Expected Firm Altruism, Quality Provision, and Brand Extensions

A setting is considered where consumers keep track of the extent to which brands care about them, which is modeled as altruism of brands toward their target consumers. Consumers who purchase an experience good of high quality reasonably deduce that the supplier of this good is relatively altruistic...

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Bibliographic Details
Published in:Marketing science (Providence, R.I.) R.I.), 2013-03, Vol.32 (2), p.325-341
Main Author: Rotemberg, Julio J.
Format: Article
Language:English
Subjects:
Altruism
brand extensions
Brand name products
Brands
Consumers
Demand functions
Economic aspects
firm objectives
Management
price signaling
Product development
Product quality
Quality control
quality provision
Studies
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Summary:A setting is considered where consumers keep track of the extent to which brands care about them, which is modeled as altruism of brands toward their target consumers. Consumers who purchase an experience good of high quality reasonably deduce that the supplier of this good is relatively altruistic toward them, and they are therefore more keen to purchase a brand extension that is also directed at them. As a result, the success of brand extensions depends on the overlap between the customers of the original product and the target customers of the extension product. The quality and demand for a brand extension can be higher if the brand is perceived as caring only for its most quality-conscious consumers rather than for all possible buyers of the good.
ISSN:0732-2399
1526-548X
DOI:10.1287/mksc.1120.0765