Extrinsic Product Cues on Perceived Quality

Paper Summary:

This paper looks at signaling theory which deals with the relationship between extrinsic product cues and perceived quality, and how high-quality firms can use this information to their advantage. The effects of country-of-origin, price, price promotions and brand names is discussed. The author examines various theories such as that of Aaker and Jacobson of perceived quality and looks at various corporations as evidence. Included are tables and graphs to explain how the theories work in practice.

Table of Contents

Introduction

Signaling Theory

Country-Of-Origin Effects

Price

Price Promotions

Brand Name

Store Name

Brand Alliances

Market Share

Advertising

Warranties

Conclusions and Suggestions for Future Research

From the Paper:

"Quality has been broadly defined as "excellence" or "superiority" (Zeithaml 1988). Though many definitions exist, most can be classified into either perceived quality (from the consumer's viewpoint) or objective (substantive) quality, where quality is measured as conformance to some set of specifications or requirements. Many, such as Tom Peters, have theorized that the lack of quality produced by firms in the U.S. has lead to its declining competitiveness vis-?-vis products from other countries like Germany and Japan. They cite segments like the auto industry where U.S. manufacturers have lost significant market share at the expense of better-built cars from Japan and Europe. In other markets, like the television industry, U.S. firms have been driven out of the market completely. One of the most predominant explanations for this relates to U.S. managers? fixation on short-term profits and meeting analysts? expectations at the expense of long-term investments like brand building, R&D, customer satisfaction and of course, quality improvements. Not only do these "soft" investments hurt immediate profits and quarterly performance, but their long-term financial benefits are difficult to quantify and therefore, easy for managers to dismiss. While this may sound reasonable, Aaker and Jacobson (1994) challenge this conventional thinking. "

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