Marketing Seminar joint with SAFE Visitors Program: Christine Moorman (Duke University)
Speaker: Christine Moorman, Duke University
Title: How Brand Impacts Firm Profits Through Employee Pay, Retention, And Productivity (joint with Alina Sorescu and Nader T. Tavassoli)
Research has found that employees will accept lower pay at companies with strong brands, with the associated compensation savings touted as a bottom-line benefit to the firm. We show that this represents a false economy. Using data from multiple secondary sources, we find that brand-derived compensation savings actually decrease profits due to lower pay’s offsetting negative effects on employee productivity and retention. Importantly, we find this relationship to be nuanced. Different dimensions of brand knowledge have opposite effects on pay, employee behaviors, and profits. Brands high in esteem, familiarity, and relevance are associated with lower pay, productivity, retention, and profits, while brands high in energized differentiation are associated with higher pay, productivity, retention, and profits. Tests to resolve endogeneity concerns and an online experiment support our theory.