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An Empirical Study of Word-of-Mouth Generation and Consumption

Marketing Science (Forthcoming)

35 Pages Posted: 22 Sep 2012  

Sha Yang

University of Southern California - Marshall School of Business

Mandy Hu

The Chinese University of Hong Kong (CUHK) - Department of Marketing

Russell S. Winer

New York University (NYU) - Department of Marketing

Henry Assael

New York University (NYU) - Department of Marketing

Xiaohong Chen

Central South University

Multiple version iconThere are 2 versions of this paper

Date Written: September 20, 2012

Abstract

Word-of-mouth (WOM) plays an increasingly important role today in shaping consumers’ attitudes and buying behaviors. Prior work in marketing has mainly focused on the aggregate impact of WOM on product sales as well as the generation of WOM. Very little attention has been paid to the consumption or usage of WOM. In this paper, utilizing a unique dataset which collects information from the automobile category on whether a consumer generates WOM to others and uses WOM for making purchase decisions, we build a discrete-choice model to study consumer WOM generation and WOM consumption decisions simultaneously and empirically answer questions which have not been explored previously. We are particularly interested in studying the key drivers of WOM generation/consumption and the synergy effect between the two WOM-related activities. We apply the proposed model to survey data collected on the automobile category. We find that there is a strong synergy between WOM generation and WOM consumption. While the majority of consumers view WOM generation and WOM consumption as complementary to each other (i.e. participation in one activity encourages participation in the other), some consumers tend to perceive the two activities as competing with each other (i.e. participation in one activity reduces participation in the other). We also find that consumer product experience and media exposure are positively correlated with their propensity to generate WOM. However, their effect on WOM consumption is mixed. Consumer product experience and media exposure can positively or negatively explain consumer propensity to consume WOM. Our empirical analysis also provides evidence of unobserved heterogeneity in the way consumer WOM activities are related to consumer product experience. Overall, these findings lead to important managerial implications on targeting for effective use of WOM as a marketing tool.

Keywords: Word-of-Mouth, Communication, Discrete Choice Model, Probit Model, Finite Mixture Model

JEL Classification: D83, M31, M37

Suggested Citation

Yang, Sha and Hu, Mandy and Winer, Russell S. and Assael, Henry and Chen, Xiaohong, An Empirical Study of Word-of-Mouth Generation and Consumption (September 20, 2012). Marketing Science (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2149798

Sha Yang (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Mandy Hu

The Chinese University of Hong Kong (CUHK) - Department of Marketing ( email )

Room 1101, 11/F, Cheung Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
China

Russell S. Winer

New York University (NYU) - Department of Marketing ( email )

Henry Kaufman Ctr
44 W 4 St.
New York, NY
United States
212-998-0540 (Phone)
212-995-4006 (Fax)

Henry Assael

New York University (NYU) - Department of Marketing ( email )

Henry Kaufman Ctr
44 W 4 St.
New York, NY
United States

Xiaohong Chen

Central South University ( email )

Changsha, Hunan 410083
China

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