiation, competitors can quickly introduce

identical products after the original creator has made large promotional expenditures (Chen Shih-fen

2002), and the established brand will not enjoy any brand equity.

The product is the foundation of a brand asset. The product design, manufacturing, and service

process should focus on attributes and benefits that can convince consumers that the brand will indeed

satisfy their needs and desires; this will form an overall positive attitude towards the brand, and thereby

create beneficial brand associations (Keller 1998).

Because of this, incorporating new attributes or strengthening existing attributes can improve and

differentiate a product (Nowlis & Simonson 1996), enabling it to satisfy consumers needs, and a strong

and consistent brand image can serve as quality assurance (Abe 1995).

(3) Packaging strategy

Because many types of products have little differentiation, innovative packaging can at least

provide a branded product a transient competitive advantage. Packaging is therefore often considered a

particularly cost-effective means of establishing a brand asset (Keller 1998). In addition, packaging

inherently possesses an advertising function, and sometimes offers a promotional effect that is better that

that of media advertising. When consumers come in contact with a product on the shelves of a store or

supermarket, packaging can serve as a visual marketing strategy that should not be neglected (McCarthy

& Perreault 1999). In recent years, brand manufacturers have usually adopted the following main

packaging methods (Keller 1998):

a. Use of more or smaller product packaging specifications to achieve new market differentiation.

b. In mature markets, incessant reliance on packaging innovation in an effort to increase short-term sales

volume.

c. Use of the functional or aesthetic elements of packaging to create other brand differentiation points.

Although product packaging is easy to transport and store, since it prevents consumers from

directly inspecting product quality, it can cause risk during the transaction process. In consumer markets,

packaged products introduce a degree of uncertainty about quality. Consumers must either bear the risk of

poor quality, or bear an extra search cost to confirm product quality (Chen Shih-fen 2002). Because of

this, this study feels that it gives an advantage to branded products when consumers pay closer attention

to packaging; only prestigious branded products can lower consumers' quality risk.

1.3 Analysis of Differences Between Generic and Branded Product Strategies

The foregoing analysis of generic and branded product strategies indicates that generic products are

marketed with low cost strategies, while branded products employ differentiation and high quality to

create a competitive advantage. This study has arranged the differences between generic in branded


230

product strategies with regard to the three elements of quality, product differentiation, and packaging in

Table 1:

Table 1: Comparison of Generic and Branded Product Strategies

Product

strategy

Quality level Product differentiation Packaging

Branded

products

Constantly pursues

superior or excellent

quality

Constant R&D in order to

create product differentiation or

cut costs

The two main design themes

are aesthetics and

functionality

Goal: To create brand

equity

Generic

products

To create quality meeting

consumers' needs while

maintaining low cost

Generics play the role of

imitators, and have no

differentiation from branded

products

A packaging strategy premised

on plainness, simplicity, and

low cost

Goal: Attracting

price-sensitive consumers Source: Compiled by this study

It is clear that brand manufacturers chiefly play the role of pioneers or leaders, actively engage in

R&D and design, employ differentiation to increase their lead over imitators and competitors, and use

their first-comer advantage to create maximal profits. In contrast, generics play the role of imitators or

followers, passively imitate leading brands while minimizing costs, and create and accumulate thin profits

in niche markets.

2 Generic and Brand Pricing Strategies

Price is the factor in a marketing mix that is most visible to consumers (Chang & Wildt 1994), and

is the sole factor in a marketing mix that can generate income; the other three factors all constitute costs

(Kotler et al.1998). While considerable time is usually required to adjust product and promotion strategies,

prices can be adjusted flexibly whenever needed in conjunction with short-term goals. And while how

prices influence consumer behavior is a very complex issue, brand and price are critical references when

consumers cannot directly judge quality from the product or its packaging.

2.1 Analysis of Generic Pricing Strategies

Generic products are generally priced in accordance with the guidelines "good quality at a

reasonable price" or "quality surpassing the price." As a consequence, price is the sole competitive

advantage of a generic product coming on the market. As for the pricing of generic products, this study

has found that there are three pricing approaches, namely the direct comparison method (Granzin 1981),

value pricing method (Keller 1998), and follower pricing method (Dolan & Simon 2000).

Because most consumers who purchase generic products do so because of low prices or discount

promotions, these consumers often tend to compare prices with comparable national brand products. The

direct comparison method involves placing generic products and branded products on the same shelf, or

stacking generic products in an aisle next to branded products, and clearly marking the generic products'

ultra-low prices. The main goal of this method is to induce consumers to make on-the-spot price

comparisons that will increase their likelihood of buying the generic products (Harris & Strang 1985). In

short, the direct comparison method uses display arrangement to highlight the low prices of generic

products. This study consequently believes that, although the direct comparison method may sacrifice

some of the gross margin on generic products, it can definitely make consumers more sensitive to price.


