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Advertising and Quality-Dependent Word-of-Mouth in a Contagion Sales Model

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Abstract

In the literature on marketing models, the assumption of mixed word-of-mouth has been limited to the Bass diffusion model. Yet explicit leveraging of the originating factors of such assumption is lacking. Apart from that example, mixed word-of-mouth has been disregarded in contagion sales models. This paper bridges the gap by suggesting a sales model, where both positive and negative word-of-mouth affect the attraction rate of new customers, along with advertising. The difference between positive and negative word-of-mouth is based on the distinction between satisfied and dissatisfied current customers, which is supposed to depend on conformance quality. A primary issue in this paper is to determine how a firm should determine the optimal intertemporal trade-off between investing in advertising-dependent word-of-mouth and quality-dependent word-of-mouth. To address this issue, a contagion sales model is suggested where mixed autonomous word-of-mouth alone can lead to either commercial success or failure of a given brand.

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Notes

  1. Design quality is supposed to increase the desirability of the product by enhancing the product’s functional performance.

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Acknowledgments

This research was supported by the Centre for Research of ESSEC Business School (France), the Austrian Science Fund (FWF) under Grants Nos. P25979-N25 and P23084-N13 and FWO Project G.0809.12N (Belgium). The authors acknowledge very helpful comments from two anonymous referees. The usual disclaimer applies.

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Authors and Affiliations

  1. ESSEC Business School, Avenue Bernard Hirsch, 95021, Cergy Pontoise, France

    Fouad El Ouardighi

  2. Vienna University of Technology, Argentinierstrasse 8, 1040, Vienna, Austria

    Gustav Feichtinger & Dieter Grass

  3. University of Vienna, Oskar-Morgenstern-Platz 1, 1090, Vienna, Austria

    Richard F. Hartl

  4. Tilburg University, PO Box 90153, 5000 LE, Tilburg, The Netherlands

    Peter M. Kort

  5. University of Antwerp, Prinsstraat 13, 2000, Antwerp, Belgium

    Peter M. Kort

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  1. Fouad El Ouardighi
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  2. Gustav Feichtinger
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  4. Richard F. Hartl
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Correspondence to Fouad El Ouardighi.

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El Ouardighi, F., Feichtinger, G., Grass, D. et al. Advertising and Quality-Dependent Word-of-Mouth in a Contagion Sales Model. J Optim Theory Appl 170, 323–342 (2016). https://doi.org/10.1007/s10957-015-0855-0

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