signaling unobservable product ouality through a brand ally

7/29/2019 Signaling Unobservable Product Ouality Through a Brand Ally

1/12

RESEARCH NOTESAND COMMUNICATIONS

AKSHAY R. RAO, LU QU, and ROBERT W. R UE KE RPIn this articie, the authors examine the circumstances in which brandnames convey information about unobservable quality. They argue that abrand name can convey unobservable quality credibly when false claimswill result in intolerable economic losses. These losses can occur for two

reasons: (1) losses of reputation orsunk investments and (2) losses offuture profits that occur whether ornot the brand has a reputation. Theauthors test this assertion in the context of the em erging practice of brandalliances. Results from several studies are supportive of the premise andsuggest that, when evaluating aproduct that has an important unobserv-able attribute, consumers' quality perceptions areenhanced when abrand isallied with asecond brand that is perceived to be vulnerable toconsumer sanctions. The authors discuss tlie theoretical and substantiveImpiications for the area of brand management.

Signaling Unobservable Product OualityThrough a Brand AllyThe area of brand management recently has begun toreceive renewed scrutiny in the marketing literature.Research symposia, special sessions at conferences, and anentire issue of the Journal of Marketing Research have beendevoted to research on the meaning and measurement of'"brand equity" (eg.. Park and Srinivasan 1994; Simon and

Sullivan 1993), issues related to extending a brand name*Akshay R Rao is Associate Professor of Marketing, the Carlson Schoolof Management, University ofMinnesota (e-maiJ: arao@csom,umn.edii),Lu Qu is Senior Modeling Analyst, Wells Fargo and Companies (e-mail:Lu,Qu@Norwest,com), Robert W, Rueken isProfessor of Marketing andAssociaie Dean of Programs, the Carlson School of Management.University of Minnesota (e-mail; (Tuekert@csom,umn,edu). The firstauthor gratefully acknowledges the financial support of the MarketingScience Institute in Cambridge. Mass,, and the Center for Research inMarketing at the Carlson School of Management. The authors are alsograteful toMark Bergen. Deborah Roedder John, Kent Monroe. DonaldLehmann, the editor, and two anonymous JM R reviewers for their com-ments on previous versions of this article. To interact with colleagues onspecific anicles in this issue, .see "'Feedback" on the JM R Web site atwww,ama org/pubs/jmr.

inlo newcategories (e.g., Broniarczyk andAlba 1994Loken and John 1993), and managerial actions that can btaken to enhance brand differentiation and profits (e.gBoulding, Lee. and Staelin 1994; Zenor 1994). In additiothe popular business press suggests that brands increasinglare becoming a key strategic asset of firms. Apparentlbrand names have significant monetary value (Aaker 1991One important theoretical perspective that informs thmonetary underpinning of a brand name is signaling theorin information econom ics (Spence 1973). According to thperspective, because branded products that falsely claimhigh quality stand to lose (I) investments in reputation (e.gbrand equity) and (2) future profits, a branded producclaim about unobservable quality will likely be true (Erdemand Swait 1998). In other words, consumers rationallshould infer that a branded seller's claims about unobservable quality are credible because false claims would lead tmonetarily unattractive outcomes (Tirole 1988). Consquently, a brand name can be aneffective signal of unoservable quality. We adopt this perspective inour researcand propose that a brand's signaling power can emerge from


2/12

LJnobservable Product Quality 25two sources: (I) dissipative signals, which involve an up-fronl expenditure in reputation building that wil] be forfeitshould quality turn out to be poor, and (2) nondissipativesignals, which do not involve any up-front expenditure butplace only future profits at risk (roughfy corresponding toBhattacharya 1980). Iti the case ofth e second type of signal,regardless of whether it has invested in reputation buildingactivities in the past, a brand may be able to signal unob-servable quality. As we discuss next, we examine this issuein the context of an emerging marketing practicethe for-mation of brand alliances (Rao and Ruekert 1994).

CONTEXTMuch ofthe current academic research, as well as writingin the popular business press, focuses on individual brandsthat have an independent and distinct identity. However, asSimonin and Ruth (1998) recently discussed, brands oftenexist in conjunction with other brands within the same prod-uct. For example. Diet Coke and NutraSweet are physicallyand perceptually intertwined, IBM (and other) computersuse Intel chips, and a recently launched line of ice cream

cordials features Haagen-Dazs in combination with variousbranded liqueurs. In addition, two or more brands may befeatured in joint promotions, even though they are not phys-ically integrated (e.g., television commercials featuringOscar Mayer and Mail Boxes Etc.). Following Rao andRuekeri (1994) and Simonin and Ruth (1998), we definesuch brand alliances to include all circumstances in whichtwo or more brand names are presented jointly to the con-sumer These alliances range from multiple brands that arephysically integrated in a product (as in the case of Appleand Motorola) to multiple brands that simply are featured injoint promotions (e.g., Bacardi Rum and Coca-Cola).Furthermore, a new or unknown brand could ally with onethat is well known (e.g., when NutraSweet initially alliedwith Coca-Cola), or two or more well-known brands couldform an alliance (e.g., Eddie Bauer and Ford). This phe-nomenon, when two or more brand names are featuredsimultaneously in a product context, is the focus of ourresearch.Although brand alliances are formed for a variety of rea-sons, ranging from the desire to gain mutual access to pro-prietary markets (e.g.. Northwest Airlines and KLM) to theattempt to encourage affect transferal (e.g., Lexus andCoach), there exists little systematic empirical examinationofthe issue in the academic literature. Consequently, brandalliances present several complexities about which existingtheory in marketing is largely mute. Specifically, thoughthere exist commonsense prescriptions, such as ensuringthat the allies "fit" in some way (Simonin and Ruth 1998),it is unclear what circumstances favor the formation of abrand alliance and why, as well as what other specific char-acteristics may make one brand an appropriate ally relativeto another.

Our article attempts to offer one theoretically based per-spective on the issue. Drawing on the signaling notion thatbrand names may communicate unobservable quality, wedevelop and test the argument that the conjoining of two (ormore) brands may have the desirable consequence ofenhancing consumers' quality perceptions of the jointlybranded produci when quality is not readily observable. Thisoccurs when the second brand (i.e., the brand ally) credibly

com mun icates a level of quality that the first brand is unabto communicate by itself. As we develop in this article, thcredibility of the hrand ally is driven in part by its vulnerbility to consumer sanctions (i.e., economic sanctions sucas boycotts) should the claim of high quality turn out lo bfalse. These sanctions may result in a hrand losing priinvestments in reputation or future profits (whether or nothas a reputation). Thus, for example, when NutraSweel firwas introduced, concems about its potential harmful healeffects were only allayed after Coca-Cola, Pepsi, and othsuch credible brands (i.e., brands that could be hurt badverse publicity if NutraSweet turned out to be harmfu"endorsed" the unobservable quality of NutraSweel bincorporating it into their diet formulations (Rao and Rueert 1994). We propose that a reputationless brand with futuprofits at stake also could have allayed fears successfulabout the harmful health effects of NutraSweet.

