Essays on word-of-mouth

Hsin-Chen Lin, Purdue University

Abstract

Online word-of-mouth (WOM), representing customers' post-purchase product reviews, is increasingly becoming one of the most trusted inputs in consumer purchase decision-making process. Despite the importance of word-of-mouth, customers' cultural attitudes can moderate the impact of word-of-mouth on consumers' purchase choices. The purpose of this paper is to characterize customers' online post-purchase posting behavior and examine the impact of their product reviews on sales in the individualistic culture of the United States versus the collectivistic culture of Japan. To this end, we use a dynamic first-differencing model of how incremental reviews affect the weekly changes in the sales of new products and how positive versus negative online word-of-mouth affects individual's purchase decisions. We use publicly available data from Amazon websites in the US and Japan, to characterize consumers' posting behavior and to construct measures of each website's sales of newly launched books, CDs, and DVDs. Our findings reveal that overall there is significantly less posting of post-purchase reviews at Amazon's website in Japan versus its website in the US. Specifically, we observe that there are fewer products with non-zero reviews at the Amazon website in Japan, and that the average number of reviews per item, excluding products with no reviews, is also fewer in Japan than in the United States after controlling for the disparity in internet traffic between the two websites. We also find that in the beginning of a product's life cycle when the word-of-mouth has a meaningful impact on sales, both the valence and volume of online word-of-mouth have more significant impact on sales at the Amazon website in Japan than on sales at its US website. Further, we find that in the beginning of a product's life cycle negative word-of-mouth has a stronger impact on Amazon's sales ranking than the positive word-of-mouth, regardless of the cultural orientation. Finally, we observe that the impact of online word-of-mouth gradually decreases and diminishes after a certain period of time in both the United States and Japan.

Degree

Ph.D.

Advisors

Kalwani, Purdue University.

Subject Area

Marketing|Asian Studies|Web Studies

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