Signaling unobservable product quality through a brand ally

In this article, the authors examine the circumstances in which brand names convey information about unobservable quality. They argue that a brand nam e can convey unobservable quality credibly when false claims will result in intolerable economic losses, These losses can occur for two reasons: (1) l osses of reputation or sunk investments and (2) losses of future profits th at occur whether or not the brand has a reputation. The authors test this a ssertion in the context of the emerging practice of brand alliances. Result s from several studies are supportive of the premise and suggest that, when evaluating a product that has an important unobservable attribute, consume rs' quality perceptions are enhanced when a brand is allied with a second b rand that is perceived to be vulnerable to consumer sanctions. The authors discuss the theoretical and substantive implications for the area of brand management.