Price Premium Method for Evaluating Brand Equity

This is done by comparing the difference between the retail price of the “brand” and the retail price of an unbranded product in the same category. Here again the difference will give an indication of brand equity. This measure will also give us an indication of “Brand strength” only. That is, higher the retailer premium that a brand can charge, greater is its equity in the minds of the customer.



But this is less useful than the profit premium method in understanding brand strength because if we take the toothpaste market, there are brands at different prices.


Comparing Colgate Total (the most expensive toothpaste) with an unbranded product will give it high brand equity as compared to Colgate Dental Cream. However, for the common man, Colgate means Colgate Dental Cretin only. How then can we accept higher brand equity for Total as compared to Colgate Dental Cream?

Similarly, some toothpastes like Babool are deliberately priced low to penetrate the market. On the basis of the lower retail price premium it commands, it would not be right to say that Babool enjoys less brand equity than what say Promise does. Further, low priced brands like Nirma and Lifebuoy will have their brand equity close to zero if this method were adopted. Such a computation would be unrealistic.


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