People’s tastes have been changing over time. Some of the changes were made by merchants’ efforts of selling their products. Merchants tend to give labels to their products, they advertise that their products are made for some particular groups of consumers, who are often considered to be the model of the society or at least admired by many other people. For example, having an iPhone signals this owner is a youth who is living comfortably or a tech enthusiasm. Moreover, when talking about afternoon tea, it sounds posh and makes people think about upper class ladies gathering and enjoying their afternoon. These are all labels. Once a company can successfully create its products’ label, then it can gain some monopoly-like power in this specific market that contains the consumer group with this label. Moreover, if this label is very desirable within the culture, then it can attract potentially more consumers who do not belong to this category yet but have very strong incentives to join the category. Under such circumstance, merchants can earn enormous profits from the labels they create.
Not only merchants need labels, customers also need labels. Customers do not want to differentiate themselves from others and give themselves some desirable and specific labels. When we live in a community, we do not know everyone around us, having labels is an efficient way to reduce the cost of forming new networks and ease the issue of information asymmetry. Having labels help people to notice or attract others with similar or desirable types.
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