Our article offers the first systematic empirical examintion of a brand ally's ability to communicate unobservabproduct quality. (Our focus is not on the more traditionissue of attribute or affect transferal [i.e.. when Brand A ha proprietary technology or image that Brand B desireand/or vice versa], not because that issue is uninterestitibut because there is a large literature on multiattribute moels that can be applied directly to understanding that phnomciion.) We report on two studies that address our prdictions regarding the circumstances in which an allianwith a particular type of brand can yield enhanced percetions of product quality.REVIEW OF LITERATURE

Although it is not controversial that brand names are aimportant marketing tool, or thai brand names are generala good long-term marketing investment (Kotler 1994), it less clear precisely why brand names are beneficial. Onschool of" thought sugge sts that brand names enha nce cosumer perceptions of product quality because brand namcany meanings that consumers come to value (Gardner anLevy 1955; for a meta-analysis of the empirical linbetween brand name and perceived product quality, see Raand Monroe 1989). Another complem entary persp ectivsuggests that brand names have utility because they asources of information that identify the manufacturer, anthis infonnation should limit any tendency on the part omanufacturers of low quality to claim high quality becausuch behavior wil! (when detected) he associated with thbrand in question and wit! affect future sales and profits neatively (Wernerfelt !988) . This second perspective faunder the rubric of signaling models in information ecnomics and is examined next.Applying Signaling Theory to Brand Names

Often, product quality is not readily observable to buyeprior to purchase but is revealed fully after purcha se (a claof products termed "experience goods"; Nelson 197Wright and Lynch 1995). Furthermore, the level of quality generally not opaqu e to the seller, and this differential levof information between buyers and sellers creates the welknown problem of "information asymmetry" (Akerlof 197Kreps 1991). A signal is an action that the seller can take convey information credibly about unobservable produquality to the buyer. For example, one signal is the offer o


3/12

260 JOURNAL OF M ARKETING RESEAR CH, MAY 199a good warranty (Boulding and Kirmani 1 993; Coop er andRoss (9 85; Grossman 1981). if the sellers' product is ofpoor quality, it would be foolish to offer a good warranty,because presumably, warranty fulfillment costs would behigher for poor quality producis because they are likely tohave higher failure rates. Conversely, sellers of high qualityproducts can afford to offer good warranties because thelikelihood that they will have to honor those warranties isrelatively low.i Similarly, advertising expenditure can serveas a signal because such expenditures will be incurred onlyby honest, high quality firms that can recoup their advertis-ing expenditures from future sales. If a low quality firmwere to advertise heavily, it likely would not recover theadvertising expenditure because consumers would discoverits low quality after purchase and use, and repeat purchasewould not occur. (If purchases in the first period providesufficient compensation for the advertising expenditure,however, such expenditures do not serve as a signal.) Inessence, therefore, a signal is a credible and informativeaction because those attempting to signal dishonestly wouldsuffer harmful monetary consequences. According to theinformation economics lilerature on brands,, under informa-tion asymmetry, brand names also can serve as a signal ofunobservable quality.

Brands names as signals of unobservable quality. If theclaim associated with a brand is one of high quality and thebrand turns out to be of poor quality, consumers can punishthe brand (Mon tgomery and Wernerfelt 1992; Wemerfelt1988). Driven principally by the withholding of repeal pur-chase, this punishment may range from simply exiting themarket to engaging in negative word of mouth or calling forregulatory action. On occasion, the negative outcome mayturn out to be dispropo rtionately severe; that is, after qualitydebasement is discovered, the offending brand may fareworse than low quality brands because this brand may haveno customer franchise among consumers of low quality(Rao and Ruekert 1994; Wernerfelt 1988). Because suchpunishment will be monetarily detrimental to the seller, theprovision of a brand name can serve as a quality assurancedevice. Branded products are likely to be of higher qualitythan unbranded products, and brand names therefore canfunction as effective signals of unobservable quality. Con-sumers who believe this logic wili accept the branded prod-uct's quality claim as true.According to much of the extant literature, the ability ofa brand name to signal unobservable quality is based on thepotential loss of prior brand equity-related investments inreputation (Erdem and Swait 1998), In other words, con-sumers can punish firms by withholding future purchases;consequently, sunk investments in brand equity-buildingactivities are irrevocably lost. This investment can bethought of as a "bond" that tbe brand offers; the higher thebond (i.e., the greater the dollar amouni spent on building areputation), the more credible the signal is (Ippolito 1990).Implicitly, therefore, if a brand has not invested in brand-

'This strategy will work only if the provision of a good warranty by apoor quality seller raises his or her costs (and price) to a level higher thanthat of the high quality seller, if the poorquality seller can offer a good war-ranty and successfully absorb the higher costs of warranty fulfillmentthrough charging a higher price (which is still lower than ihai of the highquality seller), warranties will not be a successful signal of quality.

building activities, its ability to use the brand name signashould be affected adversely.However, we argue that it is still feasible for a reputationless brand to signal quality by exposing future sales anprofits to risk. In other words, consistent with Wernerfelt(1988) argument that umbrella brands are useful signabecause they expose profits in allied markets to risk, wargue that a brand can offer a bond other than prior invesments in reputation. One such bond is future profits thawould be forfeit if the brand claiming high quality were toffer low quality. Therefore, though the principle (loss omoney) is the same in the case of reputable and reputationless brands, the mechanism is different. A reputable branalready has spent money that will be forfeit if it offers lowquality (a dissipative signal), whereas a reputationless brancan, without spending money, claim to be credible becausit will lose money in the future should it offer low quality (nond issipative signal) (Bhattacharya 1980). This distinctioon how brand names successfully can signal quality is a kesubtlety that distinguishes our approach from that of extanapproaches (e.g., Erdem and Swait 1998) and, as the resulfrom our empirical studies suggest, is potentially a managerially useful distinction.

