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Book part
Publication date: 27 September 2021

Jianjun (John) Zhu, Thomas S. Gruca and Lopo L. Rego

This study examines the empirical relationship between four broad antecedents of brand equity (branding strategy, brand structure, brand positioning and target market) and…

Abstract

This study examines the empirical relationship between four broad antecedents of brand equity (branding strategy, brand structure, brand positioning and target market) and two separate dimensions of revenue premium: price premium and volume premium. Our modeling framework aims to explain how different antecedents of brand equity influence the realized velocity and margin of branded product sales, key drivers of operating cash flow. Our generalizable empirical analyses are based on a representative dataset of over 6,500 brands, across 200 consumer-packaged goods categories, spanning three years. We find that only 20% of brands command revenue premiums, for which volume premiums are the critical determinant. Branding strategies and brand structure primarily impact volume premium. In contrast, brand positioning has little effect. Target market substantially affects both premiums. Overall, these four elements account for 73% and 69% of the explained variations in price and volume premiums, respectively. This study provides generalizable, important, and novel insights for the theory and practice of brand management regarding price positioning and extending brands into new categories.

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Marketing Accountability for Marketing and Non-marketing Outcomes
Type: Book
ISBN: 978-1-83867-563-9

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Article
Publication date: 1 June 2003

Eidan Apelbaum, Eitan Gerstner and Prasad A. Naik

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…

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5134

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.

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Journal of Product & Brand Management, vol. 12 no. 3
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 1 March 2013

Li Ding and Jalesh Mahbubani

The aim of this paper is to develop a two‐stage decision model of vertical integration by breaking down integration decisions into two stages: extent of integration and…

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3158

Abstract

Purpose

The aim of this paper is to develop a two‐stage decision model of vertical integration by breaking down integration decisions into two stages: extent of integration and direction of integration.

Design/methodology/approach

The study uses price premium as a proxy for differentiation‐based competitive advantage. The relationship between the extent of vertical integration and price premium through a vehicle of consumers' brand perception is explored. A segmentation‐based analysis is performed to study whether different vertical integration configurations are related to price premiums at different levels.

Findings

Vertical integration relates positively to price premium set by apparel companies; consumers' perception of brand quality mediates the relationship. Findings also suggest that an organization should opt for integration if vertical integration generates greater effect on price premium as relative to the cost. Strength of internal and forward integration is related strongly to higher price premiums than integration balance.

Research limitations/implications

Further research is encouraged to test if the findings of this study can be generalized to other industries and/or other types of supplier relationship integration, e.g. partnership, strategic alliance and joint venture.

Originality/value

As a departure from extant literature, it is argued that vertical integration is a viable strategy that enables companies to gain differentiation‐based advantage. A conceptual model is developed and applied to the apparel industry, which explains critical issues involved in the design of supply chain structures.

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Management Decision, vol. 51 no. 2
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 11 May 2015

Yaowarat Sriwaranun, Christopher Gan, Minsoo Lee and David A Cohen

– The purpose of this paper is to investigate factors affecting consumers’ willingness to pay (WTP) a premium for organics.

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3270

Abstract

Purpose

The purpose of this paper is to investigate factors affecting consumers’ willingness to pay (WTP) a premium for organics.

Design/methodology/approach

A self-administered questionnaire was used to collect data at five retail stores in metropolitan Bangkok. Exploratory factor analysis and the double-bound contingent valuation method were used for analysis.

Findings

Results indicate WTP premiums of 88, 51 and 51 per cent for kale, jasmine rice and pork, respectively. Analysis indicates that respondents are willing to pay a premium if they have already purchased organic products, have good health, strong ethical and environmental concerns, think that organic products provide greater quality and health benefits, and reside in the city. Respondents with children, however, are less likely to pay a premium for organic products. Analysis also indicates that the price premium hinders purchase.

Practical implications

Efforts should be made by policymakers, together with marketers and producers, to lower the price of organic products to attract more consumers.

Originality/value

To enlarge the organic market, one must understand consumers’ preferences for organic products and the premium they will pay for them. This is not well-researched. Though several studies have investigated consumers’ behaviour towards environmentally friendly products in Thailand, there is little research on WTP. This lack is a major impediment to the growth of organic consumption and the development of organic product markets.