Some large chain retailers employ the value pricing method, which is also known as the everyday

low price strategy (Moutinho 1987). This method involves providing some good-value low-price products

every day or on a regular basis, where most of these products are generic everyday goods. Because of the

price-sensitivity of generic product purchasers (Granzin 1981), an everyday low-price strategy can induce

consumers to visit the store and make purchases, which can increase the likelihood that customers will

buy national brand or private brand products. Moutinho (1987), however, believes that when generic

products are used to draw customers into a store, purchases of generics may come at the expense of

existing national brand or private brand product sales, so this method may in fact even be detrimental to a

store's overall profit. On the other hand, the study believes that generic products can yield considerable

benefits for retail stores, and this is the case no matter whether the generics are marketed through the

store's promotional activities, or whether they are used as a low-price competitive tool to capture market

share. Although generic products can steal some market share from a store's private brand, they can also

seize some of the existing market share of national brands. The research of Wheatly (1980) suggests that

retailers can capture 5% of the market share of national brand products when they acquire competing

generic products. As a consequence, the retail store is ultimately the largest winner.

The third pricing method is the follower pricing method. The prices of generic products are usually

set employing one of three guidelines (Hawes & Crittenden 1984): Retail prices should be less expensive

than those from the leading competing manufacturer; retail prices should be 10% less expensive than

those of private brand products in the store; or retail prices should be at least 30% less expensive than

those of national brand products in the store. This shows that the follower pricing method is another

pricing approach for generic products. In summary, the pricing of generic products generally does not

involve taking the lead; instead, generic products are usually priced using passive methods with the goal

of attracting price-sensitive consumers. As a result, low price is the foremost guideline for the pricing of

generics.

2.2 Analysis of Brand Pricing Strategies

Apart from the state of demand and supply costs, target price, degree of competition, economic

conditions, and even other marketing mix factors may influence corporate price decisions (Dolan &

Simon 2000). As a consequence, pricing strategies for branded products are complex and diverse. For

instance, there are psychological pricing strategies, discount pricing strategies, differential pricing

strategies, multi-stage pricing strategies, and related product pricing strategies, etc. (Kotler et al.1998).

Because of this, studies in the literature look at pricing strategy guidelines from different angles. For

instance, Monroe (1990) studied the relationship among price, perceived quality, perceived sacrifice,

value consciousness, and purchase willingness from the angle of the price perception concept, and

discovered that the willingness of consumers to purchase branded products hinges on their consciousness

of the value of those products; this value consciousness is the result of weighing perceived quality against

the perceived sacrifice that the consumer must make. The price of a branded product that backs its brand

name with uniquely good quality can consequently be increased; such a product can be highly profitable

and achieve market leader status. But when imitation by competitors leads to a high degree of product

homogeneity, and it is difficult to achieve clear differentiation, packaging and advertising can be used to

achieve product positioning and consumer preference, while consolidating the brand's image and

enhancing added value. This is the so-called perceived value pricing method (Kotler et al.1998).


232

2.3 Analysis of Differences Between Generic and Brand Pricing Strategies

As a practical matter, like national brands, generic products also employ a variety of pricing

strategies. In particular, since marketing of generic products needs to mesh with retailers' sales

promotions, pricing models for generic products connected with promotional strategies are highly varied.

In short, the pricing of generic products depends completely on the retailer's promotional strategy. In

contrast, the manufacturer retains the right to price national brand products. In the case of national brands,

the manufacturer must often pay the retailer for large display costs, and also bear the cost of advertising

and promotions. And since national brands typically depend heavily on costly TV advertising as a means

of communicating with consumers, the prices of national brand products are inevitably higher than those

of generic products.

While national brand manufacturers may be asked by powerful retailers to support promotional

activities, there is little room for reducing national brand product prices in most cases; instead of

discounts, promotions may take the form of extra gifts or new product styles. It can be seen from pricing

activities that the pricing of generic products is chiefly coordinated with retailers' sales promotions. The

pricing of generic products therefore usually focuses on price cuts, and does not take quality issues into

consideration. In contrast, national brand marketing strategies typically attempt to create brand awareness,

induce consumers to accept the brand's value, make consumers equate the product's high price with high

quality and high value, and inspire the perception that the product's value can even enhance personal

status and taste. In other words, national brand pricing includes value apart from satisfying everyday

needs, and such products are consequently priced at high levels. For their part, generic products only offer

the function of satisfying everyday needs, and their prices therefore tend to be low.

