Advertising and Consumers' Communications

Until recently, brand identities were built by the firms via brand-image advertising. However, the flourishing of consumer communication weakened the grip of firms on their brands. The interaction between advertising and consumer communications and their joint impact on brand identity is the focal point of this paper. We present a model in which consumer preference for functional attributes may correlate with the identity they desire to project on themselves. This correlation is known to the firm but not to consumers. Both the firm and the consumers can communicate their view of the brand identity, and the brand identity is determined endogeneously based on the composition of consumers who purchase it (i.e., what types of people consume this brand). We find that sometimes by refraining from advertising the firm can strengthen the identity of its brand. This result is based on the following intermediate finding — advertising can diminish the endogeneous informativeness of consumer communications by making it onesided. Furthermore, it turns out that refraining from brand image advertising may be optimal when the firm is especially well positioned to create a strong identity — i.e., when the consumers who like its functional attribute are relatively homogeneous in their desired identity.