Foundations and Trends® in Marketing > Vol 10 > Issue 1

The Information-Economics Perspective on Brand Equity

Tülin Erdem, New York University, USA, terdem@stern.nyu.edu Joffre Swait, University of South Australia, Australia, Joffre.Swait@unisa.edu.au
 
Suggested Citation
Tülin Erdem and Joffre Swait (2016), "The Information-Economics Perspective on Brand Equity", Foundations and Trends® in Marketing: Vol. 10: No. 1, pp 1-59. http://dx.doi.org/10.1561/1700000041

Published: 31 Aug 2016
© 2016 T. Erdem and J. Swait
 
Subjects
Branding and Brand Equity,  Choice Modeling,  Discrete Choice Modeling,  Panel data
 
Keywords
D12 Consumer EconomicsD8 InformationL14 Contracts and ReputationM31 Marketing
Information economicsBrand equitySignalingConsumer decision makingBrand loyalty
 

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In this article:
1. Introduction
2. Theoretical Underpinnings of the Information-Economics Framework of Brand Equity
3. Information Theoretic Brand Equity Framework
4. Implications of the Information Theoretic Brand-equity Framework
5. Validation of the Information Theoretic Brand-Equity Framework Across Product Categories, Countries, and Time
6. Links between the Information-Economics Perspective of Brand Equity and Other Conceptual Brand-Equity Frameworks
7. Summary and Future Research
References

Abstract

The focus of this monograph is the information-economics theoretic framework of brand equity. Adopting this view, Erdem and Swait [1998] argue that consumer-based brand equity is the value of a brand as a credible signal of a product's positioning. In their framework, the content, clarity, and credibility of the brand signal creates intangible benefits, enhances perceived quality, and decreases consumer-perceived risk and information costs, and hence increases consumer utility, which underlies the added value associated with a brand. The central (and motivating) construct in this view is the "credibility" of brands as signals.

DOI:10.1561/1700000041
ISBN: 978-1-68083-168-9
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ISBN: 978-1-68083-169-6
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Table of contents:
1. Introduction
2. Theoretical Underpinnings of the Information-Economics Framework of Brand Equity
3. Information Theoretic Brand Equity Framework
4. Implications of the Information Theoretic Brand-equity Framework
5. Validation of the Information Theoretic Brand-Equity Framework Across Product Categories, Countries, and Time
6. Links between the Information-Economics Perspective of Brand Equity and Other Conceptual Brand-Equity Frameworks
7. Summary and Future Research
References

The Information-Economics Perspective on Brand Equity

The Information-Economics Perspective on Brand Equity focuses on the information-economics theoretic framework of brand equity. The authors posit that consumer-based brand equity is the value of a brand as a credible signal of a product's positioning. In their framework, the content, clarity, and credibility of the brand signal creates intangible benefits, enhances perceived quality, and decreases consumer-perceived risk and information costs, and hence increases consumer utility, which underlies the added value associated with a brand. The central (and motivating) construct in this view is the "credibility" of brands as signals.

Following a short introduction, section 2 discusses the underpinnings of this framework of brand equity and outlines the analytical models of signaling under quality uncertainty, brand premia, and reputation. Section 3 outlines this information-economics theoretic framework of brand equity in greater detail and discusses the empirical validation of the framework. Section 4 reviews the theoretical and empirical implications of the information-economic theoretic framework for various aspects of consumer decision-making, such as choice, consideration-set formation, choice dynamics, customer relationship management (CRM), formation of brand loyalty, and consumer price sensitivities and willingness to pay. Finally, the authors also discuss the implications for brand management, such as managing brand extensions, alliances, co-branding, and brand crisis. Section 5 examines the validation of the basic framework across product categories and countries and over time. Section 6 provides a conclusion with directions for future research.

 
MKT-041