3 Generic and Brand Channel Strategies

Marketing channels play an extremely important role in determining whether consumers are aware

of and identify with a product (Keller 1998). Because marketing channels determine consumers' purchase

methods and locations, marketing channels should not merely attempt to satisfy the need for goods or

services in relation to the correct location, quantity, and quality; instead, the promotional activities of

members of different channels should be employed to stimulate demand (Stern, El-Ansary & Coughlan

2002). It is obvious that choosing an appropriate channel strategy can have a profound impact on a

brand's sales success (Keller 1998). Generally speaking, marketing channel strategies are composed of the

following four elements (Hardy & Magrath 1988): (1) diversity: whether a product is sold through a

single or multiple channels, i.e., selection of channel breadth; (2) directness: sales channel length, i.e.

number of layers of middlemen involved; (3) density: whether the manufacturer chooses intensive,

selective, or exclusive distribution methods; and (4) innovation: whether the manufacturer chooses a new

channel form.

A decision exists in order to achieve some important goal of the organization (Poter 1980), and

channel strategy decisions are no exception. Channel design decision-making should focus on how

channel functioning can satisfy consumers' needs (Kotler et al.1998). In addition, because retailers are

usually responsible for putting products into the hands of the ultimate consumers, retailers' role within a

marketing channel encompasses all final consumers, products, and service and sale activities (Beardan,

Ingram & LaForge 2002). We will consequently analyze channel strategies for generic and branded

products from the angle of breadth, length, density, and innovation, and assume the retailer's point of

view.


3.1 Analysis of Generic Channel Strategies

The earliest generic products were devised by the French hypermarket Carrefour (Faria 1979). Most

studies consider generics to be owned by retailers, as are private brands (Wheatley 1980; Cunningham,

Hardy & Imperia 1982; Moutinho 1987), and consequently seldom investigate generic channel strategies

(with the exception of Prendergast & Marr 1997). This study believes that the main reason for this is that

retailers, apart from developing strong private brands, have attempted to increase profits by gradually

reducing sale of generic products with the same perceived quality as their private brand products, and

replacing generics with relatively weak second-line and third-line national brands. This situation has

caused generic products, which originally constituted one of retailers' low-price strategies, to occupy a

vulnerable position in channel strategies.

(1) Generic channel length

Channel length refers to the number of layers of middlemen in a channel (Rosenbloom 1999).

Retailers put generic products in the hands of the final consumers. And since generic products strive to

reduce overall costs, generics inevitably have short, one-step channels that avoid the cost of involvement

by intermediaries such as wholesalers and distributors. In other words, retailers must obtain generic

products directly from the manufacturer, and not from a middleman. However, this study believes that

generic manufacturers will increasingly respond to competition from private brands by employing

zero-step channels, such as manufacturer-operated low-priced stores or discount stores, mail-order sales,

and no-store retail sales. These channels will enable manufacturers to gradually reduce their dependence

on retailers in the future.

(2) Generic channel breadth

Channel breadth refers to the number of channels used by a product manufacturer to contact one or

more customer groups (Huang Chun-ying 2003). It can be seen from the foregoing analysis of generic

channel length that the sale of generic products will shift from sale exclusively in retailers' stores to a

multiple channel model. In other words, manufacturers will combine direct and indirect channels, which

will enable them to expand their market coverage, while also reducing dependence on any single channel.

(3) Generic channel density

After researching the relationship between product type and store type, Stern, El-Ansary and

Coughlan (2002) suggest that, when consumers feel that the products they buy are undifferentiated, and

select stores only on the basis of low prices, the best way to satisfy the needs of these consumers is to

adopt an intensive distribution strategy. Kotler et al. (1998) state that many convenience products, such as

gum, cigarettes, and soap, etc., employ intensive distribution strategies. This is because consumers who

buy these types of everyday goods usually look for convenience, but do not pay much attention to brand

or price. Furthermore, since most generic products constitute undifferentiated everyday products, it can be

inferred that generics generally adopt intensive distribution strategies in keeping with their intensive

channel strategies.

