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Are you a big fan of Apple or Nike, or a hater of McDonald’s? A new study from the W. P. Carey School of Business at Arizona State University shows love-it or hate-it brands probably won’t perform exceptionally well in the stock market, but they also offer investors less risk because you know just what to expect – the good and the bad. It’s something to consider in our volatile stock climate.
“Investors and company officials need to better understand the impact of brand dispersion – when consumers are polarized both for and against a certain brand,” explains Assistant Professor Michael Wiles of the W. P. Carey School of Business, one of the study’s authors. “Increasing brand dispersion may mean less amazing company returns overall, but it also means less volatile returns because some customers are super loyal and some haters will never buy the brand’s products, no matter what.”
Wiles and his co-authors, Professor Xueming Luo of Temple University and Assistant Professor Sascha Raithel of Ludwig Maximilian University of Munich, looked at data from more than 3 million users of more than 2,600 brands in the United States, the United Kingdom and Germany. They considered people’s perceptions of brand quality, value and satisfaction, as well as whether they would recommend the brand, feel good about using its products, or feel good about working for the company. The results of their study were published in the academic Journal of Marketing Research and the Harvard Business Review.
“Dispersion can affect investors’ confidence in a brand, such as when there’s a lot of negative chatter on social media,” says Wiles. “Downside dispersion has a stronger pull on returns in the short term.”
Walmart, Fox News Channel and AT&T are some brands that have high dispersion. Intel and Amazon are low-dispersion brands. Wiles says brand managers should pay close attention to brand dispersion and engage, even with the haters, when appropriate. They should either placate the haters or amplify the polarizing issue to rally and interest loyal fans.
Wiles weighs in on recent examples in the news that illustrate the importance of considering brand dispersion:
The full study on brand dispersion can be found online at http://journals.ama.org/doi/abs/10.1509/jmr.12.0188.
W. P. CAREY SCHOOL OF BUSINESS The W. P. Carey School of Business at Arizona State University is one of the top-ranked and largest business schools in the United States. The school is internationally regarded for its research productivity and its distinguished faculty members, including a Nobel Prize winner. Students come from about 100 countries and include about 50 National Merit Scholars. For more information, please visit wpcarey.asu.edu and http://knowwpcarey.com.