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How and when does negative publicity increase sales?

There is no such thing as bad publicity, or so goes the adage. Tell that to McDonald’s. When a rumor circulated that McDonald’s used worm meat in its hamburgers, sales decreased by more than 25%. However, recent research suggests that negative publicity can sometimes increase sales under some circumstances.

An analysis of New York Times reviews and book sales suggests some press is better than none. Relative to not being covered, being reviewed in the New York Times increased a book’s sales, even in some instances where a reviewer panned the book. More importantly, the results delineate conditions under which negative publicity will have positive versus negative effects. Whereas positive reviews always increased sales, the effect of negative reviews depended on whether the authors were new or well established.

The gist of the research rests on the fact that source information because disaccoiated over time and this disproportionalty benefits produts with low consumer awareness levels. 

Here is the Abstract: 

Although popular wisdom suggests that “any publicity is good publicity,” prior research has demonstrated only downsides to negative press. Negative reviews or word of mouth, for example, have been found to hurt product evaluation and sales. Using a combination of econometric analysis and experimental methods, we unify these perspectives to delineate contexts under which negative publicity about a product will have positive versus negative effects. Specifically, we argue that negative publicity can increase purchase likelihood and sales by increasing product awareness. Consequently, negative publicity should have differential effects on established versus unknown products. Three studies support this perspective. Whereas a negative review in the New York Times hurt sales of books by well known authors, for example, it increased sales of books that had lower prior awareness. The studies further underscore the importance of a gap between publicity and purchase occasion and the mediating role of increased awareness in these effects.

Here are some interesting notes from the paper:

  • …negative publicity may have positive effects, however, by increasing product awareness or accessibility
  • When awareness is high, negative publicity should hurt sales
  • In contrast, through increasing awareness, negative publicity may increase sales when product awareness or accessibility is low
  • …whereas familiar products have strong memory networks, unknown products have little existing cognitive structures, making it harder to incorporate and recall new information
  • Regardless of whether participants reported purchase likelihood right away or after a delay, negative publicity hurt purchase of well-known products. For unknown products, however, the effect of publicity valence dissipated over time. Consistent with the notion that publicity valence for unknown products fades in memory, there was no effect of publicity valence on purchase likelihood of unknown products after a delay
  • Compared to no publicity at all, whether the same negative review increased or decreased purchase likelihood depended on existing awareness about the cultural product being reviewed
  • The findings also demonstrate the important role of increased product awareness in positive effects of negative publicity. For a product that was already well known, publicity valence determined the outcome. Publicity did not boost awareness, but the valence of the review influenced product evaluations and led people to be more likely to purchase after a positive rather than negative review. The process differed, however, for an unknown product. Regardless of whether the publicity was positive or negative, it increased product awareness, which, in turn, increased purchase likelihood. This is consistent with the notion that negative publicity increases sales through affecting the consideration set.

Read the paper. There is also an article in the Economist

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