Dynamic Impact of Online Word-of-Mouth and Advertising on Supply Chain Performance

Jian Feng and Bin Liu
Additional contact information
Jian Feng: School of Economics and Management, Shanghai Maritime University, Shanghai 201306, China
Bin Liu: School of Economics and Management, Shanghai Maritime University, Shanghai 201306, China

IJERPH, 2018, vol. 15, issue 1, 1-16

Abstract: Cooperative (co-op) advertising investments benefit brand goodwill and further improve supply chain performance. Meanwhile, online word-of-mouth (OWOM) can also play an important role in supply chain performance. On the basis of co-op advertising, this paper considers a single supply chain structure led by a manufacturer and examines a fundamental issue concerning the impact of OWOM on supply chain performance. Firstly, by the method of differential game, this paper analyzes the dynamic impact of OWOM and advertising on supply chain performance (i.e., brand goodwill, sales, and profits) under three different supply chain decisions (i.e., only advertising, and manufacturers with and without sharing cost of OWOM with retailers). We compare and analyze the optimal strategies of advertising and OWOM under the above different supply chain decisions. Secondly, the system dynamics model is established to reflect the dynamic impact of OWOM and advertising on supply chain performance. Finally, three supply chain decisions under two scenarios, strong brand and weak brand, are analyzed through the system dynamics simulation. The results show that the input of OWOM can enhance brand goodwill and improve earnings. It further promotes the OWOM reputation and improves the supply chain performance if manufacturers share the cost of OWOM with retailers. Then, in order to eliminate the retailers from word-of-mouth fraud and establish a fair competition mechanism, the third parties (i.e., regulators or e-commerce platforms) should take appropriate punitive measures against retailers. Furthermore, the effect of OWOM on supply chain performance under a strong brand differed from those under a weak brand. Last but not least, if OWOM is improved, there would be more remarkable performance for the weak brand than that for the strong brand in the supply chain.

Keywords: online word-of-mouth; advertising; supply chain performance; differential game; system dynamics (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.mdpi.com/1660-4601/15/1/69/pdf (application/pdf)
https://www.mdpi.com/1660-4601/15/1/69/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijerp:v:15:y:2018:i:1:p:69-:d:125497

Access Statistics for this article

IJERPH is currently edited by Ms. Jenna Liu

More articles in IJERPH from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().