Article | Marketing Science | March–April 2013

Expected Firm Altruism, Quality Provision, and Brand Extensions

by Julio J. Rotemberg

Abstract

A setting is considered where consumers keep track of the extent to which brands care about them, which is modeled as altruism of brands towards their target consumers. Consumers who purchase an experience good of high quality reasonably deduce that the supplier of this good is relatively altruistic towards them and are therefore more keen to purchase a brand extension that is also directed at them. As a result, the success of brand extensions depends on the overlap between the customers of its original product and the target customers of the extension product. The quality and demand for a brand extension can be higher if the brand is perceived as caring only for its most quality-conscious consumers rather than for all possible buyers of the good.

Keywords: Customers; Quality; Consumer Behavior; Attitudes; Brands and Branding;

Citation:

Rotemberg, Julio J. "Expected Firm Altruism, Quality Provision, and Brand Extensions." Marketing Science 32, no. 2 (March–April 2013): 325–341.