trademark theory - harvard university theory.pdf · trademark theory william fisher. what do...

May 24, 2011

© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.

Trademark Theory

William Fisher

What Do Trademarks Do?

What Do Trademarks Do? •  Identify sources of products

What Do Trademarks Do? •  Identify sources of products

 Reduce transaction costs

Consumer Information Theory •  TMs reduce transaction costs

(especially search time and memory requirements) by assisting consumers in making informed choices

•  Value of TMs is highest when: – goods are difficult to inspect – costs of mistaken choice are high – consumers are not making repeat

purchases – consumers are wealthy

What Do Trademarks Do? •  Identify sources of products

 Reduce transaction costs

What Do Trademarks Do? •  Identify sources of products

 Reduce transaction costs  Incentives to raise quality of products

What Do Trademarks Do? •  Identify sources of products

 Reduce transaction costs  Incentives to raise quality of products

Criticism: strategy of “brand experience” indicates that manufacturers typically build brand recognition and loyalty through strategies other than increase in product quality

“Brand Experience”

•  Sources: – Performance of the product – Treatment of customers – Community – extent to which consumers of

the product identify with other brand users and support the noncommercial commitments of the company

http://www.wunderman.com/Content/assets/10059_bes.pdf

http://www.wunderman.com/Content/assets/10059_bes.pdf

“Brand Experience”: 2002 Scorecard

Source: http://www.wunderman.com/Content/assets/10059_bes.pdf

“Give Women What They Want” http://www.wunderman.com/wunderman/pdf_files/news/46.pdf

What Do Trademarks Do? •  Identify sources of products

 Reduce transaction costs  Incentives to raise quality of products

Criticism: strategy of “brand experience” indicates that manufacturers typically build brand recognition and loyalty through strategies other than increase in product quality

What Do Trademarks Do? •  Identify sources of products

 Reduce transaction costs  Incentives to raise quality of products

Criticism: strategy of “brand experience” indicates that manufacturers typically build brand recognition and loyalty through strategies other than increase in product quality

Retort: But those strategies are welfare enhancing for other reasons

What Do Trademarks Do? •  Identify sources of products

 Reduce transaction costs  Incentives to raise quality of products

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices

 Reduce transaction costs  Incentives to raise quality of products

Mnemonic Power

Honda Acura Lexus Chevrolet Toyota Mazda Hyundai Chrysler Harley-Davidson

Mnemonic Power

Honda (bonus: Honda Motorcycles) Acura Lexus Chevrolet Toyota Mazda Hyundai Chrysler Harley-Davidson

Mnemonic Power

Honda (bonus: Honda Motorcycles) Acura Lexus Chevrolet Toyota Mazda Hyundai Chrysler Harley-Davidson

Excellent

Mnemonic Power

Honda (bonus: Honda Motorcycles) Acura Lexus Chevrolet Toyota Mazda Hyundai Chrysler Harley-Davidson

Excellent

Good

Mnemonic Power

Honda (bonus: Honda Motorcycles) Acura Lexus Chevrolet Toyota Mazda Hyundai Chrysler Harley-Davidson

Excellent

Good

Poor

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

Mnemonic Power

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices

 Reduce transaction costs  Incentives to raise quality of products

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information

 Reduce transaction costs  Incentives to raise quality of products

May 24, 2011

© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.

May 24, 2011

© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.

May 24, 2011

© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.

Effects of Trademarks that Convey Substantive Informative

Beneficial •  Assist consumers in

making informed choices

•  Pressure manufacturers to increase quality

Pernicious •  Confer market power

on owner of the TM •  Prices rise •  Some consumers

priced out of the market

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information

 Reduce transaction costs  Incentives to raise quality of products

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information

 Reduce transaction costs  Incentives to raise quality of products

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

May 24, 2011

© 2008, William Fisher. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.5 License.