The argument thus far has emphasized the logic that, ithe event the brand offers low quality, the bond is forfebecause consumers will take some action that will harm thbrand. However, consumers" ability to hurt a brand dependon how vulnerable the brand is to consumer sanction. Iother words, the vulnerability of the brand signal to consumer sanction may vary depending on the degree to whicconsumers can identify and punish a brand that offers loquality. For example, if a brand caters to tbree large automobile manufacturers that are geographically close, aopposed to catering to three aerospace buyers that arlocated in three different continents, the likelihood that loquality in the first case will lead to speedy negative publiity and consumer sanction by all three customers is reltively higher. By the same logic, a brand that is diversifie(e.g., 3M, which caters to multiple markets through motban 60,000 stockkeeping units) offers a less vulnerabbond than one that is not (e.g., McDonalds, which caters essentially one market, with a small assortment of homogneous products), because it is more costly for consumers seek out and destroy every tentacle of a diversified firmEven a reputationless brand that stakes future profits nondissipalive signal) is credible only if tbese future profican be influenced negatively by consumers relatively easilIf it is costly to harm the future profits of such a brand, thethe credibility of the nondissipative signal is lower. (Thargume nt is fundamentally similar to the argument in invesment portfolio theory, according to which the riskiness ofportfolio of investments is related inversely to the degree which il is diversified; Fama and Miller 1972.) In summarthe degree to which a brand's signal is bonded is a functioof not only the amount of money at stake (either in terms osunk costs or future profits), but also the degree to whicthese monies are vulnerable to future consumer sanction terms of the cost to the consumer in effecting monetadamage.

The brand ally as a signal of un observable product quaity. We now tum to the second element of our research quetion. As we argued previously, brand names are credible si


4/12

Unobservable Product Quality 26nals of quaiity wben they post vulnerable bonds based oneither (1) past expenditures on brand equity or reputation-building activities or (2) future saies and profits at risk.However, when a brand cannot successfully signal its highquality by itself (perhaps because, similar to NutraSweetwhen it first entered tbe market, it is a new brand and there-fore has no reputation), it would be appropriate for it to con-sider aJternative means of signaling its high quality to themarketplace. Credible and enforceable warranties are onesuch mechanism (Grossman 1981). Alternatively, anunknown brand might signal high quality by selling througha reputable retailer (Chu and Chu 1994). Another signalingmechanism, which forms the focus of tbis research, is toenter into an alliance with a second brand that can assist incredibly signaling high quality to the marketplace.^ Thepremise here is that the second brand in the alliance suc-cessfully signals the quality that the original brand could notsignal by itself. The source ofthe second brand's signalingability could be ils vulnerability to loss of either (1) invest-ments in reputation (a dissipative signal) or (2) future prof-its independent of ils investments in reputation (a nondissi-pative signal).

Notice that we simply have taken our theoretical argu-ment regarding the utility of a brand name as a signal andapplied it to the brand alliance context. As we discuss in asubsequent section, managers' beliefs about the prospect ofconsumer sanctions likely drive their attempts to ensure thattheir brand names are not associated with low quality prod-ucts. Consequently, consumer beliefs that brand allies arecredible endorsers of unobservable quality indeed might berational.To summarize, a brand's (or brand ally's) ability to signalquality depends on the size and vulnerability of its (1) sunkinvestments in brand reputation at risk and/or (2) futureprofits (independen t of its investments in reputation) at risk.

The bond in the former case can be viewed as the amouni ofbrand-related advertising performed in the past, other prod-uct design and development activity, and the like (elementsof brand equity) that will be forfeit if consumers boycott thebrand should it be caught offering low quality, whereas thebond in the latter case can be viewed as the amount of prof-its that will be forfeit if consumers costlessly can identify allthe products associated with a brand that has offered lowquality and withhold future purchases.HYPOTHESES

The principal predictions that emerge from our theory arecaptured in two interaction hypotheses that predict differentquality perceptions depending on quality unobservabilityand the credibility of the signal (dissipative and nondissipa-tive) provided by the brand ally.

H|: Overall perceptions of quaiity for a product featuring abrand alliance will vary, depending on the observability ol"the product's quality and the credibility of the nondissipativesignal provided by the brand ally.Speciftcally, focused tests should reveal that

-Although not germane to this research, an ohvious question centersaround which of the several available signaling mechanisms (warranties,channel allia nces, brand alliance);, and so un) should be chosen.

Hi^: When the observability of product quality is low. overaperceptions of quality will be higher when the nondissiptive signal provided by the brand ally is vulnerable to cosumer sanction, relative to when this signal is not vulnerble to consumer sanction.Tbis prediction is based on the rationale that the vulnerabiity of the ally to future sanctions makes tbe quaiity claicredible when quality is unobservable. When the brand alis not vulnerable to future sanctions, its implicit endorsment is relatively less credible because, if tbe quaiity claiturns out to be false, consumers will fmd it costly to harthe ally. Consequently, under low obser\'ability of qualitquality perceptions should be higher wben the brand allyeasy to punish.

Hit,: When the observability of product quality is high, overperceptions of quality will not be significantly different, rgardless of the vulnerability of the nondissipative signprovided by the brand ally.In this case, the observability of quality mak es the ally's signal irrelevant because the claim can be verified througinspection. Consequently, if the claim is observed to be truquality perceptions will be high, regardless of the vulnerbility ofthe ally.

Using the same rationale, it is possible to predict effecon the basis of the dissipative signal provided by the branally:Hn: Overall perceptions of quality for a product featuringbrand alliance will vary, depending on the observability othe products quality and the credibility of the dissipalisignal provided by the brand ally.

Speciftcally, focused tests should reveal thatHi^: When the observability of produci quality is low. overperception.s of quality will be higher when the dissipatisignal provided by the brand ally is vulnerable to consumsanction, relative to when this signal is not vulnerableconsumer sanction.

Again, this prediction is driven by the rationale thai, undlow observability, when the brand ally is vulnerable to cosumer sanction because it has a valuable asset that will blost should it falsely claim high quality, its claims abounohservable quality are credible.H2b- When the observability of produci quality is high, overperceptions of quality will not be signitlcantiy different, r

gardless of the vulnerability of the dissipalive signal prvided by the brand ally.Here again, because the claim can be verified by inspectiothe signal provided by the ally is irrelevant.In the inlerest of brevity, we do nol formally propose aexhaustive set of hypotheses for all possible main and inteaction effects. However, we report and discuss significaresults of interest subsequently.To test our prediclions, an experimenl was conductedwhich three factors were manipulated: the observabilityquality, the nature (or type) of the signal communicated bthe brand ally, and its credibility. In a second study, we repcate a portion of the firsl study with some methodologicchanges and fmd identical results.


