Advertising Signaling Effects for New Brands: The Moderating Role of Perceived Brand Differences

AbstractThis research considers whether new, unknown brands may be able to signal high quality to consumers via an advertising spending signal. Signaling theory suggests that heavy advertising spending for an unknown brand may be ineffective in signaling quality because the brand has no reputation at stake. More recent theorizing, however, holds that advertising spending may itself serve as a bond and, therefore, influence quality judgments even for unknown brands. The results of a laboratory experiment are consistent with the latter position as we observe strong signaling effects on perceived quality for a new, unknown brand. Interestingly, though, this effect is moderated by subjects’ prior perceptions of brand differentiation, such that a negative effect of very high ad spending occurs when differences between brands in a product category are perceived as small. The results suggest that new brands, as well as established reputable brands, may be able to successfully signal quality by strong spending on advertising. However, the results also indicate the potential for a backlash effect of high ad spending on new brand evaluations when the brand competes in a category where competitive offerings are perceived by consumers to be relatively undifferentiated. Additional informationNotes on contributorsMichael J. BaroneMichael J. Barone, (Ph.D. University of South Carolina) is associate professor of marketing in the College of Business at Iowa State University.Valerie A. TaylorValerie A. Taylor, (Ph.D. University of South Carolina) is Frank Varallo associate professor of marketing in the College of Business Administration at the University of Tennessee at Chattanooga.Joel E. UrbanyJoel E. Urbany, (Ph.D. Ohio State University) is professor of marketing in the Mendoza College of Business at the University of Notre Dame.