Are brand-name pain relievers a waste of money?
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WASHINGTON -- Do you have any Tylenol in your house? Not store-brand acetaminophen pills that you happen to refer to as Tylenol, but the real-deal Tylenol manufactured by Johnson & Johnson? How about Advil or Bayer aspirin? If you're a doctor, a nurse or a pharmacist, the answer is probably no. If the answer is yes, you're wasting your money. And that's what an awful lot of us are doing, according to intriguing new research from the University of Chicago Business School into the strange economic underworld of pure branding effects.
The novel approach taken by Bart Bronnenberg, Jean-Pierre Dub, Matthew Gentzkow and Jesse Shapiro (PDF) was to study the difference in purchasing choices made by people in different occupations or with different levels of knowledge.
They show, for example, that high-income households are much more likely to buy name-brand headache remedies than low-income households. That's an empirical finding that's compatible with all kinds of different accounts: Poor people buy cheap stuff all the time while richer people prefer more expensive items, perhaps because they're superior. The authors show, however, that while physicians have substantially higher average incomes than lawyers, they are also much less likely to buy name-brand headache medicine.
It's not just physicians. Registered nurses have more modest incomes than doctors, but are shown to be far more likely to buy generic pain relievers than other people with similar incomes. Most strikingly of all, professional pharmacists -- the people who know which pills are which -- are even less likely to buy name brand than are doctors and nurses.
This all strongly suggests that rich people avoid generics not because the pills are inferior, or even because they're showing off, but simply because they're careless. Prosperous people whose occupations give them health care expertise steer clear of expensive brands.
One moral of the story is that advertising works. Nobody I know thinks advertising works on them or on anyone else. But it's clear that even when marketers don't have any meaningful information to convey about why you should buy their product, investments in branding nonetheless move purchasing decisions.
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