Price impact: The advertising premium

Charles Young

Marketing mix models treat price as a variable, independent of advertising when, in fact, high-quality advertising supports premium prices.

Price is at the centre of the concept of brand. “If you can't charge a premium price for your product,” wrote the late management guru Peter Drucker, “then you don't have a brand!” The ability to charge premium prices is the reason why businesses that own brands are generally more profitable than businesses that do not.

In the Wild West days of capitalism, the first brands were created as markers of quality to reassure consumers buying mass-produced goods from distant, unknown manufacturers. Good value was defined as good quality at a fair price. From those earliest days a 'fair' price for a brand was understood to be more than the price you would pay for unbranded products.