Brands as Beacons: A New Source of Loyalty to Multiproduct Firms

This study provides evidence that a multiproduct firm's portfolio of products affects consumer purchase decisions about each of the firm's products. The authors present a theory that explains this empirical regularity. The theory involves revising the information set of consumers to include the profile of multiproduct firms. The authors show that revision of the information set in this way introduces a new source of consumer loyalty and explains interesting empirical regularities in consumer behavior. For example, consumers are loyal to a multiproduct firm even when it does not offer a product that matches their preferences better than a product of competing firms. The authors estimate the model and test its implications using panel data on television viewing choices. The estimated model also allows for state-dependence parameters and unobserved heterogeneity. The empirical results support the model and its implications. The model offers a parsimonious framework for brand-extension strategies and maps new channels of spillovers in a multiproduct firm.

[1]  N. Mankiw,et al.  Principles of Economics , 1871 .

[2]  Daniel McFadden,et al.  Modelling the Choice of Residential Location , 1977 .

[3]  M. Degroot,et al.  Probability and Statistics , 2021, Examining an Operational Approach to Teaching Probability.

[4]  J. Horen,et al.  Scheduling of Network Television Programs , 1980 .

[5]  Roland T. Rust,et al.  An Audience Flow Model of Television Viewing Choice , 1984 .

[6]  Gary Chamberlain,et al.  Longitudinal Analysis of Labor Market Data: Heterogeneity, omitted variable bias, and duration dependence , 1985 .

[7]  Gary J. Russell,et al.  A Probabilistic Choice Model for Market Segmentation and Elasticity Structure , 1989 .

[8]  Mary W. Sullivan.  Measuring Image Spillovers in Umbrella-Branded Products , 1990 .

[9]  Wagner A. Kamakura,et al.  Viewer Preference Segmentation and Viewing Choice Models for Network Television , 1992 .

[10]  Benjamin Senauer,et al.  THE DISTRIBUTION OF FULL INCOME VERSUS MONEY INCOME IN THE UNITED STATES , 1993 .

[11]  V. Srinivasan,et al.  A Survey-Based Method for Measuring and Understanding Brand Equity and Its Extendibility , 1994 .

[12]  A diagnostic test for the sources of persistence in individuals' decisions , 1994 .

[13]  M. Keane,et al.  Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets , 1996 .

[14]  Bernard L. Simonin,et al.  Is a Company Known by the Company it Keeps? Assessing the Spillover Effects of Brand Alliances on Consumer Brand Attitudes , 1998 .

[15]  J. Swait,et al.  Brand Equity as a Signaling Phenomenon , 1998 .

[16]  Ron Shachar,et al.  The Effectiveness and Targeting of Television Advertising , 1998 .

[17]  Tülin Erdem.  An Empirical Analysis of Umbrella Branding , 1998 .

[18]  Maureen Morrin,et al.  The Impact of Brand Extensions on Parent Brand Memory Structures and Retrieval Processes , 1999 .

[19]  Robert W. Ruekert,et al.  Signaling Unobservable Product Quality through a Brand Ally , 1999 .

[20]  R. Shachar,et al.  Cast Demographics, Unobserved Segments, and Heterogeneous Switching Costs in a Television Viewing Choice Model , 2000 .

[21]  Bharat Anand,et al.  Multiproduct Firms, Information and Loyalty , 2000 .

[22]  Ron Shachar,et al.  Spatial Competition in the Network Television Industry , 2001 .

[23]  Ron Shachar,et al.  Advertising , the Matchmaker ¤ , 2001 .

[24]  Steven M. Shugan.  The Mission of Marketing Science , 2002 .

[25]  Ron Shachar,et al.  The Asymmetric Information Model of State Dependence , 2002 .

[26]  Fox Bids for the NFL-1993 , 2003 .