Do buzz and evidence really matter in product preannouncements? : An empirical test of two competing theories

"Purpose This paper aims to investigate if product pre-announcement effects measured using stock market returns conform to the predictions of two competing consumer marketing theories. In particular, while buzz marketing theory indicates a direct positive effect, information asymmetry theory suggests an influence contingent upon evidence. The study also investigates whether a pecking order of performance effects exists across different signaling situations. Design/methodology/approach The final sample consists of 219 product-preannouncements reported in the Wall Street Journal between 2005 and 2015. The standard event study methodology was used to test for performance effects. Findings The results show that preannouncements with evidence alone significantly outperform those with buzz alone, and announcements containing buzz and evidence. Also, buzz acts as a salient moderator of the relationship between evidence and performance. In addition, company size also affects the evidence-performance relationship, with smaller firms benefiting more from evidence than larger firms. Research limitations/implications The event study method assumes efficient markets and deals with publicly traded companies. Practical implications Managers can allocate resources wisely by deciding whether to invest in evidence or buzz in their pre-announcements. Originality/value In contrast to extant research that primarily investigates contingency effects, this study identifies how an important moderator, i.e. buzz affects performance."