5/12

262 JOURNAL OF MARKETING RESEARCH, MAY 199METHODOLOGY

Overview of MethodologyTo test the assertions suggested by the theoretical devel-opment, several different approaches were considered.Because of the paucity of reliable secondary data and thepotential advantages of experimentation in theory testing, itwas decided that an appropriate methodological approachwould be a traditional, between-subjects, multifactor exper-

imeni. In Ihis design, the impact of the credibility of tbe twotypes of signals, as well as the observability of the prod uct'sperformance, could be manipulated directly. The key depen-dent variable would be the perception of product quality forthe jointly branded product.Pretesting focused on the development of appropriate stim-uli, manipulations, and dependent variables, as well as theidentification of potential problems with the instrument, pro-cedures, transparency of hypotheses (yielding demand arti-facts), and the like. Subsequently, in the formal data collectionexercises, mali-intercept subjects were assigned randomly toone of several experimental conditions and requested torespond to typical paper-and-pencil measures. Multiple indi-cators of dependent variables were submitted to iraditionalreliability checks and factor analysis. Tests of bypothesesinvolved standard analysis of variance procedures.

Study IThe first study employed a 2 (low and high credibility ofthe signal provided by the brand ally) x 2 (type of the signal[dissipative and nondissipative] provided by the brand ally)

X 2 (high and low observability of product quality) between-subjects factorial design. As we discuss subsequently,though the manipulation of the credibility of the signal (rel-ative vulnerability of future profits to consumer sanctions)and observability of quality were embedded in the stimulusdescription , the manipulation of the type of" signal wasaccomplished by using real and fictitious brand names (i.e.,a reputable brand potentially placing a dissipative signal atrisk, and a reputation I ess brand potentially placing only anondissipative signal at risk).

Pretests. On the basis of three pretests (n = 43, 168, and105), the following decisions were made: Television setswere selected as the stimulus product for the first studybecause product quality was perceived to be an importantconsideration in the purchase decision (6.28 on a seven-point scale), a key requirement of the theory (Teilis andWernerfeit 1987). "Ca lyps o" (Imagery = 3.84. Concreteness= 3.69. Meaningfulness = 1.58, rated on seven-point scaleswhere I = "Lo w" and 7 = "High" ) and "A dvantage"(Imagery = 3.88, Concreteness = 2.33, Meaningfulness =2.63, rated on seven-point scales where I = "Low" and 7 ~"High"), which are both fictitious names, were selected asthe primary brand name and name of the fictitious brandally, respectively. The scores on the imagery, concreteness,and meaningfulness scales (Paivio, Yuille, and Madigan1968) reveal that these names do not have high imagery, arenot concrete (i.e., well-entrenched), and are not laden withsecondary meanings and, thus, are relatively neutral terms.These properties are desirable for the experiment, becausethey reduce the possibility that the imagery, concreteness, ormeaningfulness of the fictitious brand name drove tbeobserved results. A five-item dependent variable scale for

quality perceptions (Cronbach's a = .85) also was generated. Finally, using subjects' guesses about the true identitof "Advantage" and "Calypso" as a basis, the most frequently occurring name w as selected as the name for the reabrand ally. Tbis brand is a well-known international corporation with a wide array of electronic consum er prod ucts aninterests in other aspects of the entertainment business anwas among the top five global brands in a recent populaindustry survey of brand affect and reco gnition. Th us, it wareasoned that this brand w as likely lo yield a high reputatioperception, yet a claim about future profits being secure (ithe low credibility con dition) also would be believable. Thpretests also were useful in developing product stimubased on the information needs of the subjects.

Independent variables. The first factor (credibility of signal) involved the manipulation of the degree to which thbrand ally stood to suffer if the product failed to live up to thpromised level of quality. The two levels of manipulatioincluded (1) a high condition, in w hich the ally providing thendorsement potentially stood to suffer considerable monetary damage should customers' quality expectations bbetrayed, and (2) a low condition, in which the ally providinIhe endorsement potentially stood to suffer little monetardamage should customers" quality expectations be betrayedConsistent with the procedure employed by Boulding anKirmani (1993), these claims were provided in the stimuluattributed to a Consumer Reports story on the product, and (awe discuss subsequently) perceived as credible.The relevant description for the high credibility conditiowas as follows;

While there is not enough information available to ac-curately evaluaie the quality of the Calypso TV. the facithat it is a collaboration with Advantage should makeconsumers very comfortable with the claims of highquality. Advantage is a brand name that is associatedwith many products, and if Ihe CaJypso product fails,consumers will definitely blame Advantage for the fail-ure. As a result. Advantage sales in their other productcategories will suffer greatly.

The re levant descr iption for the low credibil i ty condit iowas a s fo l lows:

There is not enough information available to accuratelyevaluate the quality of the Calypso TV. The fact that it isa collaboration with Advantage should not necessarilymake consumers comfortable with the claims of highquality. Advan tage is a brand nam e thai is associated w ithmany products, and if the Calypso product fails. Advan-tage is safe from blame because the other products aresold in compfelely different markets. As a result. Adva n-tage sales in their other product categ ories will not suffer.

Notice that in both condit ions, the market character ist iof the brand a lly are unchanged; in the low condit ion, thbrand a lly 's presen ce in mu ltiple marke ts is argued to m akit re la t ively immune to punishment, whereas in the higcondit ion, the brand a lly 's presence in multiple markets argued to make i t re la t ively vulnerable to punishment. Thwas done to ensure that both stor ies dif fered minimally avoid potentia l confounding. In addit ion, s imilar to the arg

iConsistent with prior research in the area (Loken and John 1993) andprotecl thi s Journal from potenlia l litiga tion, the true identity of the brandnot revealed fiere.


6/12

Unobservable Product Quality 26Table 1

DEMOGRAPHIC INFORMATION

GenderMalesFemalesAg e20-2930-3940-49Annual Income ($)60,000EducationSome high schoolGraduated higb schoolSome collegeGraduated cotiegePost collegeTotal

Study 1in i5367593524*3435201189*25353622

120

Study 2(n)312919221916141263921924

10560

'Does nol total to 120 because of missing observations,menis provided in advertisements by a firm or a competitor,the reasoning for the credibility of the claim is embedded inthe description {for a similar stimulus that provides strongquality-related arguments, see Simonin and Ruth 1998),Such an approach is considered appropriate given our inter-action hypotheses, according to which this strong manipula-tion should not yield an effect when observability is high,but should yield an effect when observability is low.