(4) Retailer types

As mentioned previously, most literature concerning generic products regards generics as being

owned by retailers, and does not perform a detailed investigation of what kinds of retailers sell generic

products. This study therefore attempts to adopt another angle in investigating the retailer types employed

by generics:

(1) Discount stores: Discount stores refers to stores selling high volumes of low-profit-margin

standardized products at low prices (Kotler et al.1998). Generic buyers are basically store-oriented

(Granzin & Schjelderup 1980). In other words, consumers who purchase generic products prefer to


234

shop at certain stores, and do not let products determine where they shop. Consumers who are highly

price-sensitive and prefer to buy low-price generic products will consequently prefer to shop at

discount stores (Granzin 1981).

(2) Hypermarkets: France's Carrefour hypermarket first acquired generic products in 1976. In addition,

such researchers as McGoldrick (1984) and Chernatony (1988) opted to locate their sampling points

in hypermarkets. It may therefore be concluded that hypermarkets constitute another type of generic

product retailer.

(3) Supermarkets: Supermarkets attempt to satisfy all the product needs of consumers by selling large

quantities of low-cost, low-profit-margin products (Kotler et al.1998). Some chain supermarkets are

in control of their own generic packaging and distribution strategies (Cunningham, Hardy & Imperia

1982), and Neidell, Boone and Cagley (1985) located their sampling points in supermarkets. It may

therefore be inferred that generic products can also be found in supermarkets.

In summary, generic products employ a relatively wide range of marketing channels. Due to the

recent economic downturn, changing consumer attitudes, and the rapid development of new technologies,

apart from being sold in the foregoing types of retailers, generics have been creating increasingly

diversified, low-cost sales channels on the basis of their existing channels. For instance, some

manufacturers have established stores specializing in the sale of generic products or low-price retail stores;

and generics constitute the mainstay products of these channel types. In summary, manufacturers are

changing their generic channel strategies or innovating new strategies as they respond to changes in the

social environment.

3.2 Analysis of Brand Channel Strategies

Channels are a key to establishment of a successful brand (Marconi 1994). Even if a product

possesses superior quality, reasonable prices, and a large advertising budget, these three elements of the

marketing mix will be ineffective without support from channel firms. Moreover, the planning of brand

channel strategies is even more important at a time when the threat from retailers is increasing. We now

analyze brand channel strategies from the same angle of channel and retailer type.

(1) Brand channel breadth

Channel breadth refers to the choice of either a single or multiple marketing channel strategy.

Single marketing channel strategies refer to situations where multiple products or brands use only a single

channel to reach out to customers. In contrast, a multiple marketing channel strategy refers to situations

where several channels are employed (Bearden, Ingram & LaForge 2002).

Motivated by a practical concerns, many companies have shifted from single channel strategies to

multiple channel strategies. The main reason for this change is the diversity of customer and channel

types in today's society, which has induced companies to adopt multiple marketing channels in order to

foster more market differentiation (Kotler et al. 1998). Many manufacturers now combine new channels

such as e-commerce web sites, stores, and mail-order sales, and each channel seeks to promote and

reinforce the effectiveness of other channels (Tiernan 2002). In summary, multiple channel strategies

attempt to use different channels to meet the needs of different markets; these strategies possess the

advantages of greater market coverage, lower channel costs, and stronger customer orientation. The

disadvantages of multiple channel strategies include conflict between new and old channels, changing

control ability, and brand confusion. For instance, howls of protest arose when Levi's blue jeans were sold

at both department stores and specialty stores (Kotler et al. 1998). In addition, manufacturers can also

employ multiple channels to implement multiple-brand strategies (Huang Chun-ying 2003) in which

different product brands are marketed through different channels.


Channel conflicts should be managed by using different channels for different brands differentiated

by price and target market. For instance, L'Oreal sells its Lancôme brand at department stores and

boutiques, but sells its L'Oreal brand at pharmacies and discount stores. Subsidiary brands may also be

established as a market segmentation method in order to resolve the problem of brand image confusion

(Aaker & Joachimsthaler 2002). Apart from resolving the problem of brand image confusion, the

adjustment of product channel strategies can also differentiate direct sales and open-shelf channel

customers.

In summary, if brand decides to employ multiple marketing channels in order to expand market

share, it should sell brands or products with different grades or packaging through different channels in

order to ease conflict and the reduce the problem of brand image confusion.

