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...of Americans feel that at least some of the things
they own or do say something about who they are. [...] A majority also
feel that the causes they care about (65 percent), what they wear (60
percent), and the car they drive (53 percent) says something about who
they are.
Clothing, perfume, and cars are, perhaps, the most frequently mentioned products that consumers use as means of self-expression (Aaker 1996). However, a much wider variety of products have a brand or user image associated with them. For example, Miller and Tsiantar (1989) reported a study of consumer perceptions finding that Pillsbury cake mix users were consistently perceived as apron-clad, grandmotherly types, while Duncan Hines cake mix users were perceived as slender, contemporary women. (2) Mustang and Abercrombie & Fitch are examples of brands that sharply divide consumers with respect to how much they like their images, and the Diesel brand name of apparel (later extended to footwear, eyeglasses, etc.) was specifically built on the idea of self-expression. (3) Such associations of brand users with the image of the brand may affect consumer brand choice, especially when brand consumption is observed by other individuals.
This paper models the value consumers may derive from such associations by explicitly considering the interaction between agents (who are also potential consumers of the brands) and their incentives to reveal or conceal information about themselves to other agents. Naturally, agents may communicate not only through displaying brands they use, but also by talking to each other. However, the two forms of communication are different because people can adjust what they say depending on who they talk to and what they observe just before each statement. In contrast, people often have to make the brand choice earlier, when they not only have less information about the other person, but perhaps before they even know who the other person is. Therefore, people may find it rational to make different inferences from the brand they see and from the words they hear. The additional value, which communication through brands brings to the value of communication, over and above the value of conversations alone, is the aspect of the consumer value of the brand images this paper studies. This aspect of the brand image value depends, in part, on the incentives for a consumer to reveal information, and on whether the information stated in a conversation is believed. (4)
Consider an environment with the following features. Agents, e.g., people, go through a sequence of costly meetings to "interview" for a partnership, e.g., a marriage. The partnership is declared if and only if both agents want to form it. The payoffs to the two agents in a partnership are different, but correlated, and partly depend on the (common) fit between the two agents. Agents do not have complete information about the fit, but rather each agent at a meeting has information about a part of the fit. This makes communication potentially valuable. Agents may communicate by talking during the meeting, but this conversation happens after they have already observed something about the payoffs of the potential partnership and each other. Agents may also communicate by selecting a brand before the meeting and bringing it to the meeting.
The main implications are the following. First, conversations at meetings can never be completely truthful and hence, cannot reveal all information. Thus, brand use may help to convey information. Second, if consumers use brands more, conversations become less truthful. Third, the consumer value of communicating through brand use has an inverse-U shape in the search cost per meeting, tending to zero as the search cost tends to zero, and becoming nonpositive when search costs are high. When the distribution of payoffs of a match is single peaked and symmetric, and the correlation of payoffs is close to zero, brand image value is positive if and only if the probability of acceptance of an agent by another (random) agent is less than one half. (5) The desire to not reveal information before a meeting (when search costs are large) can be interpreted as a desire for conformity (herding behavior) because it leads to people trying to adopt behavior and product use as not to "stand out." On the other hand, the desire to reveal as much information as possible (when search costs are small) can be seen as a tendency to extremes, especially when the desire to stand out actually dominates the benefit of truthful information transmission.
A potential difference between communication through brands and communication by talking is that brands are costly, while statements during a conversation may not be as costly. Exploring this effect of brand costliness has led to theories of conspicuous consumption, where the brand is a costly device signalling that the agent using it is of a "high" type (e.g., Pesendorfer 1995, Bagwell and Bernheim 1996). (6)
However, there are at least two reasons to believe that cost is not the only thing that makes brand images valuable. First, there is a large variety of brands that are not expensive enough to be used for costly signalling. In addition, there are images that are at odds with the "pricy" image. For example, can a person possibly signal a thrifty nature by purchasing an inexpensive car, such as a Hyundai Accent? Or can a teenager signal a desire for change or adventure by choosing a Pepsi instead of a Coke? Second, even with status goods such as luxury cars, there is often a variety of similarly priced brands with different images. Oftentimes, while a firm is trying to convey a status image for its brand, it also tries to differentiate from the firms with equally prestigious brands by developing a "style dimension." For example, a particular Corvette, a BMW, and a Lexus may be in the same price range and have similar characteristics, but people have strongly differing preferences for them due to the different images associated with the users of each brand.
If a certain attribute is desirable for everybody, costless statements, whether in words or in brands, may not be trusted. However, oftentimes, whether an attribute is desirable or not is a matter of an idiosyncratic preference rather than of an objective quality. For example, what is better: thriftiness or willingness to spend, being cautious or being adventurous, associating oneself with things classic or with things modern? A hybrid SUV may project a very different image from a sports car, but each can be appealing to some consumers (and disgusting to others). If neither attribute is objectively good, but rather either attribute could be to somebody's preference, cheap-talk communication may be informative (Crawford and Sobel 1982) and the timing of the statement is an important consideration. When person A makes a verbal statement to person B, person B wonders whether the statement was made because A has observed that B would like it. In this case, the use of brands may be valuable because B may know that A chose the brand before A had observed B's preference.
The rest of this paper is organized as follows. The formal model is presented in [section]2 and analyzed in [section]3. Section 4 illustrates the model on an example of a particular (exponential) distribution of payoffs of a match, and derives the implications for a monopoly firm's decisions on the number of brands to offer and brand pricing. Section 5 concludes with a discussion of the model implications, limitations, and potential for empirical testing and future research.
2. A Model of a Matching Game
Consider an environment where each agent, e.g., a person, has a goal of finding another agent to form a partnership, e.g., a marriage. For the possibility of finding a partner, an agent must first look for a meeting with another agent, which is costly (Burdett and Coles 1997). The payoff of a partnership to each partner is a function of how much this partner turns out to benefit from (or like) the other partner. When one agent meets another, each of them forms expectations of the payoffs he/she is likely to receive from the potential partnership, but may not know the payoffs for sure. They may each possess some, but not all the information that is needed to determine the partnership...
NOTE: All illustrations and photos
have been removed from this article.
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