Observer Interpretation of Signaling in Consumer Decision Making

Abstract

This dissertation includes two essays exploring the effects of observers' interpretation of signaling behavior by others on the inferences and decision making of the observers. The first essay investigates how observers make inferences about other people's brand attachment. We propose that observers use the proximity of branded objects to the physical being of the user and the costs incurred to acquire the object to determine the degree of self-extension of the object - that is, to what extent it represents a part of the person's self-concept. Through two studies, we show that to the extent that an object is seen as self-extensive, the user would be inferred to be engaging in self-expression, attempting to convey aspects of their personality to others by using the object. These beliefs about self-expression then lead observers to infer that the individual is attached to the brand. In the second essay, we consider how a brand's advertising appeals should be affected by its market position. Building on an experimental study, we present a duopoly model of brand advertising copy decisions, where consumer motives are influenced by Quality-based and Image-based advertising appeals. We show that each brand's decision to select one type of advertising appeal over the other is a function of its market position. We find that larger brands will use Quality-based appeals while smaller brand will use Image-based appeals. We empirically test these findings by examining advertising decisions for major brands found in a popular newsmagazine. Consistent with the model, we find that larger market share brands use Quality-based advertising appeals to a greater extent, while smaller brands use more Image-based appeals. Further, we find that brands that deviate from the predictions of the model are less profitable. Our results suggest that marketing managers should consider their position in the market when crafting advertising appeals, with larger brands emphasizing product quality in their appeals and smaller brands emphasizing the fit of their products with consumers' self-image.