There was a great letter to the editor (link no longer operative) in the Sunday, December 16 issue of the Richmond Times-Dispatch. The writer, an 11-year old named Armani, bemoans the role that celebrity plays in marketing, accurately pointing out how consumers, young consumers in particular, are drawn to purchase products because some sports or entertainment figure has affixed their name.
When we teach financial literacy, we try to get our students to look past the marketing glitz and try not to pay for the name. (Actually, when you think about it, you're acting as a walking billboard for some corporate entertainment conglomerate -- they should pay you.) We talk about the underlying value of the product and try to get our students to ask "Is there something that will function as well at a lower price."
Here we get to basic economics and the concept of utility. I've posted on the concept before, but it never hurts to review. Utility comes in three types: form, place and time. For most products, we're asking our students to evaluate the product's form utility. What we have to make sure we understand is that the endorsement itself is a type form utility to these students. It's because the item has the name of some movie/video/sports/music persona attached that, in the student's mind, it has additional value. It is this concept that financial and economic educators have to get students to understand. The additional value gained by a name is usually miniscule and temporary. It will be replaced in short order by another name, another face, another fantasy that really has no real impact on everyday life.
This takes me back to the letter mentioned at the beginning of this post. While there is some irony in the fact that it takes a student named Armani to make the point, Armani understands. I predict, this youngster is already ahead of the pack, and I suspect will pull farther ahead in years to come. Good luck, Armani.
Your comments are welcome.
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3 comments:
I think you're absolutely wrong. In some circumstances (t-shirts spring to mind), the endorsement-utility is orders of magnitude more important than the form-utility. No one buys a branded t-shirt because they think it's a better t-shirt, they buy it because they desire the branding. And similarly for most branded/endorsed goods: the endorsement-utility, far from being "miniscule and temporary," is more often than not the whole reason why that good was bought in the first place.
Your error here, I think, is to assume that the utility that you, Tim (and maybe Armani, too) get from any given good is going to be the same as the utility that someone else gets from that good. And that if endorsements and branding are worthless to you, then they must be worthless to everyone.
But of course that ain't so.
Felix,
Thanks for your comment. And while I see your point, I must confess that when I took my econ courses, the only types of utility we were taught were form, place and time. Form utility seemed the most apt here because it was defined as "in a form useful to the usere." And I used it as such because the consumer finds it useful because of the endorsement - it bestows status or some such thing. And that, of course, leads into discussion about "psychic income" and other measures of happiness in the decision-making process.
Regardless, you bring up good points. I hope others will chime in.
sorry, you're right, I got that bit wrong. Let's just break down form-utility into separate components, of which endorsement-utility is one and keeping-my-belly-covered-utility is another. You get the idea.
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