Managerial Responses To Online Word Of Mouth: Its Dynamics And Impact On Sales
Refereed conference paper presented and published in conference proceedings

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AbstractA growing body of literature starts to explore the effect of managerial responses (MR) on online reviews. This paper extends the existing literature by pinpointing the impact MR to online word of mouth (WOM) exerts on firm’s revenue. Also, whereas previous literature only examines the effect of initial MR, this paper considers every instance of MR and its dynamic impact on both subsequent rating behavior and product sales. Furthermore, this paper distinguishes between the effects of MR to positive reviews (MR-P) and that of MR to negative reviews (MR-N). Controlling WOM dynamics, we first measure the asymmetric impact of MR-P and MR-N on the arrival of future ratings using dynamic hazard models. We then model sales as a function of ratings and MR to capture both the direct and indirect effects of MR on sales. Results show that MR-N not only directly increases sales but also indirectly does so through its positive effect on future ratings. Counterintuitively, MR-P has a negative effect on future rating and consequently indirectly decreases sales, though it does not have a direct influence on sales. Simulations show that the effect of MR-N is larger than that of MR-P on both future ratings and sales, resulting in a seemingly overall positive effect of MR. These findings inspire managers to leverage the power of MR-N and at the same time avoid possible negative consequences brought by careless MR-P.
All Author(s) ListChunyu Li, Yiwei Li, Ling Peng, Xiangnan Feng, Jianmin Jia
Name of Conference39th Annual ISMS Marketing Science Conference
Start Date of Conference07/06/2017
End Date of Conference10/06/2017
Place of ConferenceUniversity of Southern California
Country/Region of ConferenceUnited States of America
LanguagesEnglish-United States

Last updated on 2018-14-05 at 15:22