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Are Beats by Dr. Dre Headphones Worth The Money? The Power of Branding and Information Cascades

https://www.consumerreports.org/cro/news/2013/05/are-beats-by-dr-dre-headphones-worth-the-money/index.htm

Impact of Celebrity Endorsement on Consumer Buying Behavior

http://mmi.fem.sumdu.edu.ua/sites/default/files/mmi2013_3_69_75.pdf

Beats by Dr. Dre are often considered one of the best brands of headphones on the market, but why? Is the sounds quality they provide truly superior to their competitors, or is it merely the distinctive lower-case “b” on the earcups that gets people going? It turns out that the latter is, in reality, the only distinguishing factor. Beats has mastered the art of branding and represents the face of high-quality, luxury headphones. Similar products with similar sound quality, such as Grado SR6oi or SR8oi, can be bought in the range of $80 to $100, while Beats are sold for double, yet Beats continue to dominate the market.

Successful branding and the success of a product like Beats relies heavily on information cascades. When a product starts to take off and people see other people buying it, they assume it’s a high-quality, worthwhile purchase. Further, the more people who buy into this, the more solidified that price becomes as the value the product is worth.

Because consumer’s are constantly making decisions based on the decisions of other consumers, it is imperative that companies, especially luxury brands like Beats, get celebrities to endorse their products in order to establish an association with a high-end lifestyle. This targeted advertising results in more “cool”, “trendy” people purchasing the product, which perpetuates a cycle. Just as companies like Pepsi and SmartWater used Beyonce and Jennifer Aniston to create high-quality brand images, Beats has done the same with Lebron, DJ Khalid, among many other celebrities.

The fact that people are paying for the Beats name rather than the quality of the product is an interesting example of how information cascades -and the assumption that a product is worth the money based on the fact that others consumers believe so- can be completely irrational. When testing out a pair of Beats and a no-name brand side by side at a retail store, a consumer likely will not be able to tell the difference in sound quality. However, because of the image that Beats has created and the fact that so many people consider it a top-of-the-line product, an individual can be easily swayed. Similarly to what we discussed in class, an individual will give up their own “private signal” for the collective information (which may seem more accurate) from previous consumers.

So, are Beats worth the money? Despite what their genius branding has consumers thinking, the reality is that the same quality can be purchased for much less; and although often times the decision making of others can provide the individual with improved information, purchasing Beats is one example where this is not the case.

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