Brand Externalities: A Taxonomy

Brand Congestion Externalities

Brand congestion involves first-party effects – the phenomenon concerning self-infliction – where stakeholders, within the brand exchange dyad, influence the brand value for themselves and/or their counterparts intentionally or unintentionally.

Brand congestion stems from network externalities ¹ . It shows that brands, like network markets, are limited in their capacity to provide value and meaning to respective stakeholders. It is sub-categorized based on the affected and affecting stakeholders (see Figure 1).

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Figure 1.

Brand congestion externalities.

Consumer-to-consumer interactions create positive brand externalities when the brand, as an intangible network, has higher brand equity. This phenomenon is manifested when consumers of a brand transpose into a “structured set of relationships” called brand community (Muniz and O’Guinn 2001, p. 412). Consumers seek emotional and psychological fulfillment through peer approval, affective association, and belongingness; and utilitarian fulfillment through sharing information, assistance, and participative rewards. Brand community members share values and ethical surplus, the value “produced by ethics, or by the ability to install affectively significant relations” (Arvidsson 2011, p. 273).

Brand community membership may simultaneously exert negative externalities as consumer-to-consumer brand congestion. Algesheimer, Dholakia, and Herrmann (2005) determined that active brand community engagement breeds normative community pressure. Consumers experience an obligatory burden to publicly comply with the community’s norms, especially if public display of brand acceptance differs from private enthusiasm for the brand. It may cause cognitive dissonance, a mental stress, characterised with reactance and negative behavioural intentions toward membership continuance, participation, recommendation and loyalty. For this reason, subgroups – founders, insiders, regulars and newcomers – identified in NBRO (Nike related community in Copenhagen, Denmark) display different degrees of social ties and conformity to the brand community norms and rituals (Kornum et al. 2017). Active engagement in one brand community intensifies a negative predisposition toward rivals within the community and members of rival brand communities. Consumers may indulge in ridicule, negative stereotyping, derogatory remarks, and trash-talking (Ewing, Wagstaff, and Powell 2013). These behaviors create a negative externality on the social standing of brand consumers themselves, as others may feel repugnant and avoid association with them.

Consumer-to-consumer brand congestion is also manifested as a crowding effect causing dilution of value perceived in brands. Typically, an extensive market presence and higher market share are linked with positive market outcomes (Arthur 1996; Caminal and Vives 1996). Several brands accentuate their leadership position for this reason, e.g., Head & Shoulders claims to be World’s No. 1 Antidandruff Shampoo, and Gillette promotes as The Best a Man Can Get. Contrarily, Hellofs and Jacobson (1999) and Rego, Morgan, and Fornell (2013) reported a negative relationship between market share and consumers’ quality perception and satisfaction, indicating a diminished perceived value. Brand value is often linked with exclusivity. When a brand becomes cliched in the market, the consumer desire for uniqueness and prestige gets violated, and brand utility starts dwindling. Every additional consumer adopting the brand compresses brand value unknowingly for self and other brand consumers (Ewing, Jevons, and Khalil 2009). The market price seemingly fails to reflect a consumer’s marginal brand utility for oneself and other consumers, causing the disadvantage in brand buying and use.

Firm-to-firm brand congestion may also result from consumer interactions. Consumer interactions are not always brand specific and may not result in positive network externalities for innovator brands. Brand-based consumer interactions favor innovators by reinforcing their competitive advantage. The higher expectation of larger network size, due to rising market competition, increases all consumers’ willingness-to-pay. The former monopolist benefits from the stronger effect of consumer willingness-to-pay over the effect of competition entering the market (Economides 1996). This positive externality fosters the competitive position of innovators over followers. Conversely, cross-brand communication among consumers of the product category becomes a positive externality for followers. It reduces their take-off time (Libai, Muller, and Peres 2009), creating a negative externality, a source of congestion, for innovator brands. This mechanism is evident in the success of smartphones by Samsung and other brands following the launch of the iPhone. Similarly, Google achieving brand leadership, despite Yahoo and MSN launched over two years earlier, may also be somewhat attributed to it.

Market fragmentation is another source of brand congestion for firms. Every new brand differentially splits the market, diminishing the perceived difference between brands. It reduces brand value and returns on branding. It also has a chilling effect on the net present value of a new brand. This is due to the influence of the initial wait-and-see scenario of consumers, breeding a slow diffusion of the new brand during the introduction phase, followed by fast growth in later stages (Goldenberg, Libai, and Muller 2010). Congestion from poor financial implications and slow adoption of the innovator brand may threaten their survival duration. It facilitates followers contributing to the higher rate of the innovator failures (Srinivasan, Lilien, and Rangaswamy 2004).

