Brand-Price Tradeoff
Quantify your Brand Equity. Calculate exactly how much more you can charge than a generic competitor while maintaining the same market share.
Market Inputs
Perceived value premium over generic
Extra profit per unit purely from brand.
Market Share vs Price
The Power of the Gap
The space between the curves is pure profit potential.
Market Share Parity
Look at where the Blue (Brand) line matches the Pink (Generic) line's height at the base price. The price on the X-axis is what you can charge to get the same volume.
The Premium
At a base price of $50, a 20% equity lift suggests you can charge roughly $65.00.
Defensibility
A wider gap means you are more defended against price wars. Competitors dropping prices won't steal your customers easily.
Execution Steps
Enter the 'Generic / Competitor Price' (the market baseline).
Estimate your 'Brand Equity Index' (0 = Commodity, 50 = Apple-level loyalty).
The chart visualizes two demand curves. The gap between them is your 'Pricing Power'.
Use this to find the price point where your brand volume matches the generic volume at the lower price.
Pro Strategy
- If you raise prices and volume drops significantly, your Brand Equity might be lower than you think.
- Marketing's job is to increase the 'Brand Equity Index'. Operations' job is to lower costs. Pricing's job is to capture the gap.
- Use this model to justify marketing spend: 'If we increase equity by 5 points, we can charge $10 more per unit'.
Core Concepts
Brand Premium
The additional amount a customer is willing to pay for a branded product compared to a functionally identical unbranded product.
Price Sensitivity Shift
Strong brands shift the demand curve to the right. Customers become less sensitive to price increases because they value the trust/status of the brand.
Commoditization Trap
If Brand Equity is 0, your demand curve overlaps the generic one perfectly. You have no pricing power and must compete solely on cost.
What is Brand-Price Tradeoff?
The Brand-Price Tradeoff (BPTO) model isolates the value of the brand name from the product features. By plotting willingness-to-pay for the brand vs a generic, we visualize the 'Pricing Power'—the monetary value of the brand's reputation.
Best For
- • Setting a premium price for a new product launch.
- • Evaluating the ROI of a branding campaign.
- • Defending against a low-cost market entrant.
Limitations
- • Brand value is fluid and can change overnight (PR crisis).
- • Assumes product features are otherwise identical.
- • Does not account for distribution availability.
Alternative Methods
Conjoint Analysis
Treats Brand as just one attribute among many to find its exact utility.
Van Westendorp
Finds acceptable price ranges but doesn't explicitly separate brand value.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
OTC Pain Relief
Store brand ibuprofen was selling for $8. Brand Name wanted to know max price premium.
BPTO study showed customers loyal to the Brand would pay up to $14 (75% premium) before switching to generic.
Fashion Label
New streetwear brand needed to set prices relative to H&M basics.
Established a Brand Equity Index of 60 based on social hype.