How to deal with negative electronic Word-of-Mouth?


Seminar Paper, 2011

23 Pages, Grade: 1,7

Anonymous


Excerpt

Table of Contents

List of Figures and Tables

1. Introduction

2. EWOM in literature
2.1 WOM and eWOM
2.2 Positive and negative eWOM

3. Development and consequences of negative eWOM
3.1 Appearance of eWOM
3.2 Opportunities and threats of negative eWOM

4. Deriving a coping strategy
4.1 Parameters influencing the impact of negative eWOM
4.1.1 EWOM parameters
4.1.2 Company parameter
4.2 Modeling the response decision
4.2.1 Tracing and measuring negative eWOM
4.2.2 Direct reaction to negative eWOM
4.2.3 Indirect reaction to negative eWOM
4.2.4 Guard against negative eWOM

5. Conclusion and future research

6. References

List of Figures and Tables

Table A: Literature overview on eWOM research

Figure A: Assessment of a direct response strategy

1. Introduction

In today’s virtual era, the power of word-of-mouth has grown dramatically.[1] Online customer-to-customer articulations have been proven to impact consumer attitudes and behavior and have therefore direct impact on a product’s success and a company’s performance.[2] The aim of this paper is to approach a response to the question how companies should deal with negative electronic Word-of-Mouth (eWOM). After a brief introduction to prior research of eWOM and its valence, the development and consequences of negative online articulations will be discussed. Following the relevant eWOM and company parameters are identified that determine the impact of negative eWOM on a brand. The first step in approaching a response decision which is tracing and measuring online articulations is explained and resulting coping strategies in form of direct and indirect reactions to negative eWOM are illustrated. Finally, the paper explains how companies can guard against negative eWOM.

2. EWOM in literature

2.1 WOM and eWOM

Word-of-Mouth (WOM) is defined by Arndt (1967) as “oral, person-to-person communication between a receiver and a communicator whom the receiver perceives as non-commercial, concerning a brand, a product, or a service”[3]. Consumers perceive WOM as a reliable and trustworthy source of information since it is based on other consumer’s experiences.[4] It is therefore a powerful force in the consumer market place.[5] With the rise of the Internet, the impact of WOM, former limited to a local social network, has changed dramatically.[6] By giving every consumer the possibility to communicate to others all over the world, WOM has become less personal but more ubiquitous.[7] Hennig-Thurau et al. (2004) define these online conversations as “electronic WOM” (eWOM) and as “any positive or negative statement made by potential, actual, or former customers about a product or company, which is made available to a multitude of people and institutions via the Internet”[8]. While traditional WOM research focused on its force in the consumer marketplace, much of new evidence comes from the analysis of eWOM. Online consumer-to-consumer (C2C) conversations have been shown to affect sales of online books[9], movies[10] TV shows[11] and influence customer acquisition in online networking sites[12], while the impact of eWOM depends on various review[13] and company characteristics[14]. Researchers evaluate multiple factors of eWOM. An overview of research foci is displayed in table 1.

2.2 Positive and negative eWOM

As both positive and negative eWOM can be found on the Internet, it is important to study their distinctive effects. In the case of product reviews, positive eWOM contains favorable experiences and encourages brand choice while negative reviews discourage other consumers to try the product or service.[15] Research of offline WOM states that a satisfied customer tells some people about the experience while an unsatisfied customer tells everyone he meets.[16] The “negativity effect” that expects negative information to be more harmful than positive information[17] has been supported in many studies. Hence it is presumed that negative WOM also has a strong impact online for example on brand equity[18], purchase decisions[19] and financial assets[20]. The prevalence of negative eWOM can lead to an online crisis with long-term damage for the company’s performance[21] whereas this paper does not focus on those scandals but more on negative eWOM that every company faces in its regular business.

illustration not visible in this excerpt

Table A: Literature overview on eWOM research; source: own depiction

3. Development and consequences of negative eWOM

3.1 Appearance of eWOM

To be able to deal with negative eWOM, a firm needs an understanding its development and consequences. To articulate themselves online, consumers have numerous possibilities. Websites include message boards (e.g. eOpinions), microblogging sites (e.g. Twitter) online communities (e.g. Facebook), chat rooms (e.g. Chatcity.de), video sharing sites (e.g. YouTube) opinion and discussion forums.[22] Many online retailers include ratings and forums (e.g. Amazon) and companies consider eWOM by offering consumers the possibility to exchange on blogs, Facebook profiles, Twitter, Myspace accounts and many more. Even if manipulation of eWOM in favor for or against a company is relatively easy[23], two reasons drive the popularity of eWOM. The first reason is the growing willingness of consumers to share opinions, second is a growing popularity of reviews and their increasing importance for purchase decisions.[24] A variety of motives leads consumers to contribute to eWOM including the desire for social interaction, the desire for economic incentives, the concern for others and extraversion or self-enhancement.[25] Negative eWOM is often motivated by dissonance reduction.[26] It is driven by the wish to be “heard” by other consumers, to create emotional connections with them. The feeling that firms do not care and would not respond leads consumers to search for emotional gratification in sharing their experiences with others[27].

Unsophisticated consumers (novices) who hesitate to purchase, benefit greatly from reviews[28] in opinion platforms, a reason why buying information is the strongest reading motive of an online articulation[29]. The powerful influence of eWOM on consumer buying and communication behavior[30] makes today’s companies very dependent why volume and valence of eWOM should be monitored constantly.

