top of page
  • Writer's pictureYoram Solomon, PhD

Why do we Trust Brand Names? The Trust Premium of Brands

Imagine this. You go to the shelves of your favorite pharmacy to buy an over-the-counter medication your doctor suggested (or Dr. Google suggested…). You know the brand name. Whether Tylenol, Advil, or any other name you know. Right next to it is a generic brand of what appears to be a similar medication but at one-third of the price. You take the two boxes, turn to the back, and compare the ingredients. The ingredients appear to be precisely the same. Which one do you buy? Well, most people will buy the brand name.

Understanding Trust Premium™

In consumer behavior, a notable phenomenon is the "trust premium" that customers are often willing to pay for brands they know and trust, even when identical, lower-priced alternatives are available. This concept suggests that consumers prefer products from familiar brands because of the inherent trust established over time, even at a higher cost.


Trust and Consumer Choices

Consider a scenario where you need to purchase over-the-counter medication. Presented with a choice between a well-known brand and a generic alternative containing identical ingredients, most individuals opt for the brand name despite a higher price. This decision-making process illustrates a "trust preference"—a consumer's likelihood to choose a trusted entity over an unknown, even if the cost is higher.


Impact of Trust in Different Industries

The influence of trust varies across industries. For instance, financial advisors trusted by clients can command fees up to 39.4% higher than lesser-known counterparts. However, in less impact-driven sectors like insurance, the trust premium is significantly lower, around 5.5%. This variance underscores that the stakes of the decision—what is at risk—greatly affect the value of trust.


Perceived Value and Consumer Perception

There is a longstanding belief that "you get what you pay for." This maxim influences consumer behavior to some extent; people tend to associate higher prices with better quality. Events like free workshops have demonstrated that when something is offered at no cost, participation drops, as potential attendees perceive the lack of a price tag as indicative of lower value.


The Role of Consequences in Trust Decisions

The severity of potential negative outcomes plays a critical role in decisions involving trust. For example, parents might pay a significant premium for a highly recommended surgeon for their child over a lesser-known doctor, reflecting the high stakes involved. Similarly, in professional settings, opting for a known brand like IBM for IT solutions can safeguard against the repercussions of system failures, aligning with the adage, "nobody ever got fired for choosing IBM."


Long-Term Relationships and Trust Building

In sectors where long-term interactions are common, such as airlines or continuous services, customers often develop a preference for brands they have engaged with over time. Loyalty programs and consistent service help reinforce trust and justify premiums associated with these brands.


Understanding Risk Aversion in Brand Choices

Most consumers are not natural risk-takers, particularly in their purchasing habits. This tendency steers them away from unknown brands, especially when significant money is at stake or the consequences of a poor choice are dire. This risk aversion is pivotal in shaping the trust landscape, where established brands often have a distinct advantage.



The dynamics of trust in consumer behavior highlight a complex interplay of factors, including perceived value, risk, consequences, and long-term relationships. These elements collectively influence why consumers often pay more for brands they trust, reflecting deeper psychological and social undercurrents that dictate purchasing decisions. Understanding these factors can give brands insights on better establishing and maintaining consumer trust, ensuring loyalty even in competitive markets.

Dr. Yoram Solomon

Dr. Yoram Solomon is an expert in trust, employee engagement, teamwork, organizational culture, and leadership. He is the author of The Book of Trust, host of The Trust Show podcast, a three-time TEDx speaker, and facilitator of the Trust Habits workshop and masterclass that explains what trust is and how to build trust in organizations. He is a frequent speaker at SHRM events and a contributor to magazine.


The Book of Trust®, The Innovation Culture Institute®, and Trust Habits® are registered trademarks of Yoram Solomon. Trust Premium™, the Relative Trust Inventory™, and The Trust Show™ are trademarks of Yoram Solomon.

0 views0 comments


bottom of page