44 Pages Posted: 14 Oct 2009 Last revised: 30 Jun 2011
Date Written: June 30, 2011
The recent growth of consumer-generated media (CGM), also known as “new” media, has changed the nature of interaction between consumers and firms from unidirectional to bidirectional. However, CGM are almost always present alongside traditional media such as TV advertising. This research addresses the key question of whether new and traditional media reinforce or damage each other’s effectiveness. This is an important question as traditional media - where the manufacturer creates content and delivers it to consumers – consume firm’s managerial resources. In contrast to these paid media, new media (where consumers create content and there in an exchange of this content between other consumers and potentially the manufacturer) are mostly available for free. This question becomes even more salient when new product launches are involved, as firms typically allocate about half of their marketing budgets to support new products.
One of the most prevalent forms of new media is blogging. We therefore assemble a unique data set from Japan containing market outcomes (sales) for new products, new media (blogs) and traditional media (TV advertising) for the movie product category. We specify a simultaneous equation log-linear system for market outcomes and the volume of blogs. Our results suggest that new and traditional media act synergistically, pre-launch TV advertising spurs blogging activity but become less effective post-launch and that market outcomes have some effect on blogging. We find detailed support for some of these findings via a unique and novel text-mining analysis. We also replicate our findings in a second product category, cellular phone service. We discuss the managerial implications of our findings.
Keywords: Consumer Generated Media, Blogs, Social Media, TV Advertising, Response Models, Text-Mining, Japan, Movies, Cellular Phone Service
JEL Classification: M31, M37, C3, L82, L66
Suggested Citation: Suggested Citation
By Craig Auker