Product Differentiation, Celebrity Endorsements and the Consumers Perception of Quality

In any market-driven Capitalistic economy it is the consumer that accounts for the vast majority of the output. Economists and Marketing scholars have long studied what motivates the consumer to demand, and eventually purchase, specific products.Depending on the type of product, the rational consumer will seek information about the quality and performance prior to purchase. Much of this information comes from advertising.Often times, seemingly similar products sell for different prices meaning that the utility maximizing consumer has differentiated the products and will pay different prices based on the perception of how well his needs will be satisfied by the product. Marketing scholars have researched this product and price differentiation phenomenon and have noted that symbolic differences exist which come mostly from information gathered through advertising. This information may have an affect on consumer tastes. Economists, on the other hand, have viewed advertising as primarily providing information for consumers, but have generally looked unfavorably on noninformative ads, noting that they have little value and are not able to change consumer tastes and preferences (Becker and Murphy 1993)..It is the objective of this thesis to show how the use of a properly matched product endorser in advertisements can have a significant impact on consumer tastes and preferences, by influencing the consumer's perception of product performance and quality. This is true for both search goods and credence goods. I will also attempt to bridge the gap that currently exists between the work of Marketing Scholars and Economists on the affect of advertising on consumers' tastes and preferences.