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International Journal of Social Economics, vol. 42 no. 5
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 1 August 1999

Raj Sethuraman and Catherine Cole

Identifies some managerially relevant factors that influence the size of the price premium that consumers will pay for national brands over store brands in grocery…

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10048

Abstract

Identifies some managerially relevant factors that influence the size of the price premium that consumers will pay for national brands over store brands in grocery products. We define price premium as the maximum price consumers will pay for a national brand over a store brand, expressed as the proportionate price differential between a national brand and a store brand. Overall, perceived quality differential accounts for about 12 percent of the variation in price premiums across consumers and product categories and is the most important variable influencing price premiums.

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Journal of Product & Brand Management, vol. 8 no. 4
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 14 April 2014

Johan Anselmsson, Niklas Vestman Bondesson and Ulf Johansson

The aim is to understand customers' willingness, or unwillingness, to pay a price premium in the market for consumer packaged food and what kind of images brands can use…

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24244

Abstract

Purpose

The aim is to understand customers' willingness, or unwillingness, to pay a price premium in the market for consumer packaged food and what kind of images brands can use in order to achieve a price premium.

Design/methodology/approach

The study is based on a quantitative survey of brand images found in food and branding literature and their impact on loyalty as well as customers' willingness to pay a price premium for consumer packaged food.

Findings

The survey shows that quality is a significant determinant of price premium, but adding other image dimensions doubles the predictability and understanding about price premium. The strongest determinants of price premium are social image, uniqueness and home country origin. Other significant determinants are corporate social responsibility (CSR) and awareness.

Practical implications

The results help brand managers to recognise the importance of incorporating price premium and to develop a better understanding of what drives price premium in addition to more traditional dimensions as quality and loyalty.

Originality/value

In grocery retailing, the competition for customers, margins and price premiums between manufacturer and private labels is fierce. Traditionally, the literature on this competition has focused on quality and product improvements as the main tool for creating distance to low priced competition. This study looks into other more branding related dimensions to distance from price competition.

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Journal of Product & Brand Management, vol. 23 no. 2
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 1 July 2014

Rebecca Schröck

The purpose of this paper is to identify and quantify the factors determining the prices of organic and conventional cheese. For a market with a high degree of product…

Abstract

Purpose

The purpose of this paper is to identify and quantify the factors determining the prices of organic and conventional cheese. For a market with a high degree of product differentiation, i.e. the German cheese market, price premiums of various cheese attributes are examined. Thereby, special attention is paid to country of origin (CO) effects, geographical indications (GIs) and organic claims.

Design/methodology/approach

The analysis is based on homescan panel data of 13,000 representative German households provided by the GfK consumer research association. The data set combines actual purchase and demographic data for a five-year sample period from 2004 to 2008. Applying the hedonic technique, the cheese price is modelled as a function of a wide range of consumer, store and product characteristics. Effects are analysed in detail by distinguishing between supply- and demand-side effects and by estimating price regressions not only for the whole sample but also for different shop types.

Findings

The estimated organic price premiums range between 18 per cent in discount shops and 26 per cent in hypermarkets. The impacts of the CO and GIs are considerably smaller in magnitude and limited to special shopping venues like super- and hypermarkets.

Originality/value

The German cheese market is currently evolving from a staple product market to a highly differentiated market where increasing attention is paid to quality indicators such as organic claims or GIs. The data are remarkable, both in sample size and information content. Furthermore, the estimation of shop type-specific price premiums offers new and detailed insights in consumer valuation and producer costs of a wide range of cheese attributes.

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British Food Journal, vol. 116 no. 7
Type: Research Article
ISSN: 0007-070X

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Article
Publication date: 25 January 2013

Zhenmin Fang and Xin Jiang

The purpose of this paper is to study the effects of short‐sale constraints and differences of opinions on the price premium of dual listed Chinese A‐H shares.

Abstract

Purpose

The purpose of this paper is to study the effects of short‐sale constraints and differences of opinions on the price premium of dual listed Chinese A‐H shares.

Design/methodology/approach

The analysis mainly follows the Miller's model, which indicates that the relaxation of stringent short‐sale constraint could reduce the upward bias in stock prices. Following the literature, the paper uses the idiosyncratic return volatility and monthly turnover rate as two main proxies of differences of opinions.

Findings

This study shows that the high level of A‐share differences of opinions will lead to the high price premium of A‐share portfolio with the short‐sale constraint in the A‐share market. However, the high level of H‐share differences of opinions has no effect on the price premium of H‐share portfolio and has also positively contributed to the A‐share price premium. The price premium of shorted A‐share portfolio is declined more significantly than those of non‐shorted ones after the relaxation of short‐sale constraint in the A‐share market.

Research limitations/implications

The findings in this study provide further evidence that dual listed Chinese A‐shares with high level of differences of opinions and short‐sale constraints tend to be overvalued.

