Negative word-of-mouth information can affect a company’s bottom line, but whom that information is shared with can determine just how much damage is done, according to a new paper co-written by a Fordham assistant professor of marketing.
Mohammad Nejad, in partnership with two University of Memphis professors, found that the spread of negative information in markets where there is economic diversity, including a core of affluent customers, will affect a company more. An article on Nejad’s research was published on the Fordham News web page.
“The key finding is that the heterogeneity of the market is more important than how many customers are disappointed and spread negative word-of-mouth,” Nejad said in the article. “If you’re dealing with a homogenous market, its not going to be as sensitive to word-of-mouth as when you have a highly heterogeneous market. If negative word-of-mouth spreads there, you’re going to lose a lot of money.”
The professor used a method called “agent-based modeling” to conduct his research. Agent-based modeling is a quantitative modeling approach to research in which data is used in simulation models that create different scenarios and market conditions, yielding much more nuanced results.
Nejad and Sertan Kabadayi, Fordham’s marketing area chair, also used agent-based modeling in a recent paper that focused on whether introductory discounts offered by financial services firm were effective lures for potential customers.
Read the entire article here.