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

 Satisfy tastes for exclusivity (Kozinski)

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige •  Increase the attractiveness of products

through sound, appearance, or connotation

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

Increase attractiveness through sound, appearance, or connotation

•  Make the products itself more attractive – Harley-Davidson muffler sound; shape of

Perrier bottle •  Evoke positive associations not

attributable to another manufacturer – Acura, Lexis, Nantucket T-shirts

•  Evoke positive associations attributable to another manufacturer – Rolls-Royce Radio Tubes; Gay Olympics

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige •  Increase the attractiveness of products

through sound, appearance, or connotation

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige •  Increase the attractiveness of products

through sound, appearance, or connotation •  Provide vehicles for conversation and parody

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige •  Increase the attractiveness of products

through sound, appearance, or connotation •  Provide vehicles for conversation and parody •  Shape consumers’ preferences and attitudes

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige •  Increase the attractiveness of products

through sound, appearance, or connotation •  Provide vehicles for conversation and parody •  Shape consumers’ preferences and attitudes

–  undermine premise of signal theory: exogenous tastes

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

Compilation of Original Virginia Slims TV Ads

•  http://www.archive.org/details/tobacco_leo23e00

Cultural Critique

•  Leads to Physically unhealthy or dangerous behavior

•  Fosters consumerism, conspicuous consumption, materialism, envy, ennui

www.2street.com/newyorker/

http://www.2street.com/newyorker/

Economic Critique

•  Consumers pay the costs of -- and don’t benefit from -- ads that merely stabilize market shares

•  Artificial product differentiation facilitates oligopolistic pricing

•  Artificial accentuation of consumer anxieties also facilitates monopoly pricing

From the Bayer homepage Myth: All aspirin products are the same. Fact: While the active ingredient in aspirin may be the same, not all aspirin products are subjected to the same stringent quality controls. Bayer Aspirin, which people have trusted for over 100 years, is required to meet some of the highest quality standards in the drug industry, going through 100 quality control checks.Source: http://www.bayeraspirin.com/myths.html#myth3

Political Critique

•  Concentration of semiotic power •  Our understandings of masculinity,

femininity, beauty, success, failure, pleasure, peace are controlled to a distressing extent by a small group of people who surely do not have our best interests at heart

Economic Defense

•  Trademarks/advertising heightens our capacity to experience pleasure – by increasing our awareness of the range of

goods and services available to us – and heightening our sensitivity to the

variations among them •  Net effect: total pleasure is increased

Cultural Defense

•  Leads to physically healthy behavior •  The liveliness and richness of western

culture derives partly from the efflorescence of consumer goods

Political Defense

•  Trademarks create a world-wide vocabulary and thus help to erode cultural and political barriers and suspicions

•  If parody is permitted, trademarks provide the raw materials for decentralized cultural criticism -- the dispersion of semiotic power

•  Utilitarian Critique: artificial product differentiation & oligopolistic pricing

•  Cultural Critique: Physically unhealthy and morally pernicious

•  Political Critique: concentration of semiotic power

•  Utilitarian Defense: increase of hedonic capacity & total social welfare

•  Cultural Defense: potential health benefits & cultural richness

•  Political Defense: common vocabulary & materials for semiotic democracy

Assessments of the Preference-Shaping Power of TMs and Ads

Possible Alternatives to Trademarks

•  Government certification of quality of goods – USDA Grade A Beef – Bar admissions

•  Private certification of quality of goods – Ebay variation

Possible Alternatives to Trademarks

•  Government certification of quality of goods – Maple syrup – Bar admissions

•  Private certification of quality of goods – Ebay variation

Possible Alternatives to Trademarks

•  Government certification of quality of goods – Maple syrup – Bar admissions

•  Private certification of quality of goods – Ebay variation

•  Warranties

Possible Alternatives to Trademarks

•  Government certification of quality of goods – Maple syrup – Bar admissions

•  Private certification of quality of goods – Ebay variation

•  Warranties •  Retailers as intermediaries

What Do Trademarks Do? •  Identify sources of products •  Mnemonic devices •  Provide substantive information •  Generalized indicia of prestige •  Increase the attractiveness of products

through sound, appearance, or connotation •  Provide vehicles for conversation and parody •  Shape consumers’ preferences and attitudes

 Reduce transaction costs  Incentives to raise quality of products  Confer market power and threaten competition

End