The Product and Timing Effects of eWOM in Viral Marketing

I. INTRODUCTIONWord of mouth (WOM) has long been used to promote products or to criticize competitors (Jacobson, 1948; Katz and Lazarsfeld, 1955). Its impact on sales and diffusion of new products was first reported to be positive in Arndt's (1967) study. In recent years, the development of social network and social media has further helped the spread of WOM via the Internet. Thus eWOM has been suggested as "free sales assistant" of online sellers (Chen and Xie, 2008). It is critical for firms to identify proper opinion leaders for seeding eWOM in order to generate favorable buzz effectively towards their products.It has been noted that consumers have shown a tendency of using eWOM in finalizing their buying decisions (Guernsey, 2000). Studies have revealed that consumers tend to consult with eWOM more than advertising because they trust their peers more than firms that sell products (Bao and Chang, 2014b; Piller, 1999). Thus, firms that receive favorable eWOM will likely enjoy a better chance for sales increase (Chevalier and Mayzlin, 2006; Chung, 2011). eWOM is an important source of information for consumers to make purchase decisions. Given the user-generated nature of eWOM, how can firms better utilize such eWOM to their advantage? As a hybrid between traditional advertising and consumer word of mouth, eWOM can be initiated by firms as a campaign and implemented by consumers for marketing communications (Godes and Mayzlin, 2009). For an eWOM marketing campaign to be successful, it is critical to consider the behavioral characteristics of target consumers and the seeding strategy for selecting opinion leaders (Hinz et al., 2011). The purpose of this study is to identify eWOM opinion leaders and to examine the product and timing effects of such opinion leaders' eWOM on product sales.II. VIRAL MARKETING VIA OPINION LEADERSIn a viral marketing campaign, firms select a small number of consumers as opinion leaders to disseminate information (Hinz et al., 2011). To be effective in such campaign, firms must first identify key opinion leaders, and then let key opinion leaders to communicate the information with followers via mass media (Iyengar, Van den Bulte, and Valente, 2011). Key opinion leaders are consumers who provide information and leadership to others in making their consumption decisions (Childers, 1986). Given the opinion leaders' behavioral tendency and ability to influence purchase decisions of followers, a firm can benefit from effective use of such opinion leaders in order to assist potential customers for shaping their buying decisions in favor of the firm's products. A theoretical basis for viral marketing is the two-step interpersonal communication process that involves target opinion leaders (Lazarsfeld, Berelson, and Gaudet, 1948). For example, by using fashion-related magazines as a mass media, firms can benefit from the use of target opinion leaders in women's clothing fashion who tend to read such magazines (Summers, 1970). However, how can firms identify proper opinion leaders for effective viral marketing? Based on the nature of eWOM, we review the literature on opinion leader and WOM related to viral marketing and propose hypotheses for studying the relationships between opinion leaders' eWOM and sales.Rogers and Cartano (1962) summarized three methods of identifying opinion leaders: (1) self-designation, i.e., asking consumers to identify whether and to which extent they are opinion leaders; (2) sociometric method, i.e., using social network to compute network centrality and other network structure related measures; (3) key informant method, i.e., asking consumers whom they listen to. The self-designation method seems to be the most popular method in marketing literature due to the survey proposed by King and Summers (1970), while the key informant method is also used in recent studies (Nair, Manchanda, and Bhatia, 2010). The main finding is that, self-designated and peer-nominated opinion leaders influence the choices of their followers. …