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If I have a particular career goal (policy) and I already know where I want to end up (in Washington), should I take the Harvard name over Georgetown even though it's easier to network and get the job through Georgetown?
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<p>I didn't say that. Everybody has to weigh these decisions for themselves and decide what they really want to do and how to best achieve those goals.</p>
<p>My point is that pop-prestige has value. It is up to you to determine how much value it has to you. But let's not pretend that it has no value. I can guarantee you that sometime in your career you are eventually going to meet some powerful people who are not familiar with your field. </p>
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I am not arguing about whether it works or whether they have the right to do that. I am arguing about whether you should really buy it and whether it is really better. In the scenario the product is the same, so you admit there is no difference besides brand name, which is essentially meaningless. By you saying "it works" you obviously say that people assign a positive meaning to something which is meaningless; they trust it more easily and it "gets them" to buy the product. Really though this is what marketing is all about. It is not about unbiasedly giving you information, and explainng why a product is better; it is an appeal toward emotion, product design, catchy phrases, and the like. </p>
<p>Because companies spends billions of dollars on marketing only means that it is a successful financial move. They spend billions because it makes them money. I am not arguing over what makes a company the most money. I am arguing that this is an excess and does not really benefit the consumer. Is it corrupt to go to a popular sandwich shop that has worse sandwiches than a less known shop's? No, but it is a bad decision. The factors which influence you in that decision are also not entirely honest. The people behind them are motivated by factors that are obviously less than ideal, but you seem to be content with this.
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<p>Oh, no no no. You are now taking the position that branding is purely emotional. Far from it. In fact, there is tremendous rational economics at play here.</p>
<p>Let's take it back to the Cisco example where Cisco buys the startup and then sells much more of the product even though it is the same product. The biggest reason why Cisco is willing to sell much more of it than the startup could is simple reputational costs. Cisco, by branding the product, is willing to put its reputation and its money behind the product. Let's say you buy Cisco-branded computer network product and it fails, shutting down your whole company's computer network down. You can sue Cisco. Cisco is a huge company so obviously has a lot of assets available for you to claim through a lawsuit. A startup company may not even exist tomorrow as a going financial entity. So if you buy a product from a startup and it fails, there may be nobody to sue as there may be no assets for you to claim. In fact, this happened many times especially during the dotcom boom where new startups sold gear that didn't work, and then went bankrupt and disappeared, leaving nobody for their customers to sue for redress. It is highly unlikely for Cisco to go bankrupt anytime soon.</p>
<p>Or put another way. Let's say Quizno's gives me a moldy sandwich that puts me in the hospital with food poisoning, I can sue Quizno's for millions. But if some mom-and-pop sandwich shop gives me a moldy sandwich that puts me in a hospital, sure I can still sue them, but will they pay? Do they have the assets to pay? </p>
<p>Even taking lawsuits out of the equation, Cisco has an extremely valuable brand name to protect. Cisco has paid billions of dollars to build its brand name. Hence, Cisco has a strong incentive to protect this brand name by not selling unreliable gear. If Cisco all of a sudden starts branding a bunch of products that are bad, Cisco's brand name will be tarnished, jeopardizing the billions of dollars that Cisco has invested in its brand name over the years. A startup doesn't have a big brand name to protect, so has less to lose by selling bad gear.</p>
<p>As an example of this, consider General Motors. In the 50's and 60's, GM used to be the most widely respected brand in the auto industry. Then in the 70's and 80's GM started producing some really bad and junky cars. GM's brand name went into the toilet. GM's poor product quality effectively destroyed all the brand equity that it had built. Now people often times buy GM cars DESPITE the GM brand name. The GM brand name is almost like a 'value-subtract'. </p>
<p>Another aspect is the pure longevity of the product. Companies buy computer networking products expecting it to last for years. They're not just buying the gear itself, they're buying the support of the gear. Companies want to know that if, 3 years later, some problem comes up, they have somebody they can call for tech support. Or some company they can go to for spare parts or software upgrades. Every vendor will SAY that they will support the gear for years, but how believable is that? Cisco will probably still be here in 3 years, but some small startup may have gone bankrupt and disappeared. Again, this happened a lot during the dotcom boom - lots of startups sold gear and then went bankrupt, leaving a lot of sold gear for which there is no tech support, no spare parts, no software maintenance, no nothing. How do you think those customers feel?</p>
<p>The other aspect is the pure cost of information gathering. Again, taking it back to the Cisco example, another reason why Cisco can sell more is because it can market the products widely. Cisco can run all these ads in trade magazines, can send all its sales reps far and wide, can sponsor all these trade conventions, and basically can do all these things to market a product and make customers aware of it. A startup company can't do that. A startup company doesn't have the resources to promote its products widely. Hence, a lot of customers simply don't buy a product from a startup because they don't even know that the product exists. But when Cisco gets a hold of it puts its marketing machine behind it, now customers will know that the product exists. Like I said, in the business world, what's so good about producing a great product if customers don't know about it? </p>
<p>The fact is, information is not free. Information is actually quite costly. Information takes time to gather and understand. Nobody has unlimited time, and thus nobody has unlimited information. Nobody has the time to sit down and weigh the individual merits of each individual sandwich shop in a neighborhood. In the real world, everybody has to make decisions on limited information. Economically speaking, branding and marketing act as information substitutes. </p>
<p>Hence, from an economic standpoint, what brand names do is that it reduces both information costs and reduces risk. These are ENTIRELY rational responses that have absolutely nothing to do with emotion. </p>
<p>If this is a subject that interests you, you may want to do some investigation on economic asymmetric information and the role of marketing and branding.</p>