Consumer-to-firm and firm-to-consumer brand congestion broadly encompass effects imposed by brand exchange partners – firms and consumers – on each other. Consumer-to-firm brand congestion occurs when consumers engage in complaining, ridicule, negative word-of-mouth, and other anti-brand actions. It leads to the firm losing more than a group of dissatisfied customers. Similarly, firm-to-consumer brand congestion occurs when corporate actions, undermining ethical concerns, perpetrate externalities on consumers. Corporate actions, like targeting vulnerable consumers, attractive packaging of hazardous products, and decorative packaging for children (Bone and Corey 1992; Rittenburg and Parthasarathy 1997), may result in wider social consequences. Brands, like Benetton and The Body Shop, are blamed for emotionally exploiting vulnerable consumers by utilizing social (external) atrocities in their corporate-image work (Muhr and Rehn 2014).

When corporate interests supersede social citizenship in brand exchange, brand congestion is entrenched. Activities, like disguising brand-sponsored messages as anonymous word-of-mouth in web-based blogs, paid celebrity endorsements as spontaneous word-of-mouth, and using brand pushers to deliver commercial messages as customer-oriented experiences (Magnini 2011), comprise firms intentionally exerting externalities. Wal-Mart (Gogoi 2006), McDonald’s (Siebert 2006), and Dr. Pepper (Kaikati and Kaikati 2004) allegedly disguised brand-sponsored messages in web-based blogs. Sony Ericsson (Martin and Smith 2008) and Blackberry (Osterhout 2010) used brand pushers to get unsuspecting consumers to try the product. Amgen Inc. and Wyeth paid the actress Kathleen Turner to promote a website marketing drug-brand Enbrel (Kaikati and Kaikati 2004). Similarly, using corporate social responsibility as a disguise to conceal questionable corporate activities, like Enron before its demise (Fan 2005), and using emotional appeal as a surrogate for concrete product information (Caccamo 2009), also represent brand congestion. Automobile brands, MG Rover in the UK, Mitsubishi Diamante, and Ford XR8 in New Zealand, increased the likelihood of accidents by inciting young drivers with the adrenaline rush in their brand communications (Jones 2007).

Brand congestion from deceptive branding reduces customers’ individual and social welfare. It propagates negative consequences like dwindling confidence, erosion of trust, denigrated self-esteem, and heightened suspicion in commercial relationships and potential personal interactions (Martin and Smith 2008). The most vocal and enthusiastic brand advocates become the worst misanthropists of the brand (Thomson, Whelan, and Johnson 2012), especially if the brand is highly self-relevant (Johnson, Matear, and Thomson 2011).

Brand Friction Externalities

Brand friction constitutes second-party effects – the social consequences of branding on immediate others – where branding influences subjects, not within the brand exchange dyad, but neighboring it.

The immediate others to brand consumers may include their friends and family, neighbors, colleagues, and others, who are not directly involved in the brand exchange. Brand friction is prominent during interactions between people from different social strata because friendships are often based on belongings causing social discrimination and exclusion. Roper and Shah (2007) reported bullying, teasing, and stereotyping based on brand consumption among children in Kenyan and British schools. Children not possessing the right brands found it difficult to fit in. They were frequently labeled as “poor quality people” (p. 719), “un-cool” (p. 720), and “out-groups” (p. 721). This interpersonal pressure causes inferiority complex and deprives children of the value of community and belonging. It prompts the feeling of resentment in them toward their parents. Parents, in turn, suffer from guilt owing to the victimization of their children. Ritzer (2004) discussed that brands undermine relationships within families and other social relationships. Highly branded work environments, especially service encounters, restrict customer-worker and worker-worker interactions creating externalities of poor personal and professional relationships.

Immediate others to firms include stakeholders like employees, suppliers, distributors, and retailers of brands, who may not be the potential brand buyers, but get exposed to the power of brands. The critical analysis of McDonald’s brand journey describes the havoc brands can wreak over their immediate stakeholders (Botterill and Kline 2007). McDonald’s is accused of exploiting young and immigrant workers by keeping wages low and demanding non-unionization, stringent productivity, and flexibility in labor hours supplied. Ritzer (2004) criticized fast-food brands like McDonald’s and Burger King for establishing robot-like work settings, utilizing a minimal set of skills, neglecting skill development, and discouraging creative thinking. This contributes to job dissatisfaction, high employee turnover, and poor well-being.

