Skip to content
Licensed Unlicensed Requires Authentication Published by De Gruyter June 12, 2019

Is the Simple Price Premium that Simple?

Yuying Shi EMAIL logo

Abstract

Brand equity has been a perennial topic in marketing. Among all types of measures, price premium is widely accepted due to its simple yet efficient characteristics. However, there is some disagreement regarding whether this measure captures enough facets of brand equity and whether price premium is an appropriate measure to reflect the market position of a brand. With current technique developments, more sophisticated brand equity measures have been developed. A natural question arises as to whether more sophisticated measures are better than price premium. Using large-scale national scanner data covering 47 major U.S. markets, we employ the aggregated demand model to estimate a complex brand equity measure and compare it with price premium. Our results suggest that the simple price premium is consistent with the complex measure under certain conditions. We provide managers with suggestions regarding choosing the most appropriate brand equity measures to signify their brands’ values.

References

Aaker, David A. 1996. “Measuring Brand Equity across Products and Markets.” California Management Review 38 (3): 102–20.10.2307/41165845Search in Google Scholar

Aaker, Jennifer L. 1997. “Dimensions of brand personality.” Journal of marketing research, 34 (3): 347–356.10.1177/002224379703400304Search in Google Scholar

Agarwal, Manoj K., and Vithala R. Rao. 1996. “An Empirical Comparison of Consumer-Based Measures of Brand Equity.” Marketing Letters 7 (3): 237–47.10.1007/BF00435740Search in Google Scholar

Ailawadi, Kusum L., Donald R. Lehmann, and Scott A. Neslin. 2003. “Revenue Premium as an Outcome Measure of Brand Equity.” Journal of Marketing 67 (4): 1–17.10.1509/jmkg.67.4.1.18688Search in Google Scholar

Ataman, M. Berk, Harald J. Van Heerde, and Carl F. Mela. 2010. “The Long-Term Effect of Marketing Strategy on Brand Sales.” Journal of Marketing Research 47 (5): 866–8210.1509/jmkr.47.5.866Search in Google Scholar

Berry, Steven T. 1994. “Estimating discrete-choice models of product differentiation.” The RAND Journal of Economics 25 (2): 242–262.10.2307/2555829Search in Google Scholar

Berry, Steven T., James Levinsohn, and Ariel Pakes. 1995. “Automobile prices in market equilibrium.” Econometrica : Journal of the Econometric Society 63(4): 841–89010.2307/2171802Search in Google Scholar

Blattberg, Robert C., Richard Briesch, and Edward J. Fox. 1995. “How Promotions Work.” Marketing Science 14 (3_supplement): G122–G132.10.1287/mksc.14.3.G122Search in Google Scholar

Bronnenberg, Bart J., Michael W. Kruger, and Carl F. Mela. 2008. “Database paper—The IRI Marketing Data Set.” Marketing Science 27 (4): 745–4810.1287/mksc.1080.0450Search in Google Scholar

Chintagunta, Pradeep K. 2002. “Investigating Category Pricing Behavior at a Retail Chain.” Journal of Marketing Research 39 (2): 141–54.10.1509/jmkr.39.2.141.19090Search in Google Scholar

Datta, Hannes, Kusum L. Ailawadi, and Harald J. van Heerde. 2017. “How Well Does Consumer-Based Brand Equity Align with Sales-Based Brand Equity and Marketing-Mix Response?” Journal of Marketing 81 (3): 1–20.10.1509/jm.15.0340Search in Google Scholar

Dubin, Jeffrey A. 1998.“The Demand for Branded and Unbranded Products—An Econometric Method for Valuing Intangible Assets.” Chapter 4 in Studies in Consumer Demand—Econometric Methods Applied to Market Data, 77–127. Norwell, MA: Kluwer Academic Publishers.10.1007/978-1-4615-5665-7_4Search in Google Scholar

Erdem, Tülin, Michael P. Keane, and Baohong Sun. 2008. “The Impact of Advertising on Consumer Price Sensitivity in Experience Goods Markets.” Quantitative Marketing and Economics 6 (2): 139–76.10.1007/s11129-007-9020-xSearch in Google Scholar

Goldfarb, Avi, Lu Qiang, and Sridhar Moorthy. 2009. “Measuring Brand Value in an Equilibrium Framework.” Marketing Science 28 (1): 69–86.10.1287/mksc.1080.0376Search in Google Scholar

Hjorth-Andersen, Chr. 1984. “The Concept of Quality and the Efficiency of Markets for Consumer Products.” Journal of Consumer Research 11 (2): 708–18.10.1086/209007Search in Google Scholar

Holbrook, Morris B. 1992. “Product Quality, Attributes, and Brand Name as Determinants of Price: The Case of Consumer Electronics.” Marketing Letters 3 (1): 71–83.10.1007/BF00994082Search in Google Scholar

Huang, Rong, and Emine Sarigöllü. 2014. “Assessment of brand equity measures.” International Journal of Market Research 56 (6): 783–806.10.2501/IJMR-2014-037Search in Google Scholar

