| Abstract: |
The propensity of consumers to engage in word-of-mouth (WOM) can di?er after
good versus bad experiences, resulting in positive or negative selection of
user-generated reviews. We study how the propensity to engage in WOM depends
on information available to customers through di?erent marketing channels. We
develop a model of WOM in which a target customer makes a purchase decision
based on his private brand association, public product-speci?c information
(e.g. from advertising or past reviews) and WOM content, and an early adopter
of the new product engages in WOM only if her information is instrumental to
the target customer’s purchase decision. We de?ne brand image to be the
distribution of the customers’ brand associations, and strength of the brand
image to be the precision of this distribution. We show that if the brand
image is strong, then in equilibrium only negative WOM can arise. In contrast,
with a weak brand image, positive WOM must occur. Moreover, holding product
quality ?xed, a positive advertising signal realization leads to a more
positive WOM selection. We use restaurant review data from Yelp.com to
motivate our model assumptions and validate the predictions. For example, a
textual analysis of reviews is consistent with prevalence of an instrumental
motive for WOM. Further, a review rating for national established chain
restaurant locations, where the brand image is strong, is almost 1-star lower
(on a 5-star scale) than a review rating for a comparable independent
restaurant, controlling for reviewer and restaurant characteristics. |