Something for the weekend

What factors are in play when a rumour become a fact and the importance of presentation in a company report

When does a rumour become perceived as a true statement and when is it merely dismissed as a rumour?

Academics have discovered that a rumour is considered to be true when an individual passes it on without any qualifying concerns about its validity.

“Rumours take on the guise of being truthful because people don’t transmit their doubt of the rumour being false,” says Derek Rucker, associate professor of marketing at the Kellogg School of Management at Northwestern University and a co-author of the report, From rumors to facts and facts to rumors: the role of certainty decay in consumer communications.

“In many ways, like the child’s game of telephone, information associated with consumers’ certainty in the rumour is lost in transmission,” he adds.

The research, led by Prof Rucker’s former PhD student David Dubois, now an assistant professor at HEC Paris, with assistance from Zackary Tormala of Stanford University covered four different experiments to see exactly what happens when rumours are passed from person to person.

In one experiment participants were told that a certain restaurant was using worm meat in its burgers. Although the first participants were told that this information was extremely unlikely, nevertheless as the message was passed on the doubt surrounding it was lost so that eventually the rumour was perceived as fact. As a result customers stated that they would be unlikely to eat at the restaurant.

“Although rumours can start with considerable scepticism or doubt, they can move closer to being perceived as fact as people fail to communicate that they questioned the truthfulness of the rumour,” says Prof Dubois.

“This loss of uncertainty can cause consumers to behave negatively, acting as if the rumour were true.”

The researchers point out that questioning the rumour is one of the best ways to stop it. Negative rumours they add can cost a company’s brand value a considerable amount of money and by understanding how rumours operate positive communication can be managed more effectively.

The research will be published in a forthcoming issue of the Journal of Marketing Research.

● We are all familiar with the saying “Don’t judge a book by its cover”, but according to research from academics at two US business schools that would seem to be how many of us judge a financial report.

Claudia Townsend, an assistant professor of marketing at the University of Miami School of Business Administration and Suzanne Shu of the UCLA Anderson School of Management have discovered that the more aesthetically pleasing an annual report, the more likely it is that investors place a higher value on the company concerned.

The pair questioned students, members of the general public and experienced investors. In the student study participants received a few pages of two annual reports, both with the same financial information. Students priced the shares of the company with the more attractive financial report almost 70 per cent higher than the company with the report that did not look so appealing.

When investors were questioned, the researchers found that adding colour to a company report appeared to have the “same impact on an investor’s firm ranking as a 20 per cent improvement in revenue from the previous year”.

Prof Townsend advises companies to look for “a good graphic designer”.

“After all, it is a lot easier to add colour to a printed piece of paper than to add revenue to a company’s bottom line,” she says

The report is published in the Journal of Consumer Psychology and can be read online.

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