The second factor {observability of quality) refers towhether the product's performance could be assessed priorto purchase. Subjects were told that the television set had aunique attribute; it automatically would lower the volumeduring commercials. In the high observability condition, inaddition to being able to observe performance in the store,subjects were told that they had observed the television setperform well in a free, 30-day, in-home trial. In the lowobservability condition, subjects were told that they couldexamine the product's performance only in the store; thestimulus did not include an in-home trial opportunity. Thus,the automatic volume reduction mechanism was differen-tially observable to the two sets of subjects.**Finally, the manipulation of tbe third factor {type of sig-nal) involved the use of a fictitious and real b^and name asthe brand ally, as noted previously. The implicit rationale isthat the real brand name carries a high investment in reputa-tion {which potentially could serve as a dissipative signal),whereas the fictitious brand name has no reputation {andtherefore can serve only as a nondissipative signal).Dependent variables. Tbe theory addresses the effect ofcredible information on perceptions of quality for attributesthat are not observab le. Therefore, it is impo rtant to measureattributes that are unobservable. Tbis requirement presents aproblem, because in the quality observable conditions, mea-"In the second study, these manipulations were changed and made con-siderably more subtle.

suring the perceived quality of unobservable attributes infeasible. However, because perceptions about attributquality (regardless of their observability) should influencperceptions of overall quality {Zeithaml 1988), the principadependent variable was constructed using a multidimensional scale of overall quality that was based on prior literature and pretests. This approach is consistent with prioempirical research in this area {Boulding and Kirman1993), Scale items included measures of global quality, awell as specific attribute-re levant eva luations that w erappropriate for the product under examination {see thAppendix for scale items). Finally, manipulation checks andemographic information also were gathered.

Sample. One hundred twenty mall shoppers in a majoMidwestern city participated in the study. The samplinframe was restricted to adults age 18 to 49 years. Subjecreceived a small {$2.00) token of appreciation for theefforts. Data collection was executed by a professional maketing research firm. Subjects took no more than 30 minuteto complete the questionnaire.Instrument and procedures. Subjects were informed ththey were being asked to participate in a market researcsurvey that would help manufacturers better design andevelop new products. Then, in the first section of the quetionnaire, in addition to responding to several distracteitems, subjects provided information about their awarenesof the various brand nam es used in the study, as well as theperception of the quality of those brand names.In the second section of the instrument, subjects were provided information about a new television set on the market. Amentioned previously, a key feature of the television set wathe ability to reduce the volume during commercial breakFollowing this, subjects responded to dependent measures,Annlysis and results. An examination of responses to thquestion about the true purpose of the study indicated thano subjects guessed the hypotheses. Descriptive informatioabout the sample is available in the first column of Table Subjects represented both genders and tended to be relatively young, well-educated, and reasonably affluent. Subjects owned an average of 1,96 television sets {ranging froma low of 0 to a high of 5). Manipulation check results suggest that all three manipulations were successful {mean diferences of ,47 [p < .05], \.2[p< .0001 ], and 2.6 [p < .000on a seven point scale for observability, wbether brand allwas perceived to be vulnerable to punishment, and wheththe brand name was perceived to be real, respectivelyFinally, quality was perceived as important in the purchasof television sets {5.87 on a sev en-point scale).One hundred eighteen usable responses were analyzed ian overall ANOVA for the full model on perceived qualitAll cells had a sample size of !5, except the high observability/high vulnerability cells for both real and fictitioubrand ally conditions {n - 14), The overall model is signifcant {F7 110 = 2.55, p < .05) and our key interaction hypotesis {credibility of signal x observability) is supporte{Fi 1,0= 3.30, p


7/12

264 JOURNAL OF MARKETING RESEARCH, MAY 199results were the following: (1) observability x type of signalinteraction effect (F, ,,o= 3.00,/>< .10, T I = .027), (2) themain effect of credibility of signal (Fi.no = 5.21, p < .05,r)2 = .0 45) , and (3) the main effect of the type of the sign al(F,,, ,0= 5.58, p < .05,T\ = .048). T he Jatler two results ind i-cate that when the brand ally has something to lose, theproduct receives significantly higher ratings than when itdoes not, and the reputable brand aily g enerates significantlyhigher ratings than the reputationless brand. (Details aboutthe reliability and factor structure of the dependent variableare available in the Appendix.)

To assess support for the principal predictions, the cellmeans for the appropriate conditions were compared using aplanned contrast procedure (Figure 1). Under high observ-ability, quality pe rceptio ns were not significantly different,regardless of the credibility of either kind of signal providedby the brand ally. Under low observability, however, qualityperceptions when the ally provides a credible signal ofeither type are significantly higher than when the ally does

Figure 1QUALITY PERCEPTIONS FOR THE JOINTLY BRANDEDPRODUCT UNDER DIFFERENT LEVELS OF SIGNAL

CREDIBILITY AND TYP E: STUDY 1

Perc eived Qualily7.0 ^

5.9SJ lS.7

S.4

S.25.15.04.9

4. 5

II

--

-

r (5.23,1.09)(5.12, .94)'*

-

( 4 . 5 5 . .7'>*

, (5 .8 5, .SS)-

^ - " " ^ (5.40, .94)

(5.21,.96), ^ ^ ( 5 . 1 2 , .851'

HighCredilibililv or Signal

High iihscrvutiiliiy/ high

Li>w nbsCT vahilily/ high(rcpuuihic hrjnJI

- H i g h i

Li i w i ^scrvahi Ul y / l i >wJi ss i pu i i vc M ^i mi

Noles. Figures in parcnibeses ure means and standard deviaiions. respec-lively, is significantly higber than ^ i,p < .05). ^ is significantly higher than^ (p < ,05).

not provide a credible signal (both results significant atp .01, one-tailed tests; d = .96 and .70 for the comparisoninvolving the reputable brand ally and the reputationlebrand ally, respectively). In otber words, under low observability, for both Ihe reputable brand ally and the reputatioless brand ally, relatively h igher quality ratings are observewhen the brand ally is perceived to be vulnerable to punishment and no t otherwise.^ Collectively, these results providsupport for H]a_b, as well as Hja.^,Rival explanations. To make the signal credibility maniulation credible and consistent with prior research (Bouiding and Kirmani 1993), the source of information regardinthe potential negative consequences (or lack thereof) oproduct failure was Consumer Reports. Although this sourcof information was not varied across conditions and wperceived as credible by subjects, there is a potential concern thai, in conditions of low observability, the reputatioof Consumer R eports for objective and unbiased evaluatiodrov e subjects' responses, not the differences in credibiliof tbe signal. In other words, it is unclear whether the effewould be obtained if Consumer Reports had not been idetified as the source of the information. In light of this cocern, a second study was conducted. In this study. ConsumReports was not identified as the source of informatioabout the brand ally's vulnerability (or lack thereoO and iinnplication for making quality judgments. In addition, seeral other modifications were made: (1) a more refined m utiple-itenn scale was used for the observability manipulatiocheck and (2) a new observability manipulation was prvided in which, in both high and low conditions, subjeccould take the television set home. T his second refinemeprotects us from any concerns that subjects in the "free, ihome trial" believed that the 30-day trial itself provided signal of quality. T he results of the second study are iden

cal to those of the first. T he second study and associateresults are described next.Study 2

