Costly Signaling: Why Trust Has to Waste Something

When a colleague drives a particular car, you believe you know something about them at once, about their income, their taste, perhaps even the way they make decisions, and nobody in the room finds that strange. Ask the same colleague which toothpaste has stood in their bathroom for years, and the answer produces exactly nothing, no picture, no guess, no placement, even though they use that toothpaste with a loyalty any car brand could only dream of. Both are brands, both are bought again and again without much thought, and yet the one does everything for their self-presentation and the other literally nothing.

The word brand pretends here to name a single thing, and it is precisely that unspoken assumption that sends most discussions of branding off in the wrong direction from the first minute. The behavioral economist Dan Ariely separates two jobs that have nothing to do with each other psychologically, even though the same word hangs over both. One job is processing fluency, the reason a familiar package on the shelf is recognized and picked faster, and that is roughly all a toothpaste brand does. The other job is identity projection, the reason knowing a person's car tells you a great deal about them and knowing their toothpaste tells you nothing at all.

Ariely draws a line from this that is sharper than it first sounds. Real branding, he says, is the relationship between consumer and product as it lives inside the consumer's mind, and everything to do with price, discount or manufactured scarcity does not belong in that chapter at all but is a question of the product. This is not an academic quibble. It is the choice of whether you regard trust as something you can buy or something you have to earn, and with that you are, almost unnoticed, at the only question a brand truly answers in its second job, which is not what it costs but whether it can be believed.

Why a peacock's tail has to be expensive

To understand why credibility cannot be asserted, it helps to take a detour through an animal that at first glance has nothing to do with marketing and on second glance more than any advertising agency. The biologist Amotz Zahavi asked himself in 1975 why evolution burdens a peacock with a tail that makes it slower, more visible and an easier target for any fox, and his answer, the handicap principle, inverts the intuition: the tail is credible because it is expensive. Only a genuinely healthy, genuinely superior animal can afford that waste and still survive, and that is exactly why the signal cannot be faked.

Communication in nature has to be costly to be believed, because a signal any animal could send for free would be sent by every animal and would therefore be worthless. A weak peacock could claim to be strong, but it cannot afford the tail, and so the tail is the one honest statement in the whole game. Transferred to advertising, that means something that makes any controller's hair stand on end and is nonetheless true: a lavish, visibly expensive campaign works not primarily because it explains something, but because it is an unfakeable signal that the company itself believes in the repeat purchase. Whoever pours millions into a brand whose product disappoints on first use is burning that money, and because everyone knows it, the waste itself is the message.

The cheap signal nature would never have allowed

This is where it gets uncomfortable, because the environment in which we now send most of our signals is exactly the one the handicap principle was supposed to make us immune to. Nature never permitted a cheap, consequence-free signal, because it would have been flooded with fakers at once, but the digital world allows precisely that: a promise of trustworthiness, a five-star average, a seal, a manifesto about one's own values, all of it costs the sender nothing and is therefore, strictly by Zahavi, not information. Ariely's worry is that we have built a communication environment in which the expensive, honest signals and the cheap, worthless ones stand indistinguishably side by side, and that the cheap ones multiply faster.

The practical advice that follows is unspectacular and, for that very reason, hard to obey: do not claim that you are trustworthy, do something only a trustworthy actor would rationally do. A company that does not hide its complaint channel but makes it visible and easy to find sends a signal a dishonest company would not care to send, because it fears the complaints. A genuinely long, unconditional trial period costs whoever has a bad product real money and whoever has a good one almost nothing, and it is precisely that asymmetry that turns it into an honest signal. The pattern is always the same: it is not the statement that counts, but the action that is only worth taking if the statement is true.

Whoever makes advertising is therefore not in the role they usually imagine, that of an advocate presenting a client's virtues as cleverly as possible. They are closer to the peacock, which says nothing and shows everything, and whose only convincing argument consists in imposing on itself a burden a weaker rival could not bear. That is a less comfortable position, because it demands money and self-commitment rather than turns of phrase, but it is the only one that still carries information in a world full of cheap signals.

The signal that faces inward

And then there is a twist that turns the whole picture once more, because it shows that we signal not only to others but also to ourselves. Ariely had participants wear t-shirts printed once with the word generous and once with the word stingy, and in subsequent tasks the wearers of the generous shirt did in fact give more. So far this is a pretty study about social pressure. The real finding comes afterward, because the effect held even when the writing was turned inward, to where no one but the wearer could read it. The word kept working although there was no longer any audience.

Ariely tells alongside this the story of a Prada bag he was given after a lecture, and how, walking down the street with it, he sheepishly turned the logo toward his side, only to find that he still felt like someone with a Prada bag. The signal needed no recipient in order to work. We learn about ourselves the same way we learn about others, namely by observing our own behavior, and so a sign we carry shapes our self-image even when no one is watching. For brands this means that the deepest form of attachment is not the one with which I show others who I am, but the one with which I confirm it to myself.

The question that separates a real signal from decoration

It is a curious irony that a discipline calling itself marketing and forever speaking of customer trust so rarely applies the one test that separates trust from its assertion. The test is not a slogan and not a campaign idea, but a single question you can put to any trust-building measure before deciding on it. Would a competitor whose product is in truth bad afford the same measure. If yes, then it is a cheap signal and carries no information, however handsome it looks. If no, if it would hurt a dishonest sender, then you have just built something a peacock would understand, and everything else follows from that on its own.