3.2 Opportunities and threats of negative eWOM

As mentioned before, negative online articulations represent a major threat for today’s companies. Anyhow, through negative eWOM some opportunities arise.

Threats: A major threat of eWOM in comparison to traditional WOM is the fact that it spreads rapidly and remains online for an unlimited time period.[31] Negative reviews have an impact on the overall online rating of a product[32] Furthermore, contact with negative reviews can cause a significant brand equity dilution[33] and impacts the retailer evaluation.[34] Negative eWOM influences purchase decisions[35] and can have long-term financial impacts on the company’s performance[36]. Concerning the appearance of negative eWOM a threat is that most conversations occur outside the company’s purview[37] and that there is only little control over volume and dissemination of comments. Last but not least, interested parties can easily manipulate eWOM which may discount online reviews[38].

Opportunities: Even if a negative comment generally represents a threat, it can also be seen as an opportunity. First, boring companies get no reviews[39] - even if the eWOM is negative; it shows that the firm is interesting enough to stimulate consumer articulations. Second, online feedback helps to find out about opinions and customer satisfaction while managers can assess product performance and service quality.[40] Negative eWOM may alert companies to imperfections in their products and motivate them to improve their business strategy.[41] Negative eWOM can increase the accessibility or awareness of unknown products which may have positive downstream effects on sales.[42] Besides, negative eWOM can be seen as an invitation for the company to get into direct contact with the customer and gives the firm the opportunity to rectify misunderstandings.

[...]


[1] Cf. Goyette et al. (2010), p. 6.

[2] Cf. Cf. Chatterjee (2001), p. 129; Chevalier and Mayzlin (2006), p. 354; Khammash, Griffith (2011), p. 83, Sen and Lerman (2007), p. 77.

[3] Arndt (1967), p. 3.

[4] Cf. Chatterjee (2001), p. 133.

[5] Cf. Chevalier and Mayzlin (2006), p. 354; Sen and Lerman (2007), p. 77.

[6] Cf. Chen and Xie (2008), p. 479.

[7] Cf. Bambauer-Sachse and Mangold (2011), p.38.

[8] Hennig-Thurau et al. (2004), p. 39.

[9] Cf. Chevalier and Mayzlin (2006)

[10] Cf. Chintagunta, Gopiath, Ventakataraman (2010); Dellarocas, Zhang and Awad (2007); Duan, Gu and Whinston (2008); Liu (2006)

[11] Cf. Godes and Mayzlin (2004)

[12] Cf. Trusov, Bucklin and Pauwels (2009)

[13] Cf. Mitchell and Khazanchi (2010)

[14] Cf. Zhu and Zang (2010)

[15] Cf. East, Hammond and Lomax (2008), p. 215.

[16] Chatterjee (2001), p. 129.

[17] Cf. Fiske (1980), p. 889; Mittal, Ross and Badasare (1998),p. 33; Mizerski (1982), p. 301 ; Skowronski and Carlston (1989), p. 131; Hennig-Thurau and Walsh (2003), p. 61.

[18] Cf. Bambauer-Sachse and Mangold (2011), p. 44.

[19] Cf. Cheung and Lee (2008), p. 8.

[20] Cf. Luo (2009), p. 161.

[21] Cf. Hennig-Thurau et al. (2010), p. 317.

[22] Cf. Mitchell and Khazanchi (2010), p. 20.

[23] Cf. Dellarocas (2006), p. 1577; Gupta and Harris (2007), p. 1041; Mayzlin (2006), p. 155.

[24] Cf. Li and Zhan (2011), p. 239.

[25] Cf. Hennig-Thurau et al. (2004), p. 50.

[26] Cf. Engel, Blackwell and Miniard (2006), p. 84.

[27] Cf. Blackshaw (2008), p. 44.

[28] Cf. Chen and Xie (2008), p. 479.

[29] Cf. Hennig-Thurau and Walsh (2003), p. 62.

[30] Cf. Hennig-Thurau and Walsh (2003), p. 65.

[31] Cf. Hennig-Thurau and Walsh (2003), p. 66.

[32] Cf. Chevalier and Mayzlin (2005); p. 2.

[33] Cf. Bambauer-Sachse and Mangold (2011), p. 44.

[34] Cf. Chatterjee (2001), p. 133.

[35] Cf. Cheung and Lee (2008), p. 8.

[36] Cf. Luo (2009), p. 148.

[37] Cf. Blackshaw (2008), p. 44.

[38] Cf. Dellarocas (2006), p. 1577; Mayzlin (2006), p. 156; Trusov, Bucklin and Pauwels (2009), p. 98; Zhu and Zang (2010), p. 133.

[39] Cf. Sernovitz (2009), p. 6.

[40] Cf. Yang and Peterson (2003), p. 29.

[41] Cf. Chen and Tseng (2011), p. 776; Khammash and Griffith (2011), p. 85.

[42] Cf. Berger, Sorensen and Rasmussen (2010), p.825.

Excerpt out of 23 pages

Details

Title
How to deal with negative electronic Word-of-Mouth?
College
University of Münster
Grade
1,7
Year
2011
Pages
23
Catalog Number
V177825
ISBN (eBook)
9783640997251
ISBN (Book)
9783640997046
File size
608 KB
Language
English
Tags
Marketing, WOM, Internet, Media, Word-of-Mouth, electronic Word of Mouth, Online Marketing, Onlinekrise
Quote paper
Anonymous, 2011, How to deal with negative electronic Word-of-Mouth?, Munich, GRIN Verlag, https://www.grin.com/document/177825

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