A brand price premium is the difference between the price a company can afford to charge and the price of a comparable offer without a known brand. It arises from three sources: reduced perceived risk, where the customer believes the delivery will go smoothly; the time saved because they do not need to compare and verify; and the value that mere association with the brand brings them. For a company, this is the most tangible commercial benefit of brand building, because it translates directly into margin. It can only be maintained by keeping the promise, as soon as the customer's experience stops matching expectations, the premium disappears faster than it was built. It can be measured by comparing prices and conversion rate against the competition, or by testing willingness to pay for the same product under a different brand.
See also: Brand equity, Brand promise, Pricing of services.
