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
Date Written: January 15, 2013
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: Suggested Citation