Put two similar products on the same shelf. One costs $5.50. The other costs $4.50. They solve the same problem and compete for the same buyer. Yet one can hold a higher price for longer. That is where brand pricing power becomes useful. It describes the ability to charge a higher price, hold price with less promotional support or increase price while retaining more demand than a weaker alternative.
- For finance, the result can be seen through revenue and margin.
- For marketing, it creates a way to connect brand strength with what happens when price changes.
The problem is simple. Marketing tracks brand measures while finance tracks price, volume and margin.
Key takeaways
- Brand pricing power shows up in the price a brand can hold relative to competitors and in how demand responds when price changes.
- Research links brand equity with price sensitivity and revenue premium, but the strength of that relationship varies by category and study.
- Promotion can change how consumers respond to price over time, making the difference between short-term volume and long-term pricing power important.
- Your own price, volume and promotion data can give you a starting estimate of price elasticity.
- The number marketing should find this week is the volume change that followed the last meaningful price change.
What pricing power actually means
Pricing power has 3 forms.
- A brand can charge more than a close competitor.
- It can sell at its regular price while another brand relies more heavily on promotions.
- It can raise prices and retain enough demand to protect the economics of the change.
These are different capabilities. A premium pricing strategy focuses mainly on the first one. But a higher shelf price by itself does not prove strong pricing power. The useful question is what happens to demand when the price changes.
That relationship is measured through price elasticity. If price rises by 10% and volume falls by 2%, the simple elasticity is -0.20. If the same price increase produces a 10% volume decline the elasticity is -1.00.
The calculation is simple. The business question is harder because price changes happen alongside promotions, competitor moves, distribution changes and other factors. That is why brand equity should not be treated as proof of pricing power on its own. It needs to be connected to actual price and demand behavior.
What the evidence actually shows
Brand equity can be linked to price outcomes:
The research does not support a blanket claim that every strong brand can charge more. Holbrook’s 1992 study of consumer electronics is a useful example because it found a limited result. After accounting for product quality and attributes, the study found no incremental brand-name effect for its home-theater products.
Across 6 electronic product categories in a second analysis, a significant brand-related price premium appeared only for Carver. That result matters because it shows why the brand and price relationship needs to be tested rather than assumed.
Ailawadi, Lehmann and Neslin took a broader market approach in 2003. They developed revenue premium as a measure of brand equity by comparing a branded product with a private-label alternative. Their analysis found that revenue premium was associated with other measures of brand health as well as advertising, promotion activity and price sensitivity.
The evidence therefore supports a relationship between brand equity and price-related outcomes. It does not establish one universal price premium that applies to every category.
Advertising and promotion can change price sensitivity:
Mela, Gupta and Lehmann studied 8¼ years of panel data for a frequently purchased packaged good in their 1997 research. They examined whether consumers’ responses to variables such as price changed over time and whether those changes were associated with advertising and promotional policies.
Their results were consistent with consumers becoming more price and promotion sensitive as advertising declined and promotional activity increased. That distinction matters for marketing effectiveness. A promotion can change sales during the promotional period. A separate question is how consumers respond to price after the promotion is gone.
A 1998 study by Dekimpe, Hanssens and Silva-Risso examined price promotions in catsup, liquid detergent, soup and yogurt using scanner data. The researchers found that long-term promotional effects differed by category and brand. They also found that when performance did evolve, the long-term effects of price promotions were not necessarily positive.
Share of voice supports the wider brand case:
Share of voice belongs in the discussion because brand presence can affect market share over time. An analysis of 123 brands across 30 categories found a relationship between excess share of voice and subsequent market-share growth.
The analysis reported that a brand with share of voice above its share of market was more likely to gain share when other factors were held constant. That evidence is about market share. It does not prove that higher share of voice directly lowers price elasticity.
It does give marketing another reason to separate short-term sales response from longer-term brand effects when assessing advertising effectiveness.
The real pricing test comes from your own market:
The strongest evidence for pricing power will usually come from the brand’s own price and volume history. A promotion tells you how buyers responded to a lower price. A price increase gives you a different test. If the brand can raise price while losing relatively little volume, then the business has evidence of lower price sensitivity in that situation.
That does not prove the result came from brand strength alone. It gives you a number that can be tested against other factors.
How to test whether you have any
Start with your promotion data:
Start with the sales data you already have. Look at how much the price changed, how unit volume changed and what happened to competitor prices during the same period. Take a simple example. A product normally sells for $10. A promotion reduces the price to $8 and weekly volume rises from 10,000 units to 12,000.
The price change is -20%. The volume change is +20%.
20% volume change ÷ -20% price change = -1.0
That is a simple elasticity calculation. It is not a controlled estimate of causal price elasticity because other factors can affect sales.
Compare the price gap:
The next step is to compare the brand with its closest alternatives. A $10 brand facing a $7 private-label product has a different price gap from a $10 brand facing a $9 competitor. Record the gap over time and compare it with changes in unit volume and market share where those figures are available.
