The Ineffectiveness of Corporate Brand Investments in Creating Price Premiums

Abstract

B2B (business-to-business) branding research indicates that corporate brand equity investments will increase suppliers' price premiums. In contrast, economics of information studies suggest that suppliers' price premiums decrease with their brand investments. This study, building on economics of information, tests these contrasting perspectives empirically in a B2B services context. The results show that suppliers' corporate brand investments are ineffective in creating price premiums because brand investments and price premiums provide substituting information of unobservable quality. Furthermore, suppliers' price premiums decrease with buyers' willingness to punish sellers' quality deception. In contrast, the suppliers' price premiums increase with their provision of warranties and with their customers' quality-sensitiveness.