Many marketers believe brands are important because they shape customer decisions and, ultimately, create economic value. Few however, would be able to back up their beliefs with facts and figures, as little attempt has been made to measure the actual value of brands.

To begin to gauge just how important brands are to customers during the purchase process, we examined 27 case studies, based on over 5,000 customer interviews in the US, Europe, and Asia. These studies revealed that in both consumer and business-to-business markets, brand was a key factor behind the decision to purchase. On average, the brand was responsible for 18 percent of the total purchase decision. The lowest brand importance measured was 3 percent, the highest 39 percent (Exhibit 1). Moreover, two-thirds of the case studies revealed a "brand loyal segment" - a segment of customers for whom brand was the major factor behind the decision to buy. When present, this segment comprised an average 21 percent of the market (Exhibit 2).

The research therefore suggests that brands have real power to persuade customers to purchase one product rather than another. In an environment where meaningful product and service differentiation is becoming increasingly difficult to achieve and sustain, that also means power to shift market shares.

But strong brands have another measurable advantage: they can command significant price premiums (Exhibit 3).

On average, prices of the strongest brands (in terms of the brand’s importance behind the decision to buy) were 19 percent higher than those of the weakest brands. Relative to second tier brands, the leading brands commanded an average price premium of 5 percent. Given the rising apprehension that marketers will increasingly be forced to lower prices to remain competitive, the research thus suggests that strong brands may be the backbone that sustain attractive price positions in the market.