Question

Why are some customers willing to pay a premium price for national brands over private labels?

Answer 1

Why are some customers willing to pay a premium price for national brands over private labels?

This is primarily owing to the following reasons:

1. A national brand gives a sense of national identity to the customer that a private label will never. Hence the willingness to pay extra

2. A national brand is usually perceived with the fact that it is indigenous to the country with majority of the supply chain if not all being part of the country. This makes the customer believe that the premium price is ensuring the value is being distributed amongst several stakeholders part of the overall community in the country. Unlike a private label where the supply chain may be geographically distributed outside the country, the willingness to pay may not be higher

3. Also, in several developing economies, the identity of a national brand is associated with the supply chain involving workers from rural areas thus involving them in the formal economy. This helps customers think that they are helping in a way in creating employment opportunities and hence willingness to pay premium

4. A lot of national brands have a great degree of history and experience associated unlike private labels. This gives customers more confidence to pay that premium

5. Availability of a national brand in different parts through different mediums is also another reason why customers prefer paying a premium. Since they are used to the brand due to this easy availability compared to a private label, they do not mind paying more