The heterogeneous effect of WOM on product sales: why the effect of WOM valence is mixed?

Abstract

Purpose -Previous literature on WOM has consistent findings on the positive and significant effect of WOM volume on product sales, but the literature on WOM valence has been mixed. In this study, the authors aim to explain the reason for the mixed effect of WOM valence on product sales by considering heterogeneous characteristics of products, especially in the movie market, by segmenting products into mainstream and non-mainstream movies. Design/methodology/approach -This study uses empirical data from the motion picture industry, such as box office revenue, WOM volume and valence, and other variables of movie characteristics. The hypothesis is tested using OLS and panel data analysis in econometric methods. Findings -The authors find a significant effect of WOM valence on box office revenue only in the case of non-mainstream movies, which have relatively smaller marketing budgets than mainstream movies. The findings suggest that as marketing communication channels become more diverse, with larger marketing budgets, the effect of online WOM valence on product sales can be diluted. In addition, it is found that the effect of WOM volume on box office revenue is greater for mainstream movies, suggesting that consumers build higher credibility on products with larger sales or WOM volume, especially for experience goods with uncertain quality. Practical implications -The findings explain the weak relationship between WOM valence and product sales, which has been controversial in the WOM literature, and broaden the understanding of the effect of WOM on product sales. Originality/value -The relationship between WOM valence and sales and, consequently, the revenue of a good has not been clearly understood, considering the heterogeneous characteristics of consumers in previous literature. In this study, it is found that WOM volume and valence have different effects on product sales, corresponding to differences in product category. The findings suggest a reason for the weak relationship between WOM valence and product sales, which has been controversial in the WOM literature.

Seasonality in the Non-U.S. Motion Picture Industry: A Case of South Korea

“…For example, decision-making of audiences regarding local and U.S. films seems to vary when we consider differences in marketing budget and channels between local and Hollywood distributors (Walls, 1997;McKenzie, 2009;Yang, Kim, Amblee, & Jeong, 2012). Deciding whether to see a local film would theoretically take more time because the amount and type of information available about such movies is limited during the prerelease period compared with imported movies.…”

Too good to be true: the role of online reviews’ features in probability to buy

“…Purchase decisions may be influenced by person-related factors, but also factors such as price, brand, product information, product quality and value, advertising, promotion, or the reference price (e.g., Chang and Wildt 1994). For example, increased marketing efforts can diminish the effect of valence (Yang et al 2012). To control for some of those variables we included price in our analysis, but future studies should investigate how price influences the effects of online reviews.…”

Predicting online product sales via online reviews, sentiments, and promotion strategies

“…Previous literature has shown that online review volume has a quantitatively measurable impact on product sales (Davis and Khazanchi, 2008;Duan et al, 2008;Liu, 2006;Lu et al, 2013). It is believed that the increased consumer product awareness caused by online review volume leads to higher sales (Liu 2006;Yang et al, 2012). For example, Lu et al (2013) found that online review volume has led to an increase in restaurant sales.…”

“…Online review valence refers to the nature of e-UGC content, which is usually presented in the form of an evaluation score which can be positive, negative or mixed (Yang et al, 2012). Although previous research has found a persuasive effect of online review valance on consumer purchase decision making (Cheung and Thadani, 2012), there is no consensus about the effect of online review valence on sales.…”

“…By analyzing the heterogeneous characteristics of products in the movie market, Yang et al (2012) found that the effect of online reviews on sales could be diluted by the use of more diverse marketing communication channels and higher marketing budgets. Zhu and Zhang (2010) found that the impact of online review valance on sales in moderated by product and consumer characteristics, which is supported by psychology literature that highlights the moderating role of context and environment on the effectiveness of influencing sales.…”