Here's an intuitively odd idea: Small doses of bad news may be good for sales. That's the theory coming out of Stanford Graduate School of Business and Tel Aviv University. It sounds weird, but a recent study undertaken by the two institutions found that smatterings of mildly negative information -- a so-called "blemishing effect" -- may strengthen a consumer's positive impression of a product or service.
In the report "When Blemishing Leads to Blossoming: The Positive Effect of Negative Information," researchers contend minor smudges on an otherwise shiny slate could change the usual approach taken by marketers, for instance, altering online ads or product descriptions on retail Websites, or even face-to-face sales attempts.
"We find that as long as the negative information about a product is minor, your pitch [to a consumer] might be more persuasive when it calls attention to that negative, especially if consumers have already learned some positive things," said Baba Shiv, Sanwa Bank Ltd., professor of marketing at Stanford Graduate School of Business, in a news release.
For the study, test groups of consumers and lab volunteers were asked to consider the purchase of hiking boots, chocolate bars, or champagne glasses. Researchers provided information about features, asked participants to rate the information as positive or negative, and measured the influence such information had on purchasing decisions.
Lets apply the concept to electronics companies, and infer what the supply chain impact could be. Purchasers of high-tech gadgets probably weigh pros and cons in much the same way they do when deciding which boots to buy.
Since the study says "small doses of bad news" could help accentuate positive attributes, I suppose the heaps of troubling headlines about Nokia Corp. (NYSE: NOK) and BlackBerry (Nasdaq: RIMM; Toronto: RIM) wouldn't make them viable candidates to test the theory.
What about Apple Inc. (Nasdaq: AAPL)? Even though the company admitted to sales shortfalls because of inadequate supply, and its contract manufacturing partner, Foxconn, has been slapped for questionable labor and safety practices, Apple is still a Wall Street darling. (See: Apple Shipment Shortfall Prompts Cut in 2011 iPad Shipment Forecast and Apple Has a Foxconn Problem.) And, as long as the iPhone and iPad keep looking glamorous, there's very little that seems dissuasive enough to uncrown the industry's current king of the hill. So, Apple probably also wouldn't fall into this study's parameters.
What impact could this blemish effect have on, say, e-readers, which still have benefits over their more sophisticated tablet cousins (namely, being easier on the eyes)? What would happen if Amazon's Kindle or Barnes & Noble's new Nook devices got a couple of bad marks for every few dozen good ones? Would that heat up conversation and competition, drive holiday gift-buying demand, and spur next-generation engineering innovation? Perhaps. And, if that happened, would the supply chain be ready?
Maybe, too, Acer's decision to flush out channel inventory while digesting a management turnover will help the Taiwanese PC OEM get back on track and redefine its expertise. (See: Acer's Blunder Sends Up Warning Flares.) It's happened before. Some electronics companies, after a few faltering quarters, take the news on the chin and come back fighting, at least for a while.
And, look at IBM Corp. (NYSE: IBM), which just celebrated its 100th anniversary. As EBN editor-in-chief Bolaji Ojo wrote last week:
IBM has taken steps many would consider suicidal: It led the creation of the memory IC (DRAM) market but exited the sector, dumped its PC business (selling the division to China's Lenovo Group), and has focused on higher-end services, consulting, and more research intensive activities.
These actions, which hurt sales, were heavily criticized at the time, but the company took the steps because it visualized a different future for itself. Low-margin businesses and what IBM described as a 'seismic shift in the world' compelled the company to make these moves in a bid to improve its competitiveness.
In this case, IBM brought the bad news on itself, and still managed to become a $100 billion company with more than 426,000 employees globally.
This leads me back to the results of the Stanford/Tel Aviv University research: How is your company using bad news to drive more sales, create new opportunities, or visualize a different future for itself?