Then examine the last meaningful price increase. If price rose 8% and volume fell 2%, the simple elasticity is -0.25. If price rose 8% and volume fell 10%, the simple elasticity is -1.25. Those figures do not prove why demand changed. They show where a deeper pricing analysis should start.
What if you don’t have clean data?
You do not need a perfect econometric model to begin. Pull the last 3 to 5 major promotions and the most useful price changes you can identify. Record the regular price, promotional price, unit volume and competitor price for each period.
Then look for the same pattern across multiple events. If the result changes sharply from one event to another, investigate the conditions around each change. Seasonality, distribution, competitor activity and promotion mechanics can all affect the result.
What actually builds it
Make the brand easy to remember:
Mental availability is the ease with which buyers think of a brand in buying situations. Category entry points are the situations or thoughts that bring a category to mind. Research from the Ehrenberg-Bass tradition treats these memory links as part of how brands become mentally available to buyers.
Distinctive brand assets such as colours, logos, shapes and other recognisable elements can also help buyers identify a brand. That gives pricing power a useful foundation. A buyer has to consider a brand before its price can be compared with another option.
Keep the positioning consistent:
Positioning gives the brand a clear set of associations. If the communication changes constantly, the brand has less opportunity to build stable associations over time. There is some empirical support for the value of consistency, but the evidence is more specific than a simple rule that consistency always wins.
Becker and Gijsenberg analysed 247 television ads from 33 brands across 6 consumer packaged goods categories over almost 4 years. They found that consistency and commonality in advertising content affected long-term sales, but the effects differed by brand size. So consistency belongs in the brand-building discussion without turning it into a universal rule.
Give it time:
Brand strength does not appear immediately after a campaign starts. The available evidence on advertising, promotion and brand response shows that marketing effects can operate over different time periods. Mela, Gupta and Lehmann separated medium-term quarterly effects from longer-term effects in their 1997 study.
That matters when a business judges brand investment against a quarterly sales target. A short measurement window can miss part of the effect.
What destroys it fastest
Repeated discounts can lower the reference price:
Price promotions can affect the price consumers use as a reference. Kalwani and Yim’s 1992 experimental study found that both promotion frequency and discount depth affected the prices consumers expected to pay for a brand.
Later research has also found that repeated promotions can change reference prices. Sheinin and Della Bitta’s 2022 study found that deep discounts at high frequency produced lower internal reference prices than shallower discounts at high frequency.
That gives the promotion question a margin angle. If customers become accustomed to a lower price, returning to the regular price can become harder.
Promotion can change more than one week’s sales:
The long-term evidence is mixed by category and brand. The 1998 study of catsup, liquid detergent, soup and yogurt found that long-term promotional effects were not uniform.
The 1997 panel study also found that consumers could become more price and promotion sensitive over time under conditions of reduced advertising and increased promotion. So the useful number is not promotion volume alone. Track the price needed to generate that volume and what happens when the discount disappears.
Inconsistent communication can weaken the brand:
Evidence on communication consistency is more nuanced than a simple rule. A 2023 study of advertising content found long-term sales effects from both consistency and commonality, but the direction differed between smaller and larger brands.
That means a change in positioning should be judged against the brand’s size, category and communication history rather than treated as automatically harmful.
The broader risk is easier to state. If a brand spends more of its marketing activity on short-term price response while giving less attention to longer-term brand effects, the business should measure whether price sensitivity is changing.
How to argue it internally
Start with the margin the brand is currently protecting. Suppose a price increase produces enough extra revenue to protect $500,000 in annual gross margin after the volume effect. That number gives finance something concrete to discuss.
Then put elasticity beside it. If the observed elasticity from a comparable price change was -0.25, a 10% price increase would imply a 2.5% volume decline under the same conditions. That is a calculation rather than a forecast. Actual demand can differ when the price change is larger or when competitors, promotions or distribution change at the same time.
The next number is the cost of losing that pricing room. Compare the margin protected by the current price with the extra discounting or volume required to produce the same financial result. Brand tracking can sit alongside this analysis. Track brand measures with price changes, promotions and volume so the business can see whether changes in brand strength move alongside changes in price response.
For the wider budget argument, use the budget defence piece rather than rebuilding that case here. The internal case then has a clear chain: brand measure, price response, margin effect.
The Read
The research does not conclude the whole market is losing pricing power. It does support a more specific concern: repeated promotion can increase price sensitivity in some settings while longer-term promotional effects vary by category and brand.
That creates a real margin risk when short-term volume becomes the main success measure. A brand can keep sales moving while becoming more dependent on discounts. The number marketing should find this week is simple: the volume change after the last meaningful price increase.
If price rose 8% and volume fell 2%, the starting elasticity is -0.25. That number does not prove brand pricing power by itself. It gives marketing and finance a common figure to investigate.
