In conclusion, there are two issues extended from the result. One is the rare brand-switching effects between these products；The other is the power of the store brand over the market structure.
6.1 A price promotion is surely an “attack strategy”?
The majority of past research preached brand-switching effects caused by price promotions. To get the others’ consumers, price promotions are regarded as an “attack strategy”. A brand gives the temporally lower price to attack competitors, because it believes in brand-switching effects. But, what if there are no truly great brand-switching effects under price promotions, as what is shown in this research? Price promotions are not just used to attack the others. Moreover, the outstanding category-expansion effects can benefit all products in the category.
In this whole system, we supposed that price promotions are used as a “defend strategy”.
While a brand starts the price promotion, the others choose to follow it. This behavior was confirmed in chapter 5. It looks like that the purpose of using price promotions in this market is to “protect” the sales volume. From negative impacts of adjustment parameters in group 2-3, it is more evident that most of the variation of product sales will tend to decrease, which means that the sales will not be able to vary in a large scale, no matter moving upward or downward. So, we called it “protection”. Here, this protection could work in two forms：
1. Keep the original sales volume
Price promotions just remind old consumers to come back, but they don’t intend to increase their purchase quantity. This can be evidenced by the lack of the postpromotion dips.
The price discounts can encourage consumers to buy again, but not buy more. There are too
many homogeneous products in the market, which indicates that there are always discounted products. It seems that consumers don’t have to stockpile.
2. New consumers brought by the category expansion
However, sometimes old consumers don’t come back to repurchase. In this situation, new consumers brought by the category expansion can bridge the gap. Yet, this is more beneficial to larger national brands. From the result, those larger national brands also enjoy more category-expansion effects.
Therefore, the old and new consumers are both the targets of price promotions. For the old consumers, out-of-store promotions can be suitable, like sending coupons；For the new consumers, in-store promotions can be suitable, like the display promotions, to stimulate the impulse purchase.
Under this circumstance, the role of price promotions is likely repositioned. What are taught in the previous research maybe won’t exactly happen. So, many perspectives on price promotions can be renewed. For example, do price promotions really weaken the brand loyalty? If these brands target at the old consumers to give price promotions, the lower price can be seemed as a reward for the consumers’ loyalty. Contrary to the traditional acknowledgement, price promotions could be somehow a plus factor in the loyalty, provided a price promotion are used as a defend strategy.
6.2 How does the store brand alter this market?
Compared with the top 13 products of the national brands, the best-selling product of the store brand occupied smaller market share. But, it doesn’t indicate that the store brand can’t influence this market at all. From the result of group2-3, the adjustment parameter of the average price index of the store brand, E2-3-3, has a significant negative impact on the variation of the sales of the other national brands. Moreover, the bigger the national brand is, the more serious the impact is. This can point out that the power of store brands over the market structure is told in the long run. In this research, the store brand, DOM, won’t hurt these national brands via the market share as soon as its launch. The chronic impact will shift the market structure by disturbing the original long-term equilibrium. Thus, store brands grow fast at present, for their profit will be explicit in the long run.
And, in group2-3, the price discounts of the store brand are detected to follow the strongest national brand. We think that this is a key point of the success of store brands. The store brand doesn’t directly participate in the game which those national brands are playing.
The No.1 product competes with the others, and the store brand mimics it. If the No.1 product wins some consumers, the store brand can also take some advantage of its victory by the much lower price. This is why the stronger leader in the market can help the store brand to success. We feel that this is a kind of “parasite strategy”.
In a word, the store brands don’t need to reach for big market share. Given the small market share, it still seems to be no problem for store brands to get profitable in the long run.
After all, national brands may face the difficulty in trade promotions if they don’t attain the ideal sales. But for store brands, there is always a place on the shelf!