Because the results observed in the first study showidentical effects for real as well as fictitious brands, and an attempt to minimize the costs of data collection, the seond study focused on a replication of the real brand namcondition in Study I . T herefore, in this study, a 2 x between-subjects factorial design studied tbe impact varying the credibility of tbe signal provided (high and lowby a well-known brand ally in conditions of high and loobservability. In other words, the well-known (and reutable) brand ally has a dissipative signal that is either at ris(i.e., the signal is credible) or not at risk (i.e., the signal not credible). T he product context and dependent variablwere identical, though several additional items from a peceived risk scale (Jacoby and Kaplan 1972) were added asmore refined manipulation check of observability. T hmodification was considered appropriate because the theosuggests that reductions in observability increase percetions of risk of nonperformance.

Independent variables. Several modifications were mato tbe stimulus. First, as noted previously, the credibility ' 'We a l so col lec ted and ana lyzed da ta on wi l l ingness to t l ) pay a

(2) buy, as wel l as on (3) the ia rge l of puni t ive ac t ion should the product nperform. Because these i ssues a re t angent ia l to thi s a r t i c le , the resul t s not reported here but a re ava i lable in Rao, Qu, and Ruekerl (1947).


8/12

Unobservable Product Quality 26signal manipulation was made more subtle by eliminatingConsumer Reports as the source of information. Second, theobservability manipulation was changed so that, in bothconditions, subjects were told that they could take the tele-vision set home and observe it functioning. However, underlow observability, two factors that potentially could affectperformance {vagaries of weather and location of the set inthe room) were described to bave stayed constant, whereasunder high observability, these two factors varied suffi-ciently to allow for a rigorous test of the electronics of thetelevision. It was reasoned that subjects who had observedthe television set work well in a variety of settings wouldbelong in the higb observability condition, whereas subjectswho had observed it working in only one setting wouldbelong in the low observability condition.Tbe low observability condition stimulus was as follows:

The automatic volume control of commercials is a veryattractive feature. However, you know thai there are twoimportant things thai can make this feature fail. First, ifthere is interference from other equipment like mi-crowave ov ens or high voltage power lines, this volumecontrol of commercials may become permanently dam-aged. Second, during thunderstorms, b ecause of eJectri-cal discharge in the atmosphere, this volume control ofcommercials may become permanently damaged.You pick up a remote control and tum the Calypso TVset on to a program in progress, and in a few minutes acommercial break occurs. You can .see the volume levelon the screen, and yoti notice that the volume drops.You try this on another brand of TV set and notice thatthe volume is much higher during a commercial. Youcan hear it, and you can also see it on the volume mon-itor on Ihe screen.You look at the product brochure and decide to takethem up on their free trial offer. So, you have the set de-livered and installed in your home free of charge. Youuse the set for 7 days after which the dealership comesand takes the TV away. During these 7 days, you forgetto place the TV in many different places of your hometo see if there were any problems because of electricalinterlerence. You al^io experienced fme weathertherewere no thunderstorms. Throughout, the TV set per-formed fine, and Che autom atic volu me control of com-mercials feature performed as it had performed in thestore. Every time a commercial came on, the volumewas reduced.

For the high observabil i ty condit ion, in the last paragraph,the degree to which the se t was exposed to vagar ies ofwea the r was enhanced , a s fo l lows:

You look at the product brochure and decide to takethem up on their free trial offer. So, you have the sel de-livered and installed in your home free of charge. Youuse the set for 7 days after which the dealership comesand takes the TV away. During these 7 days, you placethe TV in many different places of your home to see ifthere were any problems because of electrical interfer-ence. You also experienced m any thunderstorms duringthe week, some of which occurred when the TV was inone place, and some of which occurred when the TVwas in other places in your home. Throughout, the TVset performed fme, and the automatic volume control ofcommercials feature pertbrmed as it had performed in

the store. Every time a commercial came on, the vol-ume was reduced.Procedures and results. Similar to the first study, a malintercept procedure was used, and 60 usable responses wecollected {n = 15 per cell) by a professional market researcfirm. Demographic information about the subjects is avaiable in the second column of Table I. The dependenl varable was identical to that used in the first study and diplayed desirable psychometric properties (Cronbach's a

.92, factor loadings ranging from .91 lo .94, with one faci[k = 4.32] emerging). In addition, the manipulation checfor the credibility of the signal {Cronbach's a = .85) was sinificant {mean difference of .66, p


9/12

266 JOURNAL OF MARKETING RESEARCH, MAY 199condition, there is no significant difference in quality per-ceptions. In other words, when the brand ally provides acredible signal and quality information is unobservabie, thebrand ally's vulnerability to punishment is used by con-sumers to infer the quality of the product, which suggeststhat the ally's vulnerability to loss of future sales (and thus,loss of sunk costs in reputation) serves as a credible signalof unobservable quality.^

GENERAL D ISCUSSIONEmpirical tests of economic theories using primary dataare relatively rare (for exceptions, see Boulding andKirmani 1993; Rao and Bergen 1992; Urbany 1986). Inaddition, as Venkatesh and Mahajan (1996) note, analyticalor empirical research on products that include multiplebrand names does not exist. This article employs an empiri-cal test that uses primary data to assess the utility of an eco -nomic theory in addressing the issue of multiply brandedproducts. In particular, we offer the first empirical test of thecircumstances when a brand's (1) vulnerability to loss offuture profits alone and independent of reputation (i.e., theprovision of a nondissipative signal) and (2) reputation (i.e.,the provision of a dissipative signal) are likely to yieldenhanced perceptions of product quality for the jointlybranded product.The results from the studies suggest that, consistent withour premise, the credibility ofthe '"hostage" provided by thesecond brand in a brand alliance is a useful piece of infor-mation regarding produci quality when quality is unobserv-able. The hostage makes the brand vulnerable because itstands to sufter economic losses in the future should theclaim turn out to be false, or because it stands to lose invest-ments made in the past (i.e., investments in reputation)(Shapiro 1983) because that investment will be forfeitshould the claim turn out to be false. This finding lendsadded credence to the finding reported by Boulding and Kir-mani (19 93), albeit in a different context. They were able toshow the eftects of bond credibility through a manipulationof reputation {Consumer Reports ratings of past models),whereas we are able to show the effect with and w ithout themanipulation of reputation. As we discuss subsequently, thisis potentially important from a managerial standpoint.Contributions