Vertical restraints in the brand supply chain form another aspect of brand friction. It includes restrictive distribution agreements for prime shelf space, full-line forcing, sole distribution, and change in the retail atmosphere to reflect the brand image. Buying agreements with component manufacturers enforcing usage of their brand name in component manufacturing and consequent eclipsing of the corporate reputation of suppliers is a testimony of brands executing their power over supply-chain partners (Ashton and Pressey 2011). Starbucks’ efforts to suppress Ethiopian coffee producers’ trademark applications through industry lobbyists, depriving them of the value they are generating, is not just a matter of exploiting supply partners; it questions the ethical and moral credibility of the corporate (Faris 2007).

Brand Junction Externalities

Brand junction addresses third-party effects – the social consequences of branding on future others – where the present brand-fostered consumer culture influences the welfare of children limiting the progression of future generations.

Brand junction follows the contention that “today’s consumption causes tomorrow’s externality” (Meade and Nason 1991, p. 81). Branding typically resonates with children. It has a tremendous impact on their psychological development and socialization. Formulation of child-brand relationships commences at an early age (Ji 2002). Young children view brands perceptually, whereas more conceptual interpretations occur while growing up (Achenreiner and John 2003).

Brands are more than a source of fun and entertainment for children. They are used as a passport to the membership of aspirational groups, to seek value for money, quality in consumption, and reinforce gender/class/ethnic/etc., identity. Children re-enact brand narratives in their social environments (Nairn, Griffin, and Wicks 2008). The American Girl epitomizes ordinary dolls with historical and personal stories. It illustrates social values reinforced by the intergenerational engagement of grandmothers, mothers, and daughters at the American Girl Place and personal spaces where “these personal narratives are then redacted, recirculated, and replayed” (Diamond et al. 2009, p. 131).

Brands can instill negativity and suspicion and invoke extreme hatred, violence, vandalism, and theft (Nairn, Griffin, and Wicks 2008; Roper and Shah 2007). In the “Sneaker Culture” (Weinswig 2016), brands are accused of instigating sneaker crimes when a pair of Nike’s Air Jordon came to the center stage for being the motive behind first-degree murder of a 15-year-old boy on May 2, 1989 (Telander 1990). A similar incident was reported on December 18, 2017 (Alexander 2018). A father was stabbed while protecting his 8-year-old son from a teenager trying to steal the son’s pair of sneakers (Hitt 2017). Several newspapers, including reports of such offenses, demonstrate how susceptible young consumers can be and how significantly branding needs to incorporate the multidimensional construct of consumer vulnerability (e.g., Baker, Gentry, and Rittenburg 2005).

Brands have commodified self-esteem because failure to fit-in and possess the right brands cause negative peer evaluation, social exclusion, and damaged self-worth (Isaksen and Roper 2012). They have transformed the younger generation into the insecure materialistic dependents of consumerism for identity and social reference (Achenreiner and John 2003). Brands are used to disguise poverty, and brand names are more desirable to children from lower socio-economic tiers (Roper and Shah 2007). These children seek self-identity reinforcement in brands. Their self-concepts destabilize when they are unable to keep up with the modern consumption trends. It becomes “a vicious cycle” where weaker self-concept further enhances their susceptibility to peer pressure and financial aspirations to reach the status quo (Isaksen and Roper 2008, p. 1063). Brands plague children with social comparisons interfering with their intra-psychic development and social well-being.

Children’s physical well-being is directly threatened by food branding and brand placements in popular media. Brand characters, like Chester the Cheetah (Cheetos), Tony the Tiger (Kellogs Frosties), Ronald McDonald (McDonald’s), M&M’s Spokescandies, etc. instill early brand recognition in children affecting their food preferences and eating habits (Boyland and Halford 2013). Brand tie-ins with popular media characters and spaces, like Coca Cola placed in American Idol and Burger King enticing children with SpongeBob toys during the movie’s release, exemplify how future generations are affected by the clutter. Brand awareness mediates the relationship between weight status and food intake. The obese children are more responsive to food branding, taking in statistically larger food portions in branded meals (Forman et al. 2009). Branding affects children’s taste perceptions to the extent that they were found to accept milk and carrots coming out of McDonald’s packaging (Robinson et al. 2007).

