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Here's a Data Points item I wrote for our 1/21 issue. Unfortunately, the ARF doesn't provide a link to that article. Other Journal of Advertising Research stories can be found here.
Everyone knows that negative news about your company or brand can undo millions in advertising. One needs only to look at how WorldCom went from being a major telecom player to a punchline almost overnight in 2002 or how news about last year’s toy recalls overrode whatever Mattel spent on advertising its toys during the holiday season.
Deciding what to do when bad news appears is another matter. One school of thought is that maintaining or increasing advertising during such a time will drown out the bad news. But pulling advertising at that time can seem very risky. Nevertheless, a new study that ran in December’s Journal of Advertising Research suggests dialing back on advertising and letting the bad news run its course. The study, which examined the tone of news, advertising spending and public opinion of 10 firms in the Netherlands including BP, Shell and retail firms Albert Heijn and Super de Boer from 1998 through 2000, found that advertising has a magnifying effect: When the news is good, advertising helps. When it’s bad, advertising makes things worse.
The authors of the article on the study, May-May Meijer and Jay Kleinnijenhuis, both of the Universiteit Amersterdam, speculate that although negative news may be forgotten quickly by most, “subsequent advertisements may magnify its effects by restoring [its] ‘top of mind’ availability.” Data from the study supported that hypothoseis. “Positive news will boost the effects of advertising expenditures,” the article states, but “because most news is negative, the reverse side of this coin is more important: negative news will decrease the return on advertising expenditures. . . Hence, increasing or even keeping upright advertising expenditures when criticisms of the firm appear on a daily basis in the press will harm the firm.”
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