Good design helps brands command a price premium

by Nigel Hollis

Good design ought to make a product or service more convenient, easier, and more enjoyable to use; not just visually attractive or distinctive. But what evidence do we have that people will pay more for a well-designed product?

In this post from a while ago I referred to analysis which finds that people paid over 20 percent more for brands with strong brand equity versus weak equity. The analysis was based on a data set which integrated attitudinal data for 79 brands, with behavioral data from Kantar Worldpanel and similar sources. Based on the purchasing data of 2,400 people we found that they actually paid more for brands that they perceived to be meaningfully different. But what about other types of brands, and does design help make a difference?

That is where the BrandZ database comes into play, because it covers many different types of brands, and asks whether brands are well or attractively-designed. I had previously examined a set of brands measured in both 2014 and 2017 and found that being seen as different from other brands was the only metric that seemed to anticipate how well a brand would grow.

To figure out what influence design might have on wider price perceptions I turned to Josh Samuel for help (you may have read his post about our relationship with Alibaba last week). As Global Head of Innovations at Kantar Millward Brown, Josh is the ideal person to help make sure that I do not report a bogus finding after playing around with data in Excel. Our overall conclusion was that good design can support perceptions of meaningful difference, and so does influence price perceptions.

Just as with the real pricing data, the variation in relative perceived price of brands across all categories can be explained by how meaningfully different the brands are perceived to be. 60 percent of perceived price variation across brands can be explained by brand equity. In turn 32 percent of that brand equity can be explained by the image statement “well-designed”. Put the two together and we see that about 20 percent of price variation can be explained by perceptions of good design.

Our analysis suggests that one third of the influence of brand equity is driven by perceptions of design. Of course, design may well have an even bigger influence on choice through its influence on choice during search and shopping. A well-designed brand should seem more attractive, and if it is visually distinctive it will be better able to stand out from the crowd.

Are you surprised by the influence that good design has?