Explanatory factors regarding manufacturer brand price consistency Jose ´ Luis Me ´ndez, Javier Oubin ˜a and Natalia Rubio Department of Finance and Market Research, Business Studies Faculty, Auto ´ noma University of Madrid, Madrid, Spain Abstract Purpose – In the marketing process, the positioning effort exerted by manufacturers for their brands is slowed by the commercial objectives of intermediary firms. In addition, to act as buyers, retailers act as suppliers of demand segments. When they receive privileged conditions in their product purchasing contracts, they do not always transfer them, totally or partially, to the final consumers through prices. The purpose of this paper is to analyse price dispersion tools available to consumer goods manufacturers to obtain price consistency. Design/methodology/approach – An empirical study was conducted that analysed the retail price dispersion of 66 manufacturer brands in the categories of packaged foods, drugstore products, personal care products, and cellulose derivatives marketed in 574 Spanish retail outlets in different cities. Findings – In general, manufacturer brands achieve greater price-consistency, and therefore less price dispersion, when the consumer’s knowledge of the product category is greater and when there are considerable levels of differentiation. Research limitations/implications – One important limitation must be recognised. Manufacturers’ prices offered to retailers were not controlled. Such data would have allowed one to check whether some price dispersion was caused by the discount strategy of the manufacturers themselves. Originality/value – In this research the effect of retail competitive structure in Porter’s model is incorporated. In addition, it is demonstrated that price consistency is more likely to occur for manufacturer brands, and that price dispersion is likely to be lower for such brands. Keywords Pricing, Pricing policy, Competitive analysis, Retailing, Spain Paper type Research paper 1. Introduction Price is one of the most important market factors, given that it is present in all purchase situations. From the consumer’s point of view, price initially represents the minimum monetary cost that they must bear in a transaction. From the manufacturer’s point of view, price is used – in addition to being the only variable that generates immediate income – to communicate certain levels of quality and therefore to give a certain positioning to the product. Economic theory, welfare theory and perception theory are three of the mandatory perspectives when analysing prices. With respect to the first perspective, price acts as a mechanism of resource assignment, such that it reflects the sacrifice by consumers when purchasing a product. In this regard, the most important information that price provides is the number of product units that consumers could acquire before depleting their budgets (Stiglitz, 1993). Welfare theory clearly states that in perfectly competitive markets consumers obtain the desired products under the best possible price conditions, and firms reach normal profits, given that the freedom to enter and leave markets leads to the disappearance of extraordinary profits in the long term. Conversely, in imperfect competition markets, which is a more realistic model, there are incentives for firms to carry out a process of economic concentration towards positions of dominance in terms of greater overall profits (Scherer and Ross, 1990). Finally, from the perspective of perception theory, the role of price is more complex, given that it must be consistent with the perceived value of the product (Urbany et al., 1996). Thus, if consumers face prices that are different from their internal reference prices, they must decide if these differences are justified or not and act in consequence. This means that, in general, manufacturers set the prices for their products by considering not only a product’s level of real quality (physical positioning), but also its level of perceived quality (perceptual positioning). Nevertheless, in the marketing process, the positioning effort exerted by manufacturers for their brands is slowed by the commercial objectives of intermediary firms. In addition, to act as buyers, retailers act as suppliers of demand segments. When they receive privileged conditions in their product purchasing contracts, they do not always transfer them, totally or partially, to the final consumers through prices (Mulhern and Leone, 1991). This research analyses the retail price dispersion of 66 manufacturer brands in the categories of packaged foods, drugstore products, personal care products and cellulose derivatives marketed in 574 Spanish retail outlets in different cities. It likewise examines the most effective tools available to manufacturers so that retailers respect the prices that manufacturers set for their products and therefore do not disrupt the manufacturers’ positioning efforts for their brands. The current issue and full text archive of this journal is available at www.emeraldinsight.com/1061-0421.htm Journal of Product & Brand Management 15/6 (2006) 402–411 q Emerald Group Publishing Limited [ISSN 1061-0421] [DOI 10.1108/10610420610703739] The authors thank the anonymous reviewer for their comments. 402