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The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation

Information Systems Research, Forthcoming

Posted: 18 Jan 2013 Last revised: 5 Dec 2013

Rishika Ramkumar

Texas A&M University - Department of Marketing

Ashish Kumar

Aalto University School of Business

Ramkumar Janakiraman

University of South Carolina - Darla Moore School of Business

Ram Bezawada

State University of New York (SUNY) at Buffalo

Date Written: January 15, 2013

Abstract

In this study we examine the effect of customers’ participation in a firm’s social media efforts on the intensity of the relationship between the firm and its customers as captured by customers’ visit frequency. We further hypothesize and test for the moderating roles of social media activity and customer characteristics on the link between social media participation and the intensity of customer-firm relationship. Importantly, we also quantify the impact of social media participation on customer profitability. We assemble a novel data set that combines customers’ social media participation data with individual customer level transaction data. To account for endogeneity that could arise because of customer self-selection, we utilize the propensity score matching technique in combination with difference in differences analysis. Our results suggest that customer participation in a firm’s social media efforts leads to an increase in the frequency of customer visits. We find that this participation effect is greater when there are high levels of activity in the social media site and for customers who exhibit a strong patronage with the firm, buy premium products, and exhibit lower levels of buying focus and deal sensitivity. We find that the above set of results holds for customer profitability as well. We discuss theoretical implications of our results and offer prescriptions for managers on how to engage customers via social media. Our study emphasizes the need for managers to integrate knowledge from customers’ transactional relationship with their social media participation to better serve customers and create sustainable business value.

Keywords: social media marketing, social media participation, customer-firm relationship, shopping visit frequency,customer profitability, propensity score matching, quasi-experiment, difference-in-differences

JEL Classification: C19, C49, C99, M39

Suggested Citation

Ramkumar, Rishika and Kumar, Ashish and Janakiraman, Ramkumar and Bezawada, Ram, The Effect of Customers’ Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation (January 15, 2013). Information Systems Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2202262

Rishika Ramkumar

Texas A&M University - Department of Marketing ( email )

430 Wehner
College Station, TX 77843-4218
United States

Ashish Kumar

Aalto University School of Business ( email )

P.O. BOX 21230
Helsinki, AALTO 00076
Finland
+358 504311813 (Phone)

HOME PAGE: http://people.aalto.fi/index.html?profilepage=isfor#!ashish_kumar

Ramkumar Janakiraman

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
8037770534 (Phone)

HOME PAGE: http://businessanalyticslens.com/

Ram Bezawada (Contact Author)

State University of New York (SUNY) at Buffalo ( email )

215 Jacobs Center
Buffalo, NY NY 14260
United States

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