Brand name premium, should you pay one?

I recently bought a new set of tires for my car and the list of cheap tire resellers I compiled some time ago came out very handy. However I ended up buying neither one of the popular brands mentioned in the list. Why? It is actually a billion dollar question. Billions is how much US businesses are estimated to be spending annually on brand name recognition.

I fully understand how valuable brand name can be for the business in convincing customers in their decision making. I am trying however to look at this subject from online bargain hunting perspective. By buying a branded product you in most cases pay a hefty “brand name recognition” premium. Do you want to? Do you have to?

Keeping up with the Joneses

I don’t consider myself an average American however I understand the meaning of “keeping up with the Joneses” concept very well. If you are the kind, you can stop reading right here. By throwing your hard earned cash into a popular brand you have “your money well spent”. If you are the “don’t care about Joneses” kind like myself then keep on reading.

Joneses aside, a quality product at the lowest possible price is what any consumer ultimately wants. I personally think Internet has placed in our hands very powerful tools to achieve this ultimate goal. The trick is just to know when and what tool to use.

Brand name is about confidence

Take a look at eBay. Part of their tremendous success is due to the seller/buyer feedback system which lowered the entry level barrier for “new and unknown little guys” to join ranks of successful online resellers. Seeing positive feedback adds buyer the confidence needed to follow through with the sale transaction.

ResellerRating is another popular place to solicit information about a questionable reseller. If manufacturer brand is what you have question about, many popular online reseller maintain customer feedback/reviews which in many cases give you plenty of information about how good the brand/product is. The “popular” is the key word here. Smaller shops simply don’t have enough customers to build the knowledge base. Amazon, TireRack, NewEgg are a few good examples of stores with scores of information on the products and brands.

Are there any exceptions?

The only example that I can think of when you might really want to pay for the brand is personal care and pharmaceutical products. These are too complex to be easily reproduced by smaller unknown firms and while you in some cases may be safe using generic substitutes (think Tylenol), in many other cases to ensure the expected results you are better off sticking to the brand.

Besides drugs, another good example is cosmetics. According to my wife, she will only go with an established brand as far as facial creams are concerned. On the other hand she will readily substitute an expensive branded mascara with a cheaper lesser known alternative.

What is your take on brands? Please share your thoughts in the comments.

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7 Responses to “Brand name premium, should you pay one?”

  1. 1 AGF Sep 17th, 2007 at 2:22 am

    Usually non-branded stuff works just as well too, its just people are not confident buying them.

  2. 2 AmyR Sep 17th, 2007 at 9:14 am

    I think it depends on the item, some brand-name stuff is definetely worth the extra cash, IMHO.

  3. 3 Ajay Gupta Sep 17th, 2007 at 12:21 pm

    I agree with your post. Just a minor correction in that I believe the phrase is “Keeping up with the Joneses”.

  4. 4 Yan Sep 17th, 2007 at 12:42 pm

    Thanks Ajay. Comments like yours make me want to go back to high school… Except that they didn’t teach any English in my school. ;-)

    Fixed the typo.

  5. 5 XynamaX Sep 17th, 2007 at 2:13 pm

    Depends on the product.

    From my personal experience, name brand clothes tend to last a lot longer then generic branded ones that fade/fall apart after 3 washes.

    You get what you pay for, that really goes for anything.


  6. 6 Russ A Sep 18th, 2007 at 9:42 am

    I agree with Xynamax that it does depend on the product. A Banana Republic shirt looks and feels nicer than Old Navy. Diesel jeans do look better than their less expensive counterparts. Granted, they’re still just shirts and pants.

    Cars certainly matter with regards to quality of the drive as well as reliability. Japanese cars will last you 200K miles while European (German) cars are the most pleasurable to drive.

  7. 7 Yan Sep 18th, 2007 at 10:31 am

    Japanese cars are reliable not because of the brand name. Quite the other way around. They built brand on reliability & design and now make customers pay for it (a Japanese car is usually more expansive than its American counterpart). If you do some research, you will find that Buick makes just as reliable cars, if not better, and as far as reliability is concerned, buying used LeSabre would give you more value for your money than say Honda Accord. That said, I still own Accord because I like the car look and interior better.

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