Measuring National Brands' Equity over Store Brands

Abstract

In this paper, we provide an approach to measuring the overall brand equity of national brands based on customers’ reservation price differential and perceived quality differential between national brand and store brand. Our approach draws upon a utility framework and develops an econometric model for measuring national brands’ equity over store brand and decomposing it into Quality Equity and Non-Quality Equity.. We then employ the approach and estimate brand equity using data on 20 product categories from 132 consumers and explore some demographic and category antecedents. Our research offers several useful insights. First, it suggests that brand equity is a dominant component of consumers’ willingness to pay a premium for national brands than for store brands. In fact, nearly 80% of the premium that consumers would pay for national brands over store brands can be attributed to brand equity. Second, a significant portion (over 80%) of national brand equity comes from non-quality equity or brand image. Finally, our study identifies several category and consumer characteristics such as advertising, purchase price, income, and age that are significant antecedents of brand equity. The managerial implications of these findings for both national brand manufacturers and retailers are discussed.