Targeted Advertising and Social Status

Abstract

This paper shows how a firm can use non-targeted advertising to exploit consumers' desire for social status. A monopolist sells multiple varieties of a good to consumers who each care about what others believe about his wealth. Advertising allows consumers both to buy different varieties and to recognize them when others buy. In equilibrium, the firm advertises each variety to those who will buy but also to all poorer consumers who will not, so that they understand what having the goods signals. If concern for status is sufficiently high, then the firm will only place a single variety on the market.

Materialism, status consumption and consumer ethnocentrism amongst black generation Y students in South Africa

“…This sense of exclusivity is created by charging premium prices and maintaining a level of scarcity through exclusive distribution using elite retail outlets (Dubois and Duquesne, 1993;Dubois and Paternault, 1995). While care should be taken not to over expose the brand and damage its image of exclusivity, brand awareness and recognition are necessary precursors to creating desire for a status brand (Dubois and Paternault, 1995), and to facilitating the brand's ability to signal its owners' prestige and success to others (Vikander, 2010). Such a brand requires a readily identifiable characteristic that provides a symbolic status reference and which supported by a carefully crafted marketing communication appeal that stresses the opulence, expense and exclusivity of the brand (O' Cass and McEwen, 2004).…”

“…In this regard, celebrities often make perfect status brand endorsers in that their gilded and glamorous lifestyles offer a suitable symbolic status reference (Schiffman et al, 2010). Vikander (2010) suggests the use of non-targeted advertising directed at informing the wider society as to the brand's status in order to facilitate the brand's signalling appeal. Shimp and Sharma (1987) first coined the term 'consumer ethnocentrism', which they define as "the beliefs held by consumers about the appropriateness, indeed morality, of purchasing foreign-made products".…”

Product Proliferation and Pricing in a Market with Positional Effects

“…The proliferation of luxury car brands such as Lexus, Infinity, and Acura, to separate the premium (and pricey) line-ups of Toyota, Nissan, and Honda from the lesser but not radically different standard models seems to be a good example of this strategy. Vikander (2010) provides formal analysis of these advertising strategies in a signaling model of status. 23…”

Product lines, product design, and limited attention

“…Kamenica (2008) shows that information inference produces an incentive to offer premium loss leaders. Though not explicitly relating his model to the compromise effect Vikander (2010) proposes a model of prestige goods and describes a firm's incentives to advertise premium products to an audience which is not able to afford the purchase. As an example, Vikander (2010) presents some anecdotes of advertisement campaigns for premium goods.…”

“…We will show that in our model as well there is an incentive to offer premium products which are not intended for sale. Yet in our framework this incentive is based on a firm's ability to manipulate its customers' attention, and not on a firm's attempt to signal product value (Kamenica 2008) or increase its products' prestige value (Vikander 2010).…”