Practical implications

This study supports Miller's hypothesis that with the control of short‐sale constraint, the high level of differences of opinions could lead to the high degree of overvaluation of A‐share portfolio. The market capitalization and book‐to‐market ratio of A‐shares also generate significant positive effect to the A‐share price premium. Finally, the introduction of short‐sale mechanism in A‐share market could partially eliminate the mispricing of dual‐listed A‐shares and improve the price efficiency of A‐share market.

Originality/value

This study is mainly focused on the joint effects of differences of opinions and short‐sale constraints on the A‐share price premium. The new short‐sale policy in A‐share market in March 2010 provides us an opportunity to study the effect of relaxation of stringent short‐sale constraint on the A‐share price premium. In the literatures so far, all studies assumed A‐shares are strictly prohibited to be sold short.

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China Finance Review International, vol. 3 no. 1
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 17 July 2009

Mariola Palazón and Elena Delgado

This study aims to integrate price consciousness into the promotional effectiveness framework. Specifically, it aims to analyse whether price consciousness affects the…

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6652

Abstract

Purpose

This study aims to integrate price consciousness into the promotional effectiveness framework. Specifically, it aims to analyse whether price consciousness affects the evaluation of price discounts and premiums at two different benefit levels (moderate vs high).

Design/methodology/approach

An experiment was conducted with two promotional benefit level (moderate, high) × two promotion type (price discount, premium) between subjects design. A sample of 229 undergraduate students was randomly assigned to a specific product‐promotion combination.

Findings

The results obtained indicate that at moderate benefit level, price discounts and premiums are equally effective for high price conscious consumers. However, price discounts are more effective than premiums for low price conscious consumers. At high benefit level price discounts are more effective than premiums, but this effect is more apparent for high price conscious consumers.

Research limitations/implications

The limitations of the study are those typically applied to the experimental methodology. Specifically, only two product categories and two types of sales promotions were used which limits the generalization of the results. Another potential limitation is the use of students' respondents.

Practical implications

It is recommended that managers should know how price conscious their consumer segment is before taking any decisions regarding the promotional strategy. To be more effective, it is recommended to offer premiums instead of moderate price discounts if the target segment is high price conscious. However, such a recommendation should only be followed when the target is not low price conscious, because for this consumer segment a moderate discount is preferred.

Originality/value

To analyze the effectiveness of a promotion, most of the present research has focused on the benefit provided, and the promotional framework used. However, lacking in this research are insights into how consumer personal characteristics may affect that effectiveness. The current research is to fill this gap in knowledge about consumer responses to sales promotions incorporating price consciousness in the analysis.

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Journal of Product & Brand Management, vol. 18 no. 4
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 2 May 2019

M. Tolga Akcura, Ian Clark Sinapuelas and Hui-Ming Deanna Wang

This paper aims to understand empirically how shares of standard and premium private label (PL) products affect a retailer’s marketing mix decisions toward national brands (NBs).

Abstract

Purpose

This paper aims to understand empirically how shares of standard and premium private label (PL) products affect a retailer’s marketing mix decisions toward national brands (NBs).

Design/methodology/approach

Using a comprehensive store-level data set covering 52 categories and 130 stores of two retailer chains during 2003-2009, this paper examines how shares of standard and premium PLs affect retailer marketing strategies for NB retail prices, promotions and product assortments. The empirical analysis uses a simultaneous equations model estimated by the generalized method of moments approach and controls for endogeneity between PL shares and NB decisions and potential confounding variables including consumer, manufacturer and retailer factors.

Findings

Standard PL shares are associated positively with NB retail prices and negatively with NB promotions and assortments. In contrast, premium PL shares are associated positively with NB retail prices, promotions and assortments.

Research limitations/implications

The results indicate that retailers make strategic NB decisions through multitier PLs. Specifically, the evidence suggests that retailers use standard and premium PLs differently in promotion and assortment decisions toward NBs. NB manufacturers need to be cognizant of the increasing marketing power of retailers through their multitier PLs.

Originality/value

Prior research has mainly focused on the role of PLs as a strategic weapon to gain power in the channel and its impact on NB pricing decisions in a single PL context. After accounting for potential confounding factors (retailer, consumer and manufacturer) and endogeneity, the authors find empirical evidence that retailers appear to leverage standard and premium PLs differently in some marketing mix decisions toward NB. In particular, the results reveal PL performance to be a determinant of retailer NB assortment decisions.

Details

Journal of Product & Brand Management, vol. 28 no. 3
Type: Research Article
ISSN: 1061-0421

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