Market Signaling Behavior in the Service Industry‪.‬

INTRODUCTION Marketing signals are communication vehicles which provide information beyond the mere form of the message, a message within a message. These signals can be sent to competitors, customers, suppliers, or other interested stakeholders (e.g., government, stockholders, community). Signals constitute data from which a firm can draw inferences about its sender's behavior. The phenomenon of signaling can be seen everywhere. Diplomacy prides itself on the sending of signals, though sometimes it appears the more obscure the signal, the better. Demographics provide a signal to health and auto insurers. Grades and test scores act as signals for college admission boards for what is not known until after the critical decision has been made. Doctors make diagnosis based upon symptoms as signals of possible illnesses. Employers hire workers based upon such signals as education, job experience, and references because the individual applicant's productive capabilities are difficult to determine before hiring. Demographics and credit information act as signals for banks in determining whether or not to make loans or provide credit cards to applicants. In the absence of the amount-of-education signal (or the creditworthiness signal), the employer (bank) would be deterred from distinguishing among individuals on the basis of their likely productivity levels which would then lead to market inefficiencies (Black & Bulkley, 1988). It is in the interest of all parties to follow signaling strategies that eliminate the potential for inefficiency and misunderstandings.