Promotional regulations on tobacco marketing have seen corporates focus on branding. Branding (brand familiarity and brand image) affects adolescents’ attitudes and intentions to smoke more strongly than peer influence (Grant et al. 2008). Tobacco brands communicate, primarily, through the point of purchase promotions. Marlboro, Pall Mall, Kent, Dunhill, and Lucky Strike were being promoted within 300 meters of schools in several countries (Boseley et al. 2018). Sponsorships of global events have taken the impact of tobacco branding beyond the borders, increasing adolescents’ propensity to relate and indulge in physical afflictions through smoking. Young children easily relate to alcohol branding too (Harris et al. 2015). The beer brand Victoria Bitter reportedly got a brand exposure of 1.6–3.8 times per minute on-screen during the 2015 Cricket World Cup final between Australia and New Zealand (Johnston 2017). The vivid imagery and symbolic structures of style, class, and maturity in alcohol brands resonate with children providing a gateway into adulthood.

Brand junction externalities exhibit the imprints of branding practices on the pillars of our future society. Psychologically vulnerable children with limited physical capabilities, due to obesity and other ailments, require interventions to sustain the epidemic of the consumer culture.

Chronic Brand Externalities

Chronic externalities include third-party effects – the social consequences of branding on general others – where branding influences wider society in the short and long run.

Chronic externalities amount to the collective adversity of branding practice and fall in the dominion of conservation versus commercialization discourse. Branding has accelerated the rate of resource exhaustion. Branded water exemplifies the commodification of a free public good causing deleterious effects on the natural habitat and environment in the process (Wilk 2006). A lot of money is spent on a commodity otherwise free, only to bring a marginal difference in the lives of those who are adequately blessed. Expending resources this way is counter to the sustainability claims of brands. Nestle Pure Life, despite its Water and Environmental Sustainability Policy, is criticized for extracting groundwater in Pakistan and developing a bottled water culture, which serves the minor elite with a status symbol. It is drying out existing water systems and violating human rights to health by making clean drinking water inaccessible for the majority poor (Rosemann 2005).

Chronic brand externalities include psychosomatic nuisance on humans. Brand priming significantly disrupts human behavior. Mere exposure to the status-oriented brands can trigger a desire for prestige driving consumer choice towards premium-priced products (Chartrand et al. 2008). Brasel and Gips (2011) reported a dual effect of brand exposure on the behavior in a non-consumptive environment. This dual effect encompasses the simultaneous positive and negative outcomes on consumer performance metrics. Red Bull brand exposure, in line with the perceived brand identity, induced an aggressive racing strategy in a virtual car race, and resulted in either the fastest or reckless, crash-riddled slowest race times. Similarly, brand priming with Gatorade resulted in better physical endurance (Friedman and Elliot 2008); that with Apple led to more creative behavior than IBM and Disney priming ensued more honesty than E! (Fitzsimons, Chartrand, and Fitzsimons 2008).

Brands give corporates the power to benefit from the desires of low-end consumers to emulate high-end consumer choices (Amaldoss and Jain 2015). Compulsive buyers are more vulnerable and prestige sensitive. They seek relief in well-reputed premium-priced brands (Kukar-Kinney, Ridgway, and Monroe 2012). Brands become a surrogate for such consumers met with unfulfilled social and interpersonal needs (Thomson, Whelan, and Johnson 2012). Materialism arises as a coping mechanism in the face of self-doubt and perceived societal normlessness (Chang and Arkin 2002). This unhealthy coping mechanism usually results in lower self-esteem, poor functionality, diminished life satisfaction, and heightened social discomfort.

Corporations authenticate the illusion of life satisfaction and happiness built on brands. When Disneyland claims to be The Happiest Place on Earth and BMW positions itself as Joy is BMW, Coca Cola promoting itself through Open Happiness and Hershey’s Chocolate as Pure Hershey’s. Pure Happiness, they imply that gratification is hinged upon indulgence. These brand promises – seemingly harmless claims – are largely paradoxical because consumerism undermines happiness, subjective well-being, and fulfillment of psychological needs (Wang et al. 2017). At best, they drive consumer emotions into the delusion of fleeting contentment to supplement “the extraction of surplus value” and “buffer it’s [firm’s] voracious appetite” for capital accumulation (Goldman and Papson 2006, p. 340).

