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

Fouad El Ouardighi (), Gustav Feichtinger, Dieter Grass, Richard F. Hartl and Peter Kort
Additional contact information
Fouad El Ouardighi: ESSEC Business School
Dieter Grass: Vienna University of Technology
Richard F. Hartl: University of Vienna

Journal of Optimization Theory and Applications, 2016, vol. 170, issue 1, No 19, 323-342

Abstract: 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.

Keywords: Sales; Word-of-mouth; Advertising effort; Conformance quality; 49N90; 90B60; 49N10 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10957-015-0855-0

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