(2) Brand channel density

As a rule, the following three basic market coverage policies can be used to determine channel

density (Kotler et al. 1998):

a. Exclusive distribution: Exclusive distribution implies that the number of firms distributing the

company's products or services is extremely small. This distribution method can be employed when

the producer wishes to control the service standards and service outputs of intermediaries. In general,

this distribution method is employed for special products such as high-end cosmetics, apparel, and

automobiles.

b. Selective distribution: Selective distribution involves the use of some intermediaries willing to

undertake the sale of specific products. This distribution method is suitable for optional products (such

as automobiles and household appliances and accessories).

c. Intensive distribution: An intensive distribution strategy involves placing as much stock as possible in

many kinds of stores. Intensive distribution is important when consumers want convenient shopping

locations. This is usually the best distribution method for ordinary convenience merchandise or

products with low prices, high turnover rates, or low gross margins (Hsu Ying-chieh 1995).

As a consequence, a product's channel density strategy should be determined on the basis of the

product itself (depending on whether it is an optional product, special product, or convenience product)

and the marketing mix (Stern, El-Ansary & Coughlan 2002)

(3) Brand channel length and retailer types

a. Direct channels: Direct channels refer to situations where the product is shipped directly from the

manufacturer to the user without going through a middleman (Bearden, Ingram & Laforge 2002); there

are two main types of direct channels:

i. Factory outlet stores: In order to establish control of the sales process and establish stronger

relationships with customers, some brand manufacturers have established their own retail channels

(Keller 1998); for instance, Nike has established flagship stores displaying all types of Nike brand

products.

ii. No store retail: No-store retail methods generally consist of the following three types (Kotler et al.

1998):

Direct sales: Also termed direct marketing or multi-level marketing, direct sales involves direct

interaction—such as sales demonstrations—between sales personnel and purchasers. For

instance, Avon's marketing method involves Avon Ladies selling door-to-door. Avon has

recently used channels other than direct sales in order to break into new customer groups,

however (Huang Chun-ying 2003).


236

Direct marketing: Direct marketing originated from mail order marketing, and refers to the use

of various means of contact not involving personnel to directly interact with consumers, and

obtain immediate responses from consumers. Direct marketing currently includes such methods

as telephone marketing, online e-shopping, TV shopping, online shopping, catalog marketing,

and radio and magazine marketing, etc. The main advantage of these approaches is that the

manufacturer receives customers' orders directly, which can dramatically reduce channel costs.

For instance, Dell uses the Internet, telephone, and mail order to sell computers. Selling

products directly to the final consumers can cut costs or provide more effective service to

customers in target markets (Bearden, Ingram & LaForge 2002).

Automatic vending machines: The vending machine channel has relatively high costs, and the

prices of products are therefore usually higher than when sold by ordinary retailers. Vending

machines are used on a large scale to sell many types of products, including many convenience

goods and impulse-purchase products (Huang Chun-ying 2003)—Coca-Cola is perhaps the best

example of a product widely sold in vending machines.

b. Indirect channels: Indirect channels refer to situations where a middleman engaging in certain product

purchasing or intermediary sales services is located between the producer and the user, and enables

products to reach the final user (Bearden, Ingram & LaForge 2002). In other words, the sales process

occurs via an intermediary third party, such as a wholesaler, distributor, agent, or retailer. The

establishment of huge chains or hypermarkets by large retailers has transformed the power structure of

existing distribution systems, and retailers have taken control of channels (Hsu Ying-chieh 1995). As a

consequence, we will continue adopt the retailer's perspective in looking at the types of retailers

employed in indirect channels (Kotler et al. 1998):

i. Convenience stores: Convenience stores mainly sell optional, quick-sale products and their styles

and catalogs; they provide limited service and offer no after-sales service or support; prices are

relatively high, but the stores are quite convenient.

ii. Supermarkets: Mainly sell branded products with high turnover rates.

iii. Warehouse stores: Emphasize very low prices, and focus on selling national brand products at a

discount.

iv. Specialty stores: Refer to stores providing a narrow breadth of selections of a high depth of product

options. Merchandise ordinarily consists of mid- to high-price branded products. Examples include

sporting good stores and 3C product stores.

v. Department stores: Department stores are chiefly characterized by a wide assortment of luxury

products. For instance, P&G opted to establish independent counters in department stores as a

channel strategy intended to boost the luxury image of its SK-II brand (Hsiao Fu-feng 2003).

vi. Discount stores: Sell many types of branded products and provide limited service, while

emphasizing low prices. Wal-Mart belongs in this category (Huang Chun-ying 2003).

Changes in the macroeconomic environment, technology, and consumer behavior have affected

channel strategies (Stern, El-Ansary & Coughlan 2002), and spurred the increasing diversification of

retail forms. Apart from traditional retail channels such as department stores, hypermarkets, supermarkets,

and convenience stores, today's retail mix includes increasingly mature TV sales, catalog sales, and online

shopping channels. These retailing channels must be considered in channel strategy decisions.