Theoretical. The current literature in marketing and eco-nomics has emphasized the utility of constructs such asadvertising and reputation in conveying the unobservablequality of a branded product. In our treatment of this issue,we implicitly argue that the degree to which a firm will suf-fer monetari]y is the crucial construct of interest. In other

'In a third study, the details of which can be obtained from the firsiauthor, a subtler manipulation of the credibility (vulnerability) signal wasemployed in a three-factor design thai replicated Study 1. This subtlermanipulation was not effective, and consequently, the study did not yieldthe hypothe.sizd results. An internal post hoc anaiysis of those subjects forwhom the m anipulation worked as desired (approximately 90% of the data)provides suppon for the effect of the signal credibility, albeit only for thereputable brand This flnding provides an important boundary cond ition forthe theory; seemingly, subjects do not infer sophisticated economic theoriesabout (he vulnerabilify of a brand lo sanctions and the relationship of thatvulnerability to credible claims about unobservable quality spontaneously.but (as suggested by the first two studies), if they are alerted to the reason-ing, they may act in a manner coftsisient with (he theory.

words, the firm's v ulnerability to economic losses is the central issue. This is an im portant subtlety that enrich es the theoretical argument, because vulnerability exists at a highelevel of abstraction tban reputation and advertising. Foexample, though signals such as reputation and advertisininvolve a monetary expenditure (i.e., "public burning omoney"), signals such as warranty do not involve any monetary expenditure but stake or pledge a future cost to communicate unobservable quality credibly. Similarly, a branname with no reputation (i.e., a brand that has not engagein any public burning of money) can communicate unobservable quality credibly if it is able to demonstrate a vunerability to future economic sanctions.

In addition, we show how a brand ally's vulnerabilitwould make il an attraclive partner. When a brand is unablto communicate quality credibly by itself (i.e., it can no"make" vulnerability in-house), it may do so by allying wita credible ally (i.e., it may "buy" anotber brand's vulnerability). This is an insight that is new to the brand management literature in marketing. Il also suggests that vulnerablbrands may trade on their names in a market for brand allieFor example, in 1988, Sunkisl received royalties wort$10.3 million by licensing its name for use on products adiverse as soda, candy, and vitamins (Aaker 1991).Finally, tbough the degree of fit between the two brandmay be an important issue, our theoretical perspective suggests that alliances between brands thai do not necessarilfit well together (but the brand ally is vulnerable to punishmeni) also may be successful. Thus, advertising tie-inbetween US West and 3M, or American Express and Timberland, may be appropriate as one brand tries to leveragthe vulnerability or reputation of another brand to endorsits unobservable quality.Managerial. Mana gers should use extreme care in forminbrand alliances. Particularly in competitive markets in whicsmall percentages of market share translate into huge dollavolumes and margins, managers' perceptions thai their branfranchise will be damaged if it is associated with a poor quaity product likely motivates them to be circumspect, with gooreason (Rao and Ruekert 1994). This circumspection likely idriven by the recognition that a brand that is associated witanother bran d of |x)or quality stands to suffer significant m onetary losses should consumers attribute any blame to the ftrsbrand. In other words, managers are and should be cognizanof the vulnerability of their brand to future economic sanctionfrom irate consumers, should their brand be associated witanother brand that delivers lower quality than claimed.In addition, a brand that has a large amouni of profits arisk potentially can use that vulnerability to argue that iclaims about unobservable quality must be true; if they werfalse, it would have too much to lose. More specifically, reputationless brand could make itself vulnerable to loss ofuture proftts by putting a large future revenue stream at risand thus signal its unobservable quality. Then, the economirationale for high unobservable quality could be offered iadvertising copy or during sales presentations.

Limitations and Further ResearchMethodology. Experimental approaches to examininmarketplace phenomena often are criticized for lacking rea

ism (i.e., an external validity concern) and for often geneating results as a consequence of artificially strong manipu


10/12

LJnobservable Product Quality 26lations (i.e., a (Jemand artifact concern ).^ In this research , wehave been sensitive lo these concerns in two ways. First, theuse of a between-subjects design limits concerns regardingdemand artifacts; a within-subjects design would haveraised concerns that the differences in the manipulationswould be obviou s to subjects and potentially could influencetheir response. Second, after establishing theoretically dri-ven results in the first study, we performed a second studywith weaker manipulations to determine if the effects' woulddisappear. Yet, in this second study, we find an identical pat-tern of effects.

It should be noted that we consistently find interactioneffects such that the effect of the brand signal is observedonly under low observability and not under high observ-ability, regardless of the strength of the manipulation. Inother words, despite what appear to be overwhelmingmanipulations at first blush, when product quality is not amystery, subjects are not persuaded by those strongmanipulations. In effect, the presence of quality observ-ability made the issue of the signal moot in subjects'minds.Further research. From a theoretical standpoint, a brand'sfuture profits at stake (a nondissipative signal) is differentthan a brand's inv estment in reputation (a dissipative signal).Given that they are differentially expensive from a cash-flowstandpoint, but sbould be equally costly to be credible, whatfactors determine the choice of o ne type of signal relative tothe other? Although theoretical models have addressed bothtypes of signals, little theoretical or empirical work existsthat compares and contrasts these different classes of sig-nals. Research that focuses on this issue would be of signif-icant theoretical value to the field of brand management.With regard to brand alliances, an examination of the short-and long-run consequences of alliance formation is perhaps

the next appropriate step in examining this area. Specifically,whai price should the brand ally charge for (I) the signalingpower provided, (2) the consequences if the joint brand fails,and (3) the potential loss of its original identity if the jointbrand is hugely successful? Adequate compensation mustaccrue in the form of royalty payments, access to profitablemarkets, or access to other costly resources. Perhaps theapplication of transactions cost analysis or agency theorywould yieid interesting insights into this contracting problem.Finally, we have focused our attention on the signalingpower of a brand in an alliance. However, the very act offorming a brand alliance, if it is transparently expensive(because of royalty payments, promotional expenditures, oradministrative costs) also may serve as a signal of unob-servable quality. The signaling value of this managerialaction likely would benefit from further study, so that thecircumstances in which the formation of an alliance signalsunobservable quality may be identified.In summary, recent developments in information eco-nomics provide potentially useful tools for expanding theextant knowledge base on brand management issues. Per-haps, as additional research will reveal, economic, psycho-logical, and other theoretical perspectives combined with anexamination of experimental, survey, and secondary, as well

