Output & Impact: Marketing

Friday, May 27, 2016

In the nearly 100 years of the Carlson School's existence, its faculty has produced an unending stream of groundbreaking research, pushing against boundaries in both academia and in the business world at large. Discover notable examples from the Marketing Department

Is negative brand information always bad?

With the prevalence of online rating systems for goods and services, negative information about brands is everywhere. But how do consumers process such negativity about products they have grown to know and love? Professor and Curtis L. Carlson Trust Professor of Marketing Rohini Ahluwalia set out to determine this back in 2000. Her work, “Consumer Response to Negative Publicity: The Moderating Role of Commitment” (Journal of Marketing Research, 2000), was the first systematic empirical investigation of how consumers deal with the negative information they come in contact with.

“The predominant thinking in the field was that negative information is always bad,” she says. “But there were only case studies in the literature that supported this notion. There wasn't any empirically tested research.”

Ahluwalia and co-researchers Robert Burnkrant and H. Rao Unnava decided to put this conventional wisdom to the test and conducted three studies to examine their impact of negativity on brands. The results held a few surprises. Consumers who were committed to a specific brand instinctively argued away negative information they heard about it. Such an effect was found for low-commitment consumers as well, but to a lesser degree.

Most important for companies was that Ahluwalia's work gave them strategies for dealing with negative information. Businesses were in the habit of using a mass approach when it came to countering negative publicity about their brands. Ahluwalia showed that a targeted approach is more effective. Committed consumers would respond more to a “diagnosticity strategy,” or reducing the information value of the negatives, e.g., by suggesting that the brand is not alone in erring, while businesses addressing a segment of consumers not committed to the brand will find more success in offering counterarguments against the negative information.

This research, now citied 816 times in the literature, laid the foundation by presenting a theoretical framework for systematically studying negative publicity and has been considered in a slew of marketing ventures, from brand positioning to political campaigns.

Bringing meta-analysis to marketing research

A highly impactful paper that brought in new methods of research to marketing was “The Effect of Price, Brand Name, and Store Name on Buyers’ Perceptions of Product Quality: An Integrative Review” (Journal of Marketing Research, 1989) by Professor and General Mills Chair in Marketing Akshay Rao and Kent Monroe.

This paper examined two issues that are arguably central to any business: what quality to deliver and what price to charge for that quality. More specifically, the paper integrates extant research to determine the extent to which customers infer quality from price and associated information that may have little to do with the actual performance of the product.

Rao and Monroe found a significant relationship between a consumer’s perceived quality of a product and its price, as well as with the brand name. However, the effect of a store name on perceived quality turned out to be small and not significant.

Rao says there are three reasons this paper has been so impactful and garnered more than 1,500 Google Scholar citations. “First, it speaks to a fundamental issue in marketing: how do consumers make quality inferences and how can a firm leverage those processes,” he says. “Second, it takes the existing wisdom on the topic—more than 50 empirical studies at the time—and integrates them using a mathematical technique called ‘meta-analysis,’ a technique that was new to the field.”

The third reason is that the research offers interesting and provocative theoretical insights that spurred further research and practical prescriptions that identified conditions under which consumers’ tendency to use price to infer quality might be leveraged by companies.

Watching where you stick your brand name

After having done some research on brand extensions—how consumers’ beliefs about a brand transfer to a new iteration of that brand—Barbara Loken, the David C. McFarland Professor of Marketing, found a new direction to take her studies: backward. After talking to Professor and Curtis L. Carlson Chair in Marketing Deborah John after a department seminar, they decided to research how brand associations might work in reverse. Would a failed brand extension transfer harmful associations back to the parent brand name?

“We knew that this area was wide open and that no research had been performed on the topic,” Loken says. “We had also heard a branding consultant refer to this harmful transfer as brand dilution, but no one had officially coined the term yet and performed empirical work on it.”

Loken and John talked to marketing practitioners who believed their strong brand names could not be harmed by a brand extension failure or an inconsistent brand extension. But marketers in other companies said they had concerns about potentially harming their brand with a new product. “It was clear that marketers in different companies disagreed on whether brands could be harmed through extensions,” she says. “Our research showed that strong brands can be harmed. Johnson & Johnson [J&J] is the brand we studied, and we found it was vulnerable to dilution.”

However, they found that brand dilution does not always occur. “If a brand extension is moderately inconsistent with the parent brand beliefs—gentleness in the case of J&J—then the J&J parent brand is rated as lower on the gentleness belief,” Loken says. “If a brand extension is extremely inconsistent with the brand on more than one dimension, such as both low on gentleness and low on quality, consumers will discount the extension as extremely atypical and will not lower their brand perceptions.”

Loken and John’s findings, “Diluting Brand Beliefs: When Do Brand Extensions Have a Negative Impact?” (The Journal of Marketing, 1993), impacted the field as it was the first study to show empirically that brands could be harmed through extensions. “It altered the landscape by making practitioners more cautious about extending their brand names without care or forethought,” Loken says.

This research opened up new paths for others in marketing—both consumer behavior researchers and modelers. “Quite a lot of research has now accumulated on the topic of brand dilution, and the general topic has been extended beyond dilution due to brand extensions to dilution due to negative publicity and product recalls,” Loken says. “The research also has been used in trademark dilution research as a template for looking at the measurement of consumer confusion due to similarities of trademarks.”

Discover the impact of research taking place across the Carlson School:

Output & Impact: Accounting 
Output & Impact: Finance
Output & Impact: Information and Decision Sciences 
Output & Impact: Strategic Management and Entrepreneurship
Output & Impact: Supply Chain and Operations
Output & Impact: Work and Organizations