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«LUND UNIVERSITY SCHOOL OF ECONOMICS & MANAGEMENT BUSN29: MASTER THESIS IN INTERNATIONAL MARKETING & BRAND MANAGEMENT MAY 2012 TRADITIONAL VERSUS ...»

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LUND UNIVERSITY

SCHOOL OF ECONOMICS & MANAGEMENT

BUSN29: MASTER THESIS IN INTERNATIONAL

MARKETING & BRAND MANAGEMENT

MAY 2012

TRADITIONAL VERSUS ELECTRONIC WORD-OF-MOUTH

A STUDY OF WOM COMMUNICATION AND ITS INFLUENCE ON YOUNG

CONSUMERS WITHIN THE AUTOMOBILE INDUSTRY

AUTHORS: SUPERVISOR:

ANJA GFRERER ULF JOHANSSON

JUDYTA POKRYWKA

ABSTRACT Title: Traditional versus Electronic Word-of-Mouth: A study of WoM communication and its influence on young consumers within the automobile industry May 29th 2012

Date of the Seminar:

Course: BUSN29 Master thesis in international marketing & brand management Authors: Anja Gfrerer and Judyta Pokrywka Advisor: Ulf Johansson Keywords: Traditional word-of-mouth, electronic word-of-mouth, automobile industry, word-of-mouth persuasiveness, highinvolvement decision-making Thesis purpose: Examination whether one of the WoM channels is more persuasive than the other towards a possible influence on consumers’ purchase-decision making within the highinvolvement context.

Methodology: This thesis uses an iterative mixed methods approach by following a cross-sectional sequential research design. The first data collection was of quantitative nature in order to address the online WoM environment. Afterwards qualitative semi-structured interviews were completed to approach the offline nature of WoM communication and obtain in-depth explanations of the rather factual results derived from the survey.

Theoretical perspective: The study is based on theories concerning traditional and electronic word-of-mouth in the context of high-involvement products. Furthermore, the attribution theory was applied in order to address the concept of persuasiveness.

Empirical data: Empirical data was collected in form of an online survey distributed on social networking sites as well as eight qualitative semi-structured interviews conducted with consumers who have purchased an automobile recently or who are thinking of purchasing one.

–  –  –

1. INTRODUCTION This chapter offers an overview of the chosen research area by underlining the importance of traditional and electronic Word-of-Mouth communication. A literature review within this research field is provided to set the basis for the problem discussion. This is followed by a presentation of the research aim and the research question. Finally, an outline of the research study concludes the chapter.

1.1 BACKGROUND

In the discipline of consumer behaviour one of the most widely accepted notions is Word-of-Mouth communication (WoM), which plays an important role in shaping consumers’ attitudes and behaviours (Brown and Reingen, 1987: 350). Hereby, consumers obtain information about products, brands or services from known individuals such as friends, peers, family members or acquaintances who often exert influence on their purchase decision-making (Bayus, 1985: 31). This is also clearly traceable in

marketing and advertising literature (Engel et al., 1969; Gilly et al., 1998, in Chu and Yoojung, 2011:

48). It is proved that WoM is a powerful force within the consumer marketplace and former research supports the claim that WoM is more influential on behaviour than all further controlled-sources such as prints or other advertising formats (Buttle, 1998: 242). According to Day (1971) this occurs mainly because of the higher level of reliability and flexibility through interpersonal WoM communication (Day, 1971, in Buttle, 1998: 242).

However, the worldwide shift from the dominant print culture in the 19th century to the current digital culture of the 21st century (Deuze, 2006: 63) has strongly influenced WoM by the emergence of electronic Word-of-Mouth. This means consumers’ communication environment changed and was enriched by the ability to communicate in new ways (Harrison and Barthel, 2009: 56). Such electronic WoM communication takes place in the form of discussion forums, emails, news groups or within popular Social Networking Sites (Chu and Yoojung, 2011: 47f) and is typically provided by future, actual, or former consumers of a company, product or certain brand (Hennig-Thurau et al., 2004, in Jansen et al., 2009: 2170). Hereby, Dellarocas (2003) specifies the Word-of-Mouth phenomenon as “(…) being given new significance by the unique property of the Internet” (Dellarocas, 2003: 1407).