Material well-being and subjective well-being (SWB) may not necessarily resonate with each other, although several researches report otherwise. Ganglmair-Wooliscroft and Lawson (2011) found that resource availability influences overall SWB. In addition, a positive relationship has been reported between income, material resources, financial satisfaction, and SWB, recommending pursuit of both material and psychological aspects (Ahuvia and Friedman 1998; Ng and Diener 2014). The opposing school of thought claims that income and material possessions increase life satisfaction and happiness only in the short run and at subsistence-level poverty, with the marginal benefit of rising income waning after a certain threshold (Chancellor and Lyubomirsky 2014; Howell and Howell 2008).

Research has demonstrated a negative correlation between materialism and SWB (Christopher, Saliba, and Deadmarsh 2009; Dittmar et al. 2014). This phenomenon can be elucidated from a socio-cultural and psychological perspective. When more psychic energy is exhausted in pursuing happiness from extrinsic means, less remains for its pursuit intrinsically (Wang et al. 2017). Material acquisitions, brands in this case, become quickly habituated through hedonic adaptation. They escalate self-expectations providing merely momentary happiness (Chancellor and Lyubomirsky 2014). The socio-cultural cause of the discrepancy between materialism and social welfare lies in relative deprivation; comparing material possessions with others causes eventual exasperation (Crosby 1976). The disintegration of community sense and the emergence of quantifiable lifestyles have ingrained the hoax of material acquisitions into the equation of happiness and SWB (Dittmar et al. 2014; Wang et al. 2017).

Social issues related to deception and emotional manipulation that undermines trust are linked with branding. Brands engender psychological attachment to consumption. They undermine deeper social needs of love and gratification, endanger “integral human development and undermine common good” (Caccamo 2009, p. 309). The consumer preoccupation with material acquisition and brand-orientation hinders the attainment of sustainability in production and consumption (Scott, Martin, and Schouten 2014).

Conclusion: While many positive outcomes of branding are documented (see Table 1), this taxonomy predominantly illustrates negative brand externalities to highlight the need for redefining branding practices. The categories of brand externalities (see Table 5) neither infer order nor exclusivity. Keeping in view the complexity of the brand construct and meaning-led discrepancies spilled over multiple stakeholders, stark contrast among the effects is difficult. Brand junction and chronic externalities involve physical and psychological influences but are segregated based on temporal and spatial perspectives. Each stakeholder within a social system is subjected to branding one way or the other and affected by any one or multiple brand externalities. Despite the overlap, this taxonomy is a useful abstraction, like most social science taxonomies, that guides the study of the phenomena. This paper invites discussions and future extrapolations for theoretical and practical developments.

Future Research Agenda

The conceptualization of brand externalities provides significant research avenues whereby a method for analyzing the systemic architecture of brand externalities holds promise. The notion of a system’s model of branding is not new (e.g., Keller and Lehmann 2006), but the idea is not adequately developed. The systems-based model of branding would determine the specifications of a brand system and expedite the macromarketing vision of sustainability (Nason 2006).

The methods for measurement and management of brand externalities would be the next logical step. Future research should explore social intervention methods and public policy instruments through qualitative and quantitative investigations, precisely when symbolic spill-overs embody a higher order of pervasiveness and raise concerns of sustainability and well-being of future generations. Stakeholders within a brand system may (or may not) observe and analyze brand externalities from individualistic perspectives. Research is needed to determine and differentiate between methods and strategies for the management of externalities by exchange actors (first parties), their immediate others (second parties), future others, and general others (third parties).

Extending the framework of marketing ethics (Laczniak 1983), a framework for branding ethics provides another direction for future research. The guidelines for how ethical branding can be embedded in corporate marketing strategies become imperative in the wake of brand externalities. Future research should outline the managerial and organizational responsibilities in view of brand externalities originating from their decision-making processes.

The brand externalities at the micro-level (brand congestion) lead to cognitive dissonance and consumer dissatisfaction. When aggregated, these externalities may translate into social mechanisms like anti-branding movements. Further investigation is needed to determine conditions for externality endurance and remediation, the thresholds of individual and social tolerances, subsequent behaviors, and consequences of behavioral outcomes. Additionally, how brand externalities aggregate from individual stakeholders (brand congestion) to society in the short and long term (chronic externalities)? How could the aggregation of micro-brand externalities into aggregate macro-phenomenon be circumvented?

Brand externalities contribute to imperfections in the contemporary brand system. They link branding practices with the wider array of stakeholders and enable to understand the latent social mechanisms and action fields where the trouble may be deeply rooted.