Online from: 1988
|Title:||The dynamics of online word-of-mouth and product sales - an empirical investigation of the movie industry|
|Author(s):||Duan W, Gu B, Whinston A B|
|Journal:||Journal of Retailing, 2008, Volume: 84 Issue: 2 pp.233-242 (10 pages)|
|Keywords:||Consumer Behaviour, Film Industry, Retailing|
|Article type:||Research paper|
|Reference:||37AR117 (Permanent URL)|
Design/methodology/approach - Proposes a simultaneous equation system to fully capture the dual nature of online WOM and its dynamic evolution in a panel data setting in the film industry.
Findings - The model specifies the dual causal relationship between online WOM and product sales in the context of motion pictures and supports the value of considering the endogeneity of WOM and its interdependence with consumers' consumption behaviour. Goes on to suggest that extant research using simple regression techniques may have drawn biased conclusions about the direction and magnitude of the effect of WOM and reports that the volume of online user reviews has an intertwining relationship with retail sales.
Research limitations/implications - Highlights the importance of separating the effect of WOM as both a precursor and an outcome of sales and of using a dynamic system and high-frequency data in studying the effect of WOM in the digital environment. Recommends investigating the consumer decision process under the influence of WOM information, especially in the digital environment, studying how consumers choose their information source and how to establish the mechanisms that help consumers to find trusted information, characterizing and identifying the effect of online WOM in the new medium and studying the dynamic relationship between pre-release and post-release online WOM.
Practical implications - Shows that WOM valence and WOM volume play different roles in influencing product sales and that time-series changes in WOM valence influences WOM volume which leads to higher product sales. Supports the idea that the online WOM process has a significant impact on sales, suggesting that businesses should embrace and facilitate WOM activities.
Originality/value - Finds that while WOM valence does not directly affect revenue, higher WOM valence indirectly increases box office revenue by generating higher volume of WOM.