' 'For a soniewhai philosophical discussioti of ihi; irade-offs involved inlaboratory versus field studies, see Greenwood

llem

AppendixSCALE ITEMS FOR PERCEIVED DUALITY

liem-TotalCiirretaiion FactorA . Global Measures of Q uality1, Perception of Ihc overall quality2, Percepiioti of the durability3, Perception of the workmanshipB. Produa-Specific Measure of Quality4, Percepiion of the sound quality5, Perception of the picture clarity

.74.83.83

.70.72

.83.90.9 0

.81.82Only one factor emerged with an eigenvalue greater than I (>. = 3,64Note; Cronbach s a = ,9(. Although the items were identical in ail studies, these data penain only to Study I.

as quali ta t ive , data will provide a r ich descr iption of var iouphenomena in the a rea of b rand management ,

R E F E R E N C E SAaker, David A. (1991), Managing Brand Equity. New York: TbFree Press.Akerlof, George A. (1970), "The Market for 'Lemons'; QualitUnder Uncertainty and the Market Mechanism," QuarterlJournal of Economics, 84 (Augusi), 488-500.Bhattacharya, Sudipto (1980), "Nondissipative Signaling Structtjres and Dividend PoJicy," Quarterly .humal of Economics, 9(Augusi), 1-24.Boulding, William and Amna Kirmani (1993), "A Consumer-SidExperimental Examination of Signaling Theory: Do ConsutnerPerceive Warranties as Signals of Quality," Journal of Consumer Research. 20 (June). 11123., Eunkyu Lee, and Richard Staelin (1994), "Mastering thMix: Do Advertising, Promotion, and Sales Force ActivitieLead to Differentiation?" Jottrnal of Markeling Research. 3(May), 159-72.Broniarczyk, Susan M. and Jo.seph W. Alba (1994). "The Importance of the Brand in Brand Extension," Jottrnal of MarketinResearch.3\ (May), 214-28 .Chu, Wujin and Woosik Chu (1994), "Signaling Quality by SellingThrough a Reputable Retailer: An Example of Renting the Reputation ot A nother Ag eni." A/


11/12

268 JOURNAL OF MARKETING RESEARCH, MAY 19Kreps, David M, (1991). A Course in Microeconomic Theory.Princeton. NJ: Princeton University Press.Loken, Barbara and Deborah Roedder John (1993), "DilutingBrand Beliefs: When Do Brand Extensions Have a Negativeimpact?" Journal of Marketing. 57 (June). 71-84,Montgomer)'- Cyrlliia A. and Birger Wemerfeli 0992), "Risk

R e d u c t i o n a n d U m b r e l l a ^ v ^ n d m g . " J o u m a l o f B u s i n e s s , ( i % ( I ) ,31-50.Nelson, Philip (1974). "Advertising as Information," Journal ofPolitical Econom y, 83 (July/August), 729-54.Paivio, Alan, John Yuille, and Stephen Madigan (1968), "Con-creteness. Imagery, and Meaningtulness Values for 925 Nouns."Journal of Experimental Psychology: Monograph Supplement,

7 6 , 1-25.Park, Chan Su and V. Srinivasan (1994). "A Survey-Based Methodfor Measuring and Understanding Brand Equity and ItsExtendibility," Journal of Marketing Research, 31 (May),271-88.R a o . Akshay R. and Mark E. Bergen (1992), "Price Premium Vari-ations as a Con.sequence of Buyers' Lack of information," 18(December), Journal of Consumer Research, 412-23,and Kent B, Monroe (1989), 'The Effect of Price. BrandName, and Store Name on Buyers ' Perceptions of Product Qual-

ity: An Integrative Review," Journal of Marketing Research, 26(August 1989). 351 -57.-, Lu Qu. and Roben W, Ruekert (1997). "Brand Alliancesas Information About Unobservable Product Quality." Work-ing Paper # 97-100. Cambridge, MA: Marketing ScienceInstitute.and Robert W. Ruekert (1994), "Brand Alliances as Signalsof Product Quality." Sloan Management Review, 36 (Fa))),87-97.Shapiro, Carl (1983). "Premiums for High Quality Products asRetums to Reputations," Quarterly Journal of Economics. 98

(November). 659-79,Simon, Carol J. and Mary Sullivan (1993), 'Th e M easurement Determinants of Brand Equity: A Financial Approach," Marking Science, 12 (Winter). 28-52.Simonin, Bemard L. and Julie A. Ruth (1998), "Is a CompKnown by the Company It Keeps? Assessing the SpilloEffects of Brand Alliances on Consumer Brand Attitudes," Jonal of Marketing Research, 35 (February), 30-42.Spence. Michael (1973). "Job Market Signaling," Quarterly Jonal of Economics, 87 (August), 355-74,Tellis. Gerard J. and Birger Wernerfelt (1987), "Competitive Prand Quality Under Asymmetric Information," Marketing Sence, 6 (Summer), 240-53,Tirole, Jean (1988). The Theory of Industrial Organization. Cabridge. MA: MIT PressUrbany, Joel (1986). "An Experimental Examination of the Enomics of Infonnation." Journal of Consumer Research,(September). 257-71.Venkatesh, R. and Vijay Mahajan (1996), "Products with BrandComponents: An Approach for Premium Pricing and PartSelection," Marketing Science, (6(2), 146-65Wemerfelt. Birger (1988), "Umbrella Branding as a Signal of NProduct Quality: An Example of Signaling by Posting a Bon

RAND Journal of Economics. 19 (3), 458-6 6.Wright. Alice A. and John G. Lynch Jr. (1995), "CommunicatEffects of Advertising Versus Direct Experience when BSearch and Experience Attributes Are Pre.sen(." Journal of Csumer Research. 21 (March). 708-18,Zeithaml. Valarie A, (1988), "Con.sumer Perceptions of PrQuality and Value: A Means-End Model and Synthesis of Edence," Journal of M arketing, 52 (July). 2-22.Zenor, Michael J. (1994). "The Profit Benefits of CategManagement ." Journal of Marketing Research. 31 (Ma202-13.


12/12

signaling unobservable product ouality through a brand ally

Documents