Given the unprecedented reach of social media, firms are increasingly relying on it as a channel for marketing communication. The objective of this study is to examine the effect of firm-generated ...content (FGC) in social media on three key customer metrics: spending, cross-buying, and customer profitability. The authors further investigate the synergistic effects of FGC with television advertising and e-mail communication. To accomplish their objectives, the authors assemble a novel data set comprising customers' social media participation data, transaction data, and attitudinal data obtained through surveys. The results indicate that after the authors account for the effects of television advertising and e-mail marketing, FGC has a positive and significant effect on customers' behavior. The authors show that FGC works synergistically with both television advertising and e-mail marketing and also find that the effect of FGC is greater for more experienced, tech-savvy, and social media-prone customers. They propose and examine the effect of three characteristics of FGC: valence, receptivity, and customer susceptibility. The authors find that whereas all three components of FGC have a positive impact, the effect of FGC receptivity is the largest. The study offers critical managerial insights regarding how to leverage social media for better returns.
“Facts Up Front” nutrition labels are a front-of-package (FOP) nutrition labeling system that presents key nutrient information on the front of packaged food and beverage products in an easy-to-read ...format. The authors conduct a large-scale empirical study to examine the effect of adoption of FOP labeling on products’ nutritional quality. The authors assemble a unique data set on packaged food products in the United States across 44 categories over 16 years. By using a difference-in-differences estimator, the authors find that FOP adoption in a product category leads to an improvement in the nutritional quality of other products in that category. This competitive response is stronger for premium brands and brands with narrower product line breadth as well as for categories involving unhealthy products and those that are more competitive in nature. The authors offer evidence regarding the role of nutrition information salience as the underlying mechanism; they also perform supplementary analyses to rule out potential self-selection issues and conduct a battery of robustness checks and falsification tests. The authors discuss the implications of the findings for public policy makers, consumers, manufacturers, and food retailers.
The authors examine the effects of a firm’s and its competitors’ online reviews on its demand within the hotel industry. The authors leverage a unique data set of actual bookings from properties of a ...major hotel chain in six different markets in the United States, supplemented with online reviews garnered from a popular social media platform. The findings indicate that not only a hotel’s own reviews but also its competitors’ reviews have a significant impact on the hotel’s booking performance. The impact of review sentiment is amplified if the focal hotel also charges higher prices or when the volume of reviews is high. The authors establish heterogeneous effects across consumer segments (business vs. leisure travelers) and by the type of review content (objective vs. subjective attributes to assess quality). Specifically, both a hotel’s own reviews and its competitors’ reviews have a larger impact on bookings for business travelers compared with leisure travelers, and for reviews that mainly discuss subjective attributes, for which consumers need to rely on the experiences of others to assess the quality of a hotel prior to their stay. The study provides a set of comprehensive insights on the impact of both own and competitors’ online reviews on a focal hotel’s bookings.
Online communities have experienced burgeoning popularity over the last decade and have become a key platform for users to share information and interests, and to engage in social interactions. ...Drawing on the social contagion literature, the authors examine the effect of online social connections on users' product purchases in an online community. They assess how product, user, and network characteristics influence the social contagion effect in users' spending behavior. The authors use a unique large-scale data set from a popular massively multiplayer online role-playing game community—consisting of users' detailed gaming activities, their social connections, and their in-game purchases of functional and hedonic products—to examine the impact of gamers' social networks on their purchase behavior. The analysis, based on a double-hurdle model that captures gamers' decisions of playing and spending levels, reveals evidence of "social dollars," whereby social interaction between gamers in the community increases their in-game product purchases. Interestingly, the results indicate that social influence varies across different types of products. Specifically, the effect of a focal user's network ties on his or her spending on hedonic products is greater than the effect of network ties on the focal user's spending on functional products. Furthermore, the authors find that user experience negatively moderates social contagion for functional products, whereas it positively moderates contagion for hedonic products. In addition, dense networks enhance contagion over functional product purchases, whereas they mitigate the social influence effect over hedonic product purchases. The authors perform a series of tests and robustness checks to rule out the effect of confounding factors. They supplement their econometric analyses with dynamic matching techniques and estimate average treatment effects. The results of the study have implications for both theory and practice and help provide insights on how managers can monetize social networks and use social information to increase user engagement in online communities.
This article focuses on how the customer portfolios of technology-based entrepreneurial firms affect new product development. Drawing on knowledge-based, resource dependence, and relational theories, ...the authors argue that the impact of a firm's customers on new product development depends on the size and relational embeddedness of the customer portfolio and the extent to which the firm is dependent on one or a few dominant customers for a majority of its revenues. The authors test the research model using longitudinal data on young firms operating in business-to-business markets in six technology-based industries. The results indicate that customer portfolio size has an inverse U-shaped relationship to the number of new products developed and that the more relationally embedded the customer set, the more new products the firm develops. Dependence stemming from revenue concentration has a negative impact on new product output. Furthermore, the authors find that relational embeddedness can compensate for too small of a customer portfolio and can help offset the negative effects of a highly concentrated portfolio. These results make important theoretical and empirical contributions to the new product development literature, helping uncover some of the antecedents of innovative productivity particularly relevant for young, technology-based firms. The results also contribute to the broader discourse on how customers affect new product development.
