"It also makes a difference whether the company makes any kind of guarantee, such as purchasing land worth $20 million for a factory to make the new product. "If companies create all this buzz about a product but never release it, they might benefit from the stock market having gone up initially, but shareholders will suffer down the road," Mishra said. An announcement by IBM to use artificial intelligence to draw insights from digital data and create graphics of data that, while positive, stated it was part of the company's $1 billion investment.The announcement of one new beverage by Coca-Cola didn't promise when it would be rolled out or how much the company had invested in the new product, meaning it could've been easy for the company to reverse that announcement if needed.Alternatively, costly approaches didn't often result in a significant stock market reaction either way. They found that costless approaches generally resulted in a positive stock market reaction, and contrary to expectations, losses from not investing as much up-front in building up product hype could be compensated after the release. Mishra and a fellow researcher gauged the impact by collecting data from 149 product launch events and their preceding preannouncements, as reported in The Wall Street Journal from 2005–2018.īy examining what kind of information came out within one year preceding a product's announcement, whether it was a costly announcement (the company loses money if it doesn't introduce the product) or a costless one, the researchers could compare the effect on stock across these scenarios. "Do you provide all the information upfront or more toward the preannouncement phase? And depending on how this information is communicated, they create surprise in the marketplace that can prove beneficial." "New products are the heartbeat of a company, especially those products that are more consumer-facing, so how a company communicates with consumers or stakeholders about new products is the key to future growth and survival," Mishra said. While that often depends on the actual product performance, he said, how companies manage and communicate the "buzz" plays a big role. What these communications provide is another way to think about shareholder return because shareholders want the money that they're putting in to appreciate in value, said Mishra, a marketing expert who conducted the study. A study from Binghamton University's School of Management Associate Professor Debi Mishra shows how companies might use this type of marketing to their advantage. Preannouncement marketing can often influence a product's success, whether it's an upcoming blockbuster movie or a new product rollout from major companies like Coca-Cola or Apple. It's no surprise when critically acclaimed movies score well at the box office, but when films like "Barbie" or "Oppenheimer" go above and beyond that, the extra push can often be traced back to the buzz they generated building up to their debut on the big screen. How often have you watched trailers for an upcoming movie and thought, "I can't wait to see that," when it hits theaters next year?
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