The effects of expert quality evaluations versus brand name on price premiums

Abstract

Investigates the extent to which expert evaluations of quality impact price premiums of national brands over the store brands. Using data from Consumer Reports, finds that the average quality of store brands exceeds the average quality of national brands in 22 out of 78 product categories. Yet store brands typically do not charge price premiums, while national brands do (28.7 percent price premium on average). When national brands have higher quality, however, they increase the price premium from 28.7 percent to 50.4 percent on average. Regression analysis predicts that a national brand would command 37 percent price premium over a store brand that offers the same quality, a finding that highlights the handsome returns on building brand equity.