3.3 Analysis of Differences Between Generic and Brand Channel Strategies

Based on the foregoing survey generic and brand channel strategies, we can find many differences

between the two in terms of channel breadth, length, density, and retailer type; these differences are

summarized in Table 2.

Table 2: Differences Between Generic and Brand Channel Strategies

Channel

strategies

Generic products Branded products

Channel

breadth

In the past: single channel

In the future: can develop multiple

channels

Depends on number of market

segments; a large majority of brands

currently employ multiple channels

Channel

length

In the past: one-step

In the future: can adopt no-store channels

Determined on the basis of the market,

product characteristics, middlemen,

and the manufacturer's resources

Channel

density

Intensive Depends on product type: convenience

products, optional products, and

special products

Retailer

type

In the past: discount stores,

hypermarkets, and supermarkets

In the future: can develop stores

specializing in low-price products

The most appropriate mix of retailer

types can be determined after analysis

of channel breadth, length, and density

analysis Source: Compiled by this study

It can be seen from Table 2 that generic products select low cost, low-price channel strategies, while

branded products determine channel strategies based on product type, market segment, marketing goals,

and product positioning. It can also be known from the foregoing analysis of generic and branded product

channel strategies that generic manufacturers may choose to expand into discount or low-price store

channels under pressure from retailers promoting their private brands. Because brand manufacturers often

have access to plentiful resources, they are able to develop other channels, such as channels combining

mail order, TV shopping, and online shopping, and can develop and integrate various channels.

Finally, this study feels that the difference between generic and branded product channel strategies

derives from the polarization of generic and brand positioning, which results in polarized channel

strategies. In short, generic products are positioned as low-price merchandise, and seek to develop

low-price channels. In contrast, branded products use a variety of channel strategies in order to enhance

their own value and expand market coverage and market share. Branded products can thereby increase

their brand equity and gradually establish high-price channels.

4 Generic and Brand Promotion Strategies

A promotion mix is a marketing communication mix consisting of the five communication methods

of in-person sales, direct marketing, public relations, sales promotions, and advertising (Kotler et al.

1998). Liu Mei-chi (1995) explains in-person sales as one-on-one communication, where the sales person

is the communication medium. Kotler et al. (1998) suggests that direct marketing refers to sales where no

middleman is involved; instead, customers can directly use the telephone, Internet, or funds transfer to

purchase products after they see advertisements. McCarthy and Perreault (1999) believe that public

relations involves the use of mass methods to transmit product and service information for free. Belch and

Belch (1999) define sales promotion as directly purchase incentives directly to target consumer groups,


238

with the intention of influencing consumer attitude and behavior, and increasing short-term sales volume.

Dalrymple and Parsons (2001) suggest that advertising is a form of promotion employing the mass media,

including magazines, television, and newspapers, and intended to boost the company's image and thereby

establish consumer brand preference. Looking from the point of view of contact, Schultz, Tannenbaum

and Lauterborn (1994) define the whole process and experience of transmitting a brand, product type, and

market-related information to consumers or potential consumers as integrated marketing communications.

In summary, the integration of in-person sales, direct marketing, public relations, sales promotion, and

advertising can achieve an optimal effect. This study consequently employs the five major elements of

integrated marketing communications as its main means of analyzing promotion strategies for generic and

branded products.

4.1 Analysis of Generic Promotion Strategies

Little spending on advertising is one reason that generic products are able to maintain their low

prices. Apart from when generic products have just been acquired, generics generally do not employ the

marketing promotional activities used by other types of retailers (Faria 1979). As a result, this study

focuses on analysis of the advertising and sales promotion activities used for generic products.

1. Advertising:

(1) Distribution of leaflets: Granzin (1981) believes that both generic purchasers and non-purchasers

search for information, and therefore suggests that the distribution of leaflets can be used as an

advertising method to obtain customers' attention.

(2) In-store display methods: Because generic products do not employ mass media advertising, in-store

product display methods are clearly quite important.

Moutinho (1987) believes that generic products should be displayed in the most conspicuous places

in a store in order to attract customers' attention. This is because generic products are most likely to be the

subject of impulse-type purchases by price-sensitive consumers. Generic products should therefore be

displayed in obvious places.

2. Sales promotion:

Kotler (2000) suggests that most advertising does not have an immediate effect on sales.

