Quantifying and Explaining Product Positionality

This study proposes and applies an empirical approach to measure and explain product positionality, or the ability of a product to signal the socioeconomic status of consumers. The proposed approach identifies the social utility that consumers draw from different positional products from the variation in expenditures across consumers with different levels of social involvement. Consumer-specific estimates address concerns of unobserved heterogeneity, while a control function approach addresses concerns of simultaneity in the behavior of consumers. Applied to consumer expenditure data, the method allows the authors to explain positionality as a function of consumption cost, visibility, exclusivity, and superfluousness. The results reveal that positionality is mostly determined by exclusivity and superfluousness, supporting theories that cost matters only to the extent that it determines exclusivity. Low income consumers have the strongest preferences for positionality while middle income consumers have the weakest. Implications for managers of positional products and for policy makers are discussed