Thus, in particular social media provides consumers with the opportunity to discuss, recommend or criticize products (Harvard Business Review, 2011: 2), and Social Networking Sites (SNSs) represent an ideal tool for electronic WoM, as consumers unreservedly create and disseminate product- or brand related information within their online networks (Chu and Yoojung, 2011: 49). A published report by the Pew Internet & American Life Project (2010) states that more than 70% of online users between 18 and 29 years use SNSs, whereby Facebook (73%) is the most popular one, followed by MySpace (48%) and LinkedIn (14%) (Lenhart et al., 2010, in Chu and Yoojung, 2011: 49). It is important to notice that individuals using SNSs are not only able to communicate and share their thoughts, experiences and opinions, but might also influence others in regard to pending purchase decisionmaking within high-involvement contexts (Vilpponen et al., 2006). Most of the previous studies focus on WoM concerning low-involvement products such as books or CDs, whereas WoM of highinvolvement products, in particular automobiles and its influence on persuasiveness, is not duly investigated thus far. Therefore, the focus of this research is on the under-investigated phenomenon of offline and online WoM by employing existing theories of relevance and applying them in a new context. In comparison to convenience shopping, it is stated that when purchasing an automobile consumers conduct extensive research due to the high-involving nature of the product. (Hjälte and Larsson, 2004: 4f). Thus, in regard to this high-involvement decision-making context, the power-shift of communicated messages about products or brands is significant within the WoM field, offline as well as online. Due to that fact it is argued that the success of a product strongly depends on it’s produced WoM (Godes and Mayzlin, 2004: 545), when the delivered information originates from a





more persuasive source than, for instance, a company generated message (Chu and Yoojung, 2011:

48).

1.1.1 TERMINOLOGY OF WORD-OF-MOUTH This research study addresses WoM within different settings. Traditional WoM is also referred to as offline WoM, whereas electronic WoM is referred to as online WoM. The overall term of WoM communication is used, by referring to Word-of-Mouth as general phenomenon.

1.2 LITERATURE REVIEW

Katz and Lazarsfeld (1955) conducted one of the first formal studies discovering that WoM was the most influential source of information when making a purchase decision concerning household products and food (in Brown and Reingen, 1987: 350). Thereby, they found that WoM was

considerably more effective than newspapers, magazines, personal selling and radio advertising (Ibid.:

350). Their findings were further confirmed by Engel, Blackwell and Kegerreis (1969, in Jansen et al., 2009: 2169), and King and Summers (1970, in Cheung and Thadani, 2010). Studies by Clarke and Belk (1978) and by Engel and Blackwell (1982) distinguished consumers’ information search behaviour concerning the level of involvement within the product purchase (in Gu et al., 2012: 183). A supplementing construct of homophily was studied by Rogers (1983) who suggested individuals share similarities on the level of attributes such as age, gender, education and social status (in Steffes and Burgee, 2009: 45). Brown and Reingen (1987) deepened the understanding of homophily and tie strengths as well as investigated the micro and macro levels of information exchange between individuals (Brown and Reingen, 1987, in Steffes and Burgee, 2009: 45). Further, Lang (2006: n.p.) confirmed that persuasiveness of WoM is a vital factor of purchase decision-making, which is reliant on the perception of the message as credible, trustworthy and reliable (Arndt, 1967; Dholakia and Sternthal, 1977; Heckman, 1999; Richins, 1984; Sobczak, 1990, in Lang: n.p.). Hereby, persuasiveness is seen as altering consumers’ attitudes and behaviours and has been found to be enhanced by the receiver’s ability to provide accurate feedback (Arndt, 1967, Ibid.: n.d.) as well as tailored (Lazarsfeld, Berelson and Gaudet, 1948, Ibid.: n.p.) or personalized information, which in turn makes WoM highly persuasive (Arndt, 1967, Ibid.: n.p.). The consumers’ influence evoked through WoM communication was further enhanced with the advent of the Internet. For this reason, Dellarocas and Narayan (2006) conducted a study suggesting the similarity of the antecedents of traditional WoM and electronic WoM, which entails that previous research on offline WoM is partly applicable in online WoM (in Ohashi and Parrot, 2010: 7). Calabrese and Borchert (1996) and Johnson et al. (1999) focused therefore on the online setting and researched how the source credibility impacts interpersonal influence (in Karakaya and Barnes, 2010: 448). Godes and Mayzlin (2004) argued that their study results provide the statement that some aspects of electronic WoM substitute the overall WoM (in Ohashi and Parrot, 2010: 6). Nevertheless, East, Hammond and Lomax (2008) questioned this position and stated that online WoM is likely to become a progressively more significant form of offline WoM (Ibid.: 6).