Drawing on the accessibility—diagnosticity framework and previous literature on branding and order of entry, the authors hypothesize that perception spillovers can also occur across directly ...competing products that do not share a common brand name. The authors suggest two mechanisms (prior perception spillover and dynamic perception spill-over) and one moderating variable (product/brand similarity). To test for spillovers across competing brands, the authors develop a structural Bayesian learning model and estimate it using prescription choice and marketing communication data from a panel of physicians. From their model results, the authors find evidence of prior and dynamic perception spillovers across competing brands only when brands are sufficiently similar. In contrast, they find no evidence of spillover effects across brands that are highly dissimilar. Finally, several policy experiments illustrate the strength and significance of competitive spillovers for product diffusion, and from the results, the authors derive strategic implications for order-of-entry effects and the entry of "me-too" products.
This article contributes to the entrepreneurship and network literatures by addressing the fundamental research question of how a new venture’s initial network ties are formed. The authors focus on ...the broad network search evinced by nascent entrepreneurs at the very earliest stages of venture and network creation and examine some of the instrumental and interpersonal mechanisms driving nascent entrepreneurs’ value attributions about the contacts met during this network search. The authors utilize a unique empirical data set of 1,407 entrepreneur–contact dyads collected during a 6-month period of real-time nascent venture activity. Their results suggest a view of new venture network construction in which the content benefits conferred through anticipated or real resource acquisition form a clear basis for entrepreneurs’ assessments of value, with the process benefits of interpersonal age and gender similarity playing an amplifying role. Contrary to their expectations, the authors did not observe direct interpersonal similarity effects. Their findings shed light on some of the very early decision processes that underlie an entrepreneur’s network search and thus are critical to network formation.
In this study, the authors assess the effects of a data breach announcement (DBA) by a multichannel retailer on customer behavior. They exploit a natural experiment and use individual customer ...transaction data from the retailer to conduct a detailed and systematic empirical examination of the effects of a DBA on customer spending and channel migration behavior. To identify the effects, the authors compare the change in customer behavior before and after the DBA between a treatment group (customers whose information is breached) and a control group (customers whose information is not breached) using the difference-in-differences modeling framework. They find that although the data breach results in a significant decrease in customer spending, customers of the firm migrate from the breached to the unbreached channels of the retailer. The findings further reflect that customers with a higher retailer patronage are more forgiving because the negative effects of the DBA are lower for customers with a higher level of patronage. The authors propose and empirically test for the role of customer data vulnerability as the behavioral mechanism that drives customer behavior subsequent to a DBA. The authors offer prescriptions for managers on how to engage with customers following DBAs.
In this study we examine the effect of customers' participation in a firm's social media efforts on the intensity of the relationship between the firm and its customers as captured by customers' ...visit frequency. We further hypothesize and test for the moderating roles of social media activity and customer characteristics on the link between social media participation and the intensity of customer-firm relationship. Importantly, we also quantify the impact of social media participation on customer profitability. We assemble a novel data set that combines customers' social media participation data with individual customer level transaction data. To account for endogeneity that could arise because of customer self-selection, we utilize the propensity score matching technique in combination with difference in differences analysis. Our results suggest that customer participation in a firm's social media efforts leads to an increase in the frequency of customer visits. We find that this participation effect is greater when there are high levels of activity in the social media site and for customers who exhibit a strong patronage with the firm, buy premium products, and exhibit lower levels of buying focus and deal sensitivity. We find that the above set of results holds for customer profitability as well. We discuss theoretical implications of our results and offer prescriptions for managers on how to engage customers via social media. Our study emphasizes the need for managers to integrate knowledge from customers' transactional relationship with their social media participation to better serve customers and create sustainable business value.
Young firms in business-to-business markets often experience a high level of dependence on a key customer, but what are the firm-level effects of such dependence on survival and growth? And what can ...entrepreneurs do to manage such dependence? Many of the mechanisms suggested by resource dependence studies (such as safeguarding investments, symmetrical dependence, or acquisitions) are not available for young firms with limited resources. In this article, we develop a knowledge-based framework to examine how young firms can utilize congenital, experiential, and interorganizational learning to manage the effects of dependence on firm survival and growth. We test our hypotheses in a sample of young technology-based firms in the UK. First, we find a significant negative effect of key customer dependence on firm survival. Further, we find that experiential knowledge (accumulated as the firm ages) mitigates this negative effect, indicating that dependence is particularly hazardous for the youngest firms. Surprisingly, contrary to our hypothesis, we find that, for surviving firms, dependence has a positive effect on customer portfolio growth, and that this effect is stronger for less experienced, i.e., younger, firms. The effect is also amplified by congenital learning from the top management team's industry experience. Finally, interorganizational learning (facilitated by the relationship quality of the key customer relationship) has a negative moderating effect on the dependence-growth relationship. This indicates an impeding effect on the young firm's ability to acquire other customers. Taken together, our results contribute a more dynamic and nuanced view of young firms' customer relationships, shedding light on two distinct performance outcomes, firm survival and firm growth.
•Dependence on a key customer is hazardous for young firm survival.•However, for surviving firms, such dependence has a positive effect on customer portfolio growth.•The younger the firm, the more significant are the effects of dependence on both survival and growth.•The top management team's industry experience amplifies the growth effect of dependence.•Key customer relationship quality impedes the growth effect of dependence.
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