When Do Consumers Talk?

Ishita Chakraborty, Joyee Deb () and Aniko Oery ()
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Ishita Chakraborty: Yale School of Management
Joyee Deb: Cowles Foundation, Yale University
Aniko Oery: Cowles Foundation, Yale University

No 2254R3, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The propensity of consumers to talk after a good versus bad experience with a product can differ based on information available from other marketing channels, for example the brand image or advertising. This can result in selection of positive/negative word-of-mouth for reasons outside of product quality. We develop a unifying framework of WOM, brand image, product advertising, and pricing with a focus on the instrumentality motive of word-of- mouth: early adopters talk to inform new buyersÕ purchasing decisions. The different marketing channels shape the information sharing behavior of the early adopter as well as the target consumerÕs purchase decision. 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. We also show that holding product quality fixed, a positive advertising signal realization leads to a more positive WOM selection. The model can be applied to both one- one informal WOM as well as online reviews. The assumptions and main predictions of our model are consistent with those that we identified from a primary survey and observational Yelp data.

Keywords: Brand image; Costly communication; Recommendation engines; Review platforms; Word of mouth (search for similar items in EconPapers)
Pages: 57 pages
Date: 2020-08, Revised 2023-02
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