Advertising chiefly acts at the psychological level, and not at the behavioral level. In contrast, sales

promotions can have an immediate effect on behavior. Sales promotions are therefore very important for

generic products. Generic products were themselves considered a sales promotion strategy for retail stores

during the late 1970s, and were used as gifts and bingo prizes, etc. (Gelb 1980). Generic products later

morphed into just another type of product sold at stores, but were still used as promotional tools to attract

customer attention.

As in the case of other elements of the marketing mix, generic products should control the cost of

sales promotions in order to support their low-price positioning (Prendergast & Marr 1997). It has been

mentioned in the foregoing analysis of product strategies that a large majority of consumers feel that

"low-price is equivalent to low-quality." In addition, Strang, Harris and Hernandez (1979) discovered that

consumers who had not tried generics perceived them to have lower quality than did consumers who had

tried generic products. This implies that trying generic products can enhance the perceived quality of

these products. Opportunities to try or taste samples of generic products should therefore play an

important role in the promotion of these products (Bellizzi & Martin 1982).

Generics must provide incentives to potential customers who are highly sensitive to prices and

wavering between national brands in order to encourage them to switch from branded to generic products.

Short-term sales promotions are commonly employed to increase interest in buying generics.


As for discounting promotions, Dolan and Simon (2000) suggest that while offering relatively

high-grade products for reduced prices can readily attract consumers who would ordinarily buy

lower-grade products, cutting the prices of relatively poor-quality products will not tend to attract

consumers who would ordinarily purchase higher-quality products. Furthermore, reducing the prices of

generic products as a sales promotion strategy will clearly cut into profit margins (Handy & Seigle 1978).

We may conclude that price-cutting is not a suitable method for promoting the sale of generic products.

In summary, TV advertising is not an appropriate method of promoting generic products, which

commonly employ in-store marketing, promotional activities, display methods, and distribution of leaflets

as promotional method. This is because the need to limit expenditures determines promotional strategies

for generic products, which must maintain their low-price advantage and appeal. In addition,

opportunities to try or taste samples of generic products can be used to allay consumers' concerns about

the quality of such products. Trial use or tasting activities are a much more suitable means of promoting

generic products than price reduction sales.

4.2 Analysis of Brand Promotion Strategies

Advertising has long played an extremely important role in marketing. Not only can advertising

introduce product functions and uses, but it can also convey an image and induce consumers to identify

with the product's spirit and attitude (Randall 2000). While brand manufacturers may produce many

products, advertising budget restrictions usually prevent them from advertising all of their products.

Brand promotion should consequently adopt an integrated marketing communications strategy, which

involves putting together the most suitable media for communicating with consumers and achieving

promotion goals in light of the brand's positioning and target consumer groups. Integrated marketing

communications can be used to integrate the information and media resources of a firm in order to

enhance brand value (Percy 2000). This implies that brand promotion strategies should shift their focus

away from the individual elements of advertising, sales promotions, face-to-face marketing, and direct

marketing, and adopt an integrated mix of elements based on target consumer groups, market conditions,

and ultimate goals and tailored to achieving the firm's objective.

It is obvious that brand promotion strategies will vary in light of product characteristics, product life

cycle, competition, market share, and the manufacturer's resources. Furthermore, the integration of

different promotional elements has clearly won out over use of a single element. It is safe to say that

today's promotional strategies for branded products typically combine the promotional elements of

in-person sales, direct marketing, public relations, sales promotions, and advertising in order to achieve

versatile promotional methods that mesh with product, price, and distribution channel strategies.

4.3 Analysis of Differences Between Generic and Brand Promotion Strategies

National brands commonly use large amounts of advertising to promote the quality of their products

and gradually build a good image in consumers' minds. Generic products cannot match branded products'

use of advertising. In addition, national brands can employ integrated marketing communications

strategies integrating the elements of advertising, sales promotions, public relations, in-person sales, and

direct marketing in order to achieve their promotional goals. For their part, generic products must pursue

low-cost strategies, and therefore do not employ mass media advertising. Instead, generics typically rely

on low-cost promotional strategies involving in-store marketing, leaflets, and free samples. Since generics

are positioned as being inexpensive products, they must clearly support this strategy with low


240

promotional costs. Furthermore, generic products are themselves often used as sales promotion tools, and

therefore do not make much use of relatively costly promotional strategies.

In summary, branded products typically adopt integrated marketing communications strategies to

establish brand value and respond to encroachments by competitors and imitators. Low cost is always an

overriding concern in the case of generic products, however.

