Does Deceptive Marketing Pay? The Evolution of Consumer Sentiment Surrounding a Pseudo-Product-Harm Crisis

Abstract

The slandering of a firm’s products by competing firms poses significant threats to the victim firm, with the resulting damage often being as harmful as that from product-harm crises. In contrast to a true product-harm crisis, however, this disparagement is based on a false claim or fake news; thus, we call it a pseudo-product-harm crisis. Using a pseudo-product-harm crisis event that involved two competing firms, this research examines how consumer sentiments about the two firms evolved in response to the crisis. Our analyses show that while both firms suffered, the damage to the offending firm (which spread fake news to cause the crisis) was more detrimental, in terms of advertising effectiveness and negative news publicity, than that to the victim firm (which suffered from the false claim). Our study indicates that, even apart from ethical concerns, the false claim about the victim firm was not an effective business strategy to increase the offending firm’s performance.

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Notes

  1. 1.

    There is no standard terminology for the use of adverse rumors against competitors in business. Both academicians and practitioners use deceptive marketing and negative marketing interchangeably. We use deceptive marketing throughout the paper.

  2. 2.

    https://www.cpsc.gov/Business--Manufacturing/Recall-Guidance/Social-Media-Guide-for-Recalling-Companies.

  3. 3.

    http://openhangul.com/.

  4. 4.

    Varying values of \( K \) produces robust results.

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Acknowledgements

We thank Tae Ho Song who provided a part of the data used in this research.

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Correspondence to Reo Song.

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Song, R., Kim, H., Lee, G.M. et al. Does Deceptive Marketing Pay? The Evolution of Consumer Sentiment Surrounding a Pseudo-Product-Harm Crisis. J Bus Ethics 158, 743–761 (2019). https://doi.org/10.1007/s10551-017-3720-2

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Keywords

  • Fake news
  • Product-harm crisis
  • Deceptive marketing
  • Unethical business practice
  • Slandering
  • Advertising
  • Word of mouth
  • Social media
  • Text mining