Communicating Identity: How the Symbolic Meaning of Goods Creates Different Market Types

Abstract

This paper argues that the different symbolic meaning of goods (functional, status and taste) give rise to three institutionally different market types. We start from the realization that consumption has symbolic meaning, which individuals use to communicate and construct their identity to their social networks. We argue that the (the observable parts) of firm behavior including size, pricing and marketing strategies must be congruent with the symbolic meaning of goods. We distinguish between two stylized symbolic meanings of goods, status and taste, which we derive from the sociological and anthropological literature on consumption. We argue that these different symbolic meanings, used by consumers to construct and communicate their identity, give rise to three ideal-typical market types. We present the institutional differences between these market types as well as the implications for firm behavior. We demonstrate how firm behavior and marketing strategies in taste-markets, such as the contemporary craft and creative industries, differs significantly from markets in which the symbolic meaning of goods is relatively unimportant. We use the recent transformation of the beer market by the craft-beer producers, to illustrate the empirical relevance of our theory.