Advertising and quality-dependent word-of-mouth in a contagion sales model

Fouad El Ouardighi*, G. Feichtinger, D. Grass, R.F. Hartl, Peter M. Kort

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

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.

Original languageEnglish
Pages (from-to)323-342
JournalJournal of Optimization Theory and Applications
Volume170
Issue number1
DOIs
Publication statusPublished - Jul 2016

Keywords

  • Sales
  • Word-of-mouth
  • Advertising effort
  • Conformance quality

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