Jedidi, Kamel, Carl F. Mela, and Sunil Gupta. 1999. “Managing Advertising and Promotion for Long-Run Profitability.” Marketing Science 18 (1): 1–22.10.1287/mksc.18.1.1Search in Google Scholar

Kamakura, Wagner A., and Gary J. Russell. 1993. “Measuring Brand Value with Scanner Data.” International Journal of Research in Marketing 10 (1): 9–22.10.1016/0167-8116(93)90030-3Search in Google Scholar

Keller, Kevin Lane. 1993. “Conceptualizing, Measuring, and Managing Customer-Based Brand Equity.” The Journal of Marketing 57 (1): 1–22.10.1177/002224299305700101Search in Google Scholar

Keller, Kevin Lane. 2003. Strategic Brand Management: Building, Measuring, and Managing Brand Equity, 2nd ed. Upper Saddle River, NJ: Prentice Hall.Search in Google Scholar

Keller, Kevin Lane, and Donald R. Lehmann. 2006. “Brands and Branding: Research Findings and Future Priorities.” Marketing Science 25 (6): 740–59.10.1287/mksc.1050.0153Search in Google Scholar

McFadden, Daniel. 1973. “Conditional Logit Analysis of Qualitative Choice Behavior”.Search in Google Scholar

McFadden, Daniel, and Kenneth Train. 2000. “Mixed MNL Models for Discrete Response.” Journal of Applied Econometrics 15 (5): 447–70.10.1002/1099-1255(200009/10)15:5<447::AID-JAE570>3.0.CO;2-1Search in Google Scholar

Mela, Carl F., Sunil Gupta, and Donald R. Lehmann. 1997. “The Long-Term Impact of Promotion and Advertising on Consumer Brand Choice.” Journal of Marketing Research 34 (2): 248–61.10.1177/002224379703400205Search in Google Scholar

Mela, Carl F., Kamel Jedidi, and Douglas Bowman. 1998. “The long-term impact of promotions on consumer stockpiling behavior.” Journal of Marketing research 35 (2): 250–262.10.1177/002224379803500210Search in Google Scholar

MSI. 1999. “Value of the Brand.” workshop at Marketing Science Institute Conference on Marketing Metrics, Washington, DC. October 6–8.Search in Google Scholar

Nevo, Aviv. 2000. “A Practitioner’s Guide to Estimation of Random‐Coefficients Logit Models of Demand.” Journal of Economics & Management Strategy 9 (4): 513–48.10.1162/105864000567954Search in Google Scholar

Nevo, Aviv. 2001. “Measuring Market Power in the Ready‐To‐Eat Cereal Industry.” Econometrica 69 (2): 307–42.10.1111/1468-0262.00194Search in Google Scholar

Papatla, Purushottam, and Lakshman Krishnamurthi. 1996. “Measuring the Dynamic Effects of Promotions on Brand Choice.” Journal of Marketing Research 33 (1): 20–35.10.1177/002224379603300103Search in Google Scholar

Rothschild, Michael L., and William C. Gaidis. 1981. “Behavioral Learning Theory: Its Relevance to Marketing and Promotions.” The Journal of Marketing 45 (2): 70–78.10.1177/002224298104500207Search in Google Scholar

Shocker, Allan D., and Barton Weitz. 1988. “A Perspective on Brand Equity Principles and Issues.” Report 88–104 (1988): 2–4.Search in Google Scholar

Simon, Carol J., and Mary W. Sullivan. 1993. “The Measurement and Determinants of Brand Equity: A Financial Approach.” Marketing Science 12 (1): 28–52.10.1287/mksc.12.1.28Search in Google Scholar

Slotegraaf, Rebecca J., and Koen Pauwels. 2008. “The Impact of Brand Equity and Innovation on the Long-Term Effectiveness of Promotions.” Journal of Marketing Research 45 (3): 293–306.10.1509/jmkr.45.3.293Search in Google Scholar

Srinivasan, Venkatachary. 1979. “Network Models for Estimating Brand-Specific Effects in Multi-Attribute Marketing Models.” Management Science 25 (1): 11–21.10.1287/mnsc.25.1.11Search in Google Scholar

Sriram, Srinivasaraghavan, Subramanian Balachander, and Manohar U. Kalwani. 2007. “Monitoring the Dynamics of Brand Equity Using Store-Level Data.” Journal of Marketing 71 (2): 61–78.10.1509/jmkg.71.2.061Search in Google Scholar

Sudhir, Karunakaran. 2001. “Competitive Pricing Behavior in the Auto Market: A Structural Analysis.” Marketing Science 20 (1): 42–60.10.1287/mksc.20.1.42.10196Search in Google Scholar

Valette-Florence, Pierre, Haythem Guizani, and Dwight Merunka. 2011. “The Impact of Brand Personality and Sales Promotions on Brand Equity.” Journal of Business Research 64 (1): 24–28.10.1016/j.jbusres.2009.09.015Search in Google Scholar

Published Online: 2019-06-12
Published in Print: 2019-06-26

© 2018 Walter de Gruyter GmbH, Berlin/Boston

Downloaded on 28.1.2023 from https://www.degruyter.com/document/doi/10.1515/roms-2018-0009/html
Scroll Up Arrow