Professor Christine Moorman's research shows that brands that leverage their 'resume power' to pay lower wages, ultimately hurt their profits
The research found that paying workers less leads to negative effects on productivity, employee turnover and, eventually, lowers the firms’ profits.
Image: Shutterstock
High-prestige brands sometimes pay their employees less, with negative effects on productivity, employee retention, and profits. However, brands that differentiate themselves for their uniqueness may be willing to pay employees more, especially for those who embody that difference, a strategy that ultimately may yield better business outcomes.
These are the findings of a new article co-authored by marketing Professor Christine Moorman of Duke University’s Fuqua School of Business, published in the Journal of Marketing Research
The research, she said, sheds new light on the impact of brands on a company’s labor market strategies.
“We used to think that brands only contribute value to firms through the brand's effects on customers’ willingness to pay for the firms’ products,” Moorman said. “But we show that brands also affect the behavior and attitudes of their employees, another potent determinant of firms' performance and value.”
Brands differentiate themselves for quality (vertically differentiated) or for uniqueness (horizontally differentiated), said Moorman. Firms high in vertical differentiation are those that most customers perceive as “high-quality,” Moorman said. The horizontally differentiated ones attract some customers for their “distinctive” and “unique” qualities, she said.
[This article has been reproduced with permission from Duke University's Fuqua School of Business. This piece originally appeared on Duke Fuqua Insights]