Brand economics: the price premium and the repeat rate
What a brand is worth in money: a higher price, more repeat buying and cheaper customers, measured against the store brand.
Key takeaways
- A brand is worth what it adds over an unbranded product. It can add a higher price (the premium).
- Marketing researchers have long observed a pattern called double jeopardy, set out in the Journal of Marketing in 1990.
- Common mistakes: Calling a brand strong without a number: a premium, a repeat rate, or lost volume when prices rise.
Key idea
A brand is worth what it adds over an unbranded product. It can add a higher price (the premium). It can bring customers back without paying to win them again (the repeat rate). And its buyers react less to a rival's discount. If you cannot show at least one of these in numbers, the brand is not earning its advertising.
The clearest test of a brand is the store's own label, also called private label. This is the supermarket's own product. It is often made by the same kind of factory and sold for less. In 2025 private label took 38.8 percent of grocery sales by value across 17 European countries. The figure is NielsenIQ data published by the Private Label Manufacturers Association. The share ranged from 23.6 percent in Norway to over 50 percent in Switzerland. In many categories, then, shoppers are willing to drop the brand. A brand has to give them a reason not to.
Where a brand shows up in the numbers
- Price premium: the brand's price over the store brand's, as a percentage of the store brand's price.
- Repeat rate: the share of buyers who buy again. A higher repeat rate means fewer customers have to be won again each year.
- Lower price sensitivity: when a rival cuts its price, a strong brand loses fewer buyers.
- Cheaper growth: a known name makes advertising and new products cost less to launch.
Marketing researchers have long observed a pattern called double jeopardy, set out in the Journal of Marketing in 1990. Small brands have far fewer buyers than big brands. Those buyers also buy them a little less often. So big brands are big mainly because more people buy them, not because their buyers are much more loyal. In a case, question any plan that relies only on making existing buyers far more loyal. Reaching more buyers usually adds more.
Worked case
What is a detergent brand worth in Spain?
The prompt
A fictional detergent maker in Spain sells 2 million packs a year under its own brand at EUR 10 on the shelf. The supermarket keeps 30 percent, making a pack costs EUR 3.50, and brand advertising costs EUR 2 million a year. The other choice is to drop the brand and make the same detergent as a supermarket's private label. Volume stays the same and the shelf price is EUR 7. The supermarket keeps 40 percent, and there is no advertising. How much is the brand worth each year, and what is its price premium? (Figures are illustrative.)
The structure
- Brand value = branded contribution minus private label contribution
- Branded: packs x (maker price minus cost) minus advertising
- Private label: packs x (maker price minus cost)
- Key: Price premium over the store brand
Working it through
1. Branded maker price
The maker receives 70 percent of EUR 10.
Branded maker price (EUR per pack):10 × 0.7 = 72. Branded contribution
2 million packs at EUR 7 minus EUR 3.50, minus EUR 2 million of advertising.
Branded contribution (EUR millions):2 × (7 - 3.5) - 2 = 53. Private label maker price
The maker receives 60 percent of EUR 7.
Private label maker price (EUR per pack):7 × 0.6 = 4.24. Private label contribution
2 million packs at EUR 4.20 minus EUR 3.50.
Private label contribution (EUR millions):2 × (4.2 - 3.5) = 1.45. Brand value per year
The difference.
Brand value (EUR millions per year):5 - 1.4 = 3.66. Price premium
EUR 10 against EUR 7, as a share of EUR 7.
Price premium (percent):(10 - 7) ÷ 7 × 100 = 42.86
The recommendation
The brand is worth about EUR 3.6 million a year, so the maker should keep it and keep advertising. It earns EUR 5 million as a brand against EUR 1.4 million as private label. First, shoppers pay a 43 percent premium for the brand, which leaves the maker EUR 3.50 a pack against EUR 0.70. Second, the EUR 2 million of advertising is well covered by that gap. The risk is that private label keeps gaining share, as it has across Europe. Then the brand must cut its price to hold volume. As a next step, test how many packs the brand loses if the premium widens or the supermarket runs its own label on promotion.
Take a tea brand in Turkey (illustrative figures). Of 25 million households, 20 percent buy the brand in a year. Each buys 6 packs at TRY 150. What are the brand's yearly sales, in TRY millions?
A branded paracetamol in India sells at INR 30 a strip, and a pharmacy's own label sells at INR 20 (illustrative prices). What is the brand's price premium, in percent?
Calling a brand strong without a number: a premium, a repeat rate, or lost volume when prices rise. Cutting advertising to lift this year's profit and finding, a few years later, that the premium has gone. Assuming loyalty can grow without more buyers. Computing the premium on the wrong base: measure it against the cheaper product's price.
See the brand premium business model patternA brand sells at EUR 6 and the store brand at EUR 4. What is the price premium?
A small brand wants to double sales. Which plan does the double jeopardy pattern suggest is more realistic?
Sources for this lesson (3)
- Recognized public explanations of case-interview concepts and terms
- PLMA International, "A mosaic of markets: private label strengthens its position across Europe" (NielsenIQ data for 2025, 17 countries)
- Journal of Marketing (1990), "Double Jeopardy Revisited"
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Keep going: lesson 8 of 8
It builds on what you just read, in Customers and growth: the economics of marketing.
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