The answer to this has to do with consumer tastes and perceived quality. Consumers tend to feel that a brand name product is of higher quality than a product that does not have a brand.
One of the determinants of the level of demand for a good is consumer tastes. If consumers believe that the good is of high quality, they will pay more for it than if they think it is of low quality. This is where branding comes in. Creating and publicizing a brand tends to create the perception of quality among consumers. When they perceive this, they will pay more for the good.
So, the reason for this is that consumers believe that branded goods are of higher quality and therefore are worth a higher price.
For businesses, branding is a powerful tool and consumers will often pay more for a branded product than an unbranded one. Here are some reasons that account for this trend:
- Consumers associate branded products with quality. In a study of young consumers by Robin Couter et. al, quality was the "single most important aspect of a branded product." For these consumers, quality also meant dependability, another desirable aspect.
- Branded products reflect a consumer's sense of personal identity. In this same study, consumers said that buying a particular brand was linked to the consumer's individual identity and status. Coulter uses the example of Apple, which some of her participants felt better reflected their values and interests than other technology brands.
- Branded products are often more visible on the shelf. Branded products often have clear, recognizable packaging when compared with unbranded products. Moreover, this branding is deliberately designed to stand out against its competitors so consumers are far more likely to notice it. Bottles of Coca-Cola, for example, stand out because they are shaped differently than regular bottles. Moreover, the labeling is immediately noticeable: a red label with white text catches the consumer's eye. If it's easier to locate, a consumer is likely to pay more for the convenience.
I don't disagree with the above statement. I do, however, feel that mind conditioning has a large effect. Ads are aimed at triggering feelings associated with their products. Basically, they are brain-washing the consumer to feeling good when they see their product. That is why you always see happy people associated with a particular drug or drinking a particular beverage. You are conditioned to think that their product will bring happiness and that is a huge tool to have when selling.