As Phelps et al. (2004) indicated, individuals are more likely to assimilate information when they identify the source as trustworthy, compared to receiving information from less reliable sources (in Yeh and Choi, 2011: 151). Accordingly, Jumin et al. (2008) studied the source of online reviews or recommendations and concluded that other consumers’ recommendations influence message receivers more effectively than experts’ recommendations (Karakaya and Barnes, 2010: 449). Nardi et al.

(2004) and Anderson (1998) investigated why consumers engage in WoM and came to the consensus that consumers experiencing extreme feelings, i.e. satisfaction or dissatisfaction, are more inclined to engage in WoM (in Ohashi and Parrot, 2010: 6). Moreover, a positive connection between consumer’s satisfaction and loyalty has been proved (Anderson and Sullivan, 1993; Fornell, 1992; Rust and Zahornik, 1993; Taylor and Baker, 1994, in Söderlund, 1998: 169) as well as between a consumer’s satisfaction and the predisposition for recommending certain items to other consumers (Hartline and Jones, 1996; Parasuraman et al., 1988; Selnes, 1993, in Söderlund, 1998: 169). Furthermore, a number of studies suggested that brand-loyal consumers, who experience positive feelings show a tendency to create and share information favouring their brand (Dick and Basu, 1994; Gounaris and Stathakopoulos, 2004, in Yeh and Choi, 2011: 149). Additionally, Hennig-Thurau and Walsh (2004) and Goldsmith and Horowitz (2006) examined the motives for looking for online opinions. They concluded their study with the notion that consumers seek product reviews in order to learn more about the product attributes before purchasing, whereas their main reasons are risk-reduction and purchasing decision enhancement (Ibid.: 149). On the whole, former research shows that offline WoM and online WoM impact not only consumers’ attitudes, but also their behaviour. To our knowledge, the academic literature investigates ways and reasons for sharing information concerning highinvolvement products; nevertheless, it does not cover the effects of traditional nor electronic WoM on consumers in regard to the automobile industry.

1.3 PROBLEM STATEMENT

Previous researchers have already engaged in studying traditional WoM and its effects on consumer attitudes and behaviour; thus also its influences on consumers’ purchase-decisions. Offline WoM is hereby dependent on the consumer-to-consumer advocacy and occurs between known individuals within direct settings. The potential of traditional WoM communication is recognised by previous researchers and practitioners, however it is argued that this acknowledged power tends to be neglected because of the shift towards electronic information sources. Hereby, the advent of social media and their social networking sites has revolutionized the potential of online WoM since it enables accessibility and reaches a completely different level than traditional WoM could achieve. Online comments, opinions, users experiences or other product-related information are facile to distribute globally and reach millions of users, which implies the phenomenon of electronic WoM stands for an additional force in affecting consumers’ purchase-decisions. However, the persuasiveness of WoM communication is puzzling due to the fact that its level may differ between offline and online settings;

thus evoking greater or lesser influence on automobile consumers’ purchase-decisions.



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