Table 3 uses 4Ps perspective to compare the different marketing strategies employed by generic and

branded products as reported in the literature:

Table 3: Differences Between Generic and Brand Marketing Strategies

Marketing

mix element Aspects Branded products Generic products

Product

strategy

Quality

Pursuit of superior or excellent

quality, creation of brand equity

Creation of basic quality satisfying

consumers' needs at low cost, and

attracting price-sensitive consumers

Product

differentiation

Constant R&D, creation of product

differentiation

Playing the role of an imitator, and

attempting to eliminate differentiation

from branded products

Packaging

Two major packaging design

themes of aesthetics and

functionality

Low-cost packaging that is simple and

not-frills

Pricing

strategy Price

Prices are set on the basis of

promotion, production, and

channel costs. Prices tend to be

higher than those of generic

products

Because pricing should conform to the

retailer's sales promotional activities,

changes in pricing model in

conjunction with sales promotion

strategies tend to be frequent. Prices

tend to be lower than those of branded

products.

Channel

strategy

Channel

breadth

Determined on the basis of number

of market segments. Most brands

currently use multiple channels.

Multiple channels

Channel

length

Determined on the basis of market

and product characteristics,

middlemen, and the manufacturer's

resources

Past: one-step

Future: more reliance on no-store

channels

Channel

density

Depends on product type:

convenience products, optional

products, and special products

Intensive

Retailer type

The most suitable retailer types are

selected after analysis of channel

breadth, length, and density

Discount stores, hypermarkets,

supermarkets, low-price specialty

stores

Promotional

strategy

Advertising

type

Use of integrated marketing

communications strategies

No mass media advertising; reliance on

low-cost strategies including in-store

marketing, leaflets, and free samples

CONCLUSIONS

The recent global economic downturn and flood of low-priced generic products from China have

had a major impact on consumer behavior, and have forced the manufacturers of branded products to cut

prices as a response to competition. This has gradually eroded the profit margins of branded products.

Apart from intense existing competitive pressure from well-known foreign brands, national brands have


struggled to respond to the foregoing trends. Furthermore, marketing strategies have become more

diversified in the face of competition and changes in technology, the times, and the industry structure,

making a further move toward integrated development an inevitable trend. This study consequently used

the 4Ps perspective to analyze differences in the marketing strategies employed by generic and branded

products, and obtained the following results:

1. In the wake of changes in consumer behavior, consumers have come to demand high product quality

and inexpensive prices. This study consequently feels that both generic and national brand products

should adopt value pricing methods. Adoption of a value pricing approach requires the integration of

product design and production procedures in the manufacturing process, which can effectively lower

manufacturing costs and allow the establishment of a competitive advantage via value pricing.

2. Inexpensive prices are the main competitive advantage of generic products, and purchasers of generic

products tend to be relatively sensitive to prices. Consumers are particularly sensitive to prices during

recessions, and this can increase purchases of generics. In contrast, after economic conditions have

improved, consumers tend to increase their purchases of branded products. In short, the overall

economic environment may influence the relative sales of generic and branded products. However,

consumers who purchase generic products during an economic downturn may discovered that not only

are the generics able to meet their needs, but are also the same as national brand products. These

consumers may continue to buy generic products when good economic conditions return. This

suggests that recessions may provide opportunities for generic products, even as they make national

brands more vulnerable.

3. Differentiation and low cost are the two basic elements that can create a competitive advantage. Most

national brands compete on the basis of differentiation, while generic products rely on their low cost to

compete with national brands. Generic manufacturers consequently use low-price strategies to expand

their market share. It requires both differentiation and low cost to become a strong brand, however. If a

national brand cannot maintain differentiation, its brand status will be in jeopardy.

4. The quality of low-price generic products was very uneven in the past, and brands have long been a

sign of quality assurance. But as generic products have caught up to their branded counterparts in

terms of both quality and function, branded product have become very vulnerable to replacement by

generics. As a consequence, brands have been forced to continuously develop products with even

higher added value in order to hold their own against generics.

5. The growing power of retailers and channel firms, and their ability to provide consumers after-sales

service guarantees, poses another threat to national brands. This threat arises because the provision of

service by retailers can ease consumers' concerns that low price means poor quality where generic

products are concerned. Consumers will then switch to low-price generics that are guaranteed by the

retailer.

6. Manufacturers may introduce fighting brands in response to generic price wars. The establishment of a

subsidiary brand can allow a manufacturer to avoid using brand extension strategies that might dilute

the leading brand, and may also serve to divide the brand market into segments and better meet

consumers' need for low prices. For instance, Giant Manufacturing established a subsidiary brand in

the Chinese market, giving it a fighting brand and a subsidiary brand, which has proved to be the most

suitable response measure in line with its overall generic strategy.

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