Brand‐name effects, segment differences, and product characteristics: an integrated model of the car market

Purpose – The purpose of this paper is to consider how product characteristics, segment differences, and brand‐name effects determine the price structure of the new car market. Design/methodology/approach – The authors design and implement a hedonic price model that includes functional characteristics and addresses segment and brand heterogeneity. Findings – The application of the model to an extensive dataset supports the hypotheses of segment differences and brand‐name effects. In mainstream segments automobile prices are determined more completely by functional characteristics. In high‐end segments carmakers follow implicit premium pricing strategies. The brand‐name effects reflect the incremental value added to a car by its brand name. Prestige brands not only earn brand‐name premia but also seize high‐margin market segments. Research limitations/implications – Several issues await investigation including possible discrepancies between the primary and secondary market, inter‐temporal change, and differences in attribute value across segments and marques. Practical implications – The study has clear implications for auto manufactures, distributors and advertisers. It demonstrates the role of brands, segments, and observed product differences in the price structure of the automobile market. The proposed approach also allows managers to appraise new concepts and determine market‐driven prices. Originality/value – The paper provides new interesting insights into critical issues for pricing strategy and brand management. It demonstrates the return on investment in brand building and identifies considerable opportunities for future research.