The dynamics of online word-of-mouth and product sales—An empirical investigation of the movie industry

By Wenjing Duan, Bin Gu, Andrew Whinston. 2008

1,311 citations recorded by the source corpus.

There are growing interests in understanding how word-of-mouth (WOM) on the Internet is generated and how it influences consumers’ purchase decisions at retail outlets. A unique aspect of the WOM effect is the presence of a positive feedback mechanism between WOM and retail sales. We characterize the process through a dynamic simultaneous equation system, in which we separate the effect of online WOM as both a precursor to and an outcome of retail sales. We apply our approach to the movie industry, showing that both a movie's box office revenue and WOM valence significantly influence WOM volume. WOM volume in turn leads to higher box office performance. This positive feedback mechanism highlights the importance of WOM in generating and sustaining retail revenue.

Subfields: Management Science and Operations Research, Marketing, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/58398baccf1827c422c83a5005f5933cbfe85afd

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Citations in the corpus

The influence of online reviews to online hotel booking intentions [Summary] (2015, background): “Measurement of volume of online reviews in terms of agreement level with the following statement was adapted from Duan et al. (2008): • “I pay more attentions to hotels having larger volume of online reviews”.”
Effect of Online Reviews on Consumer Purchase Behavior (2015, background): “By the research on online reviews and movie box office revenues, some scholars found using sales to measure consumer buying behavior was feasible in the quantitative measure [5].”
The Impact of Status Seeking on Consumers’ Word of Mouth and Product Preference—A Comparison Between Luxury Hospitality Services and Luxury Goods (2017, background): “According to Eastman et al. (1999), need for status is defined as “the motivational process by which individuals strive to improve their social standing through conspicuous consumption of consumer products that confer and symbolize status both for the individual and surrounding significant others” (”
What We Know and Don't Know about Online Word-of-Mouth: A Review and Synthesis of the Literature (2014, background): “For instance, Duan, Gu, and Whinston (2008) examine the dynamic relationship between online movie reviews (from Yahoo.com) and box office revenues.”
The Differential Effects of the Quality and Quantity of Online Reviews on Hotel Room Sales (2014, background): “…understood because the construct of eWOM itself includes at least two components, the valence, or customer rating level (Cheung and Thadani 2012; Duan, Gu, and Whinston 2008b), and the volume, or the quantity of discussion about the product (Cheung and Thadani 2012; Duan, Gu, and Whinston 2008b).”
Dynamic Effects among Movie Ratings, Movie Revenues, and Viewer Satisfaction (2010, result): “Our reasoning is similar to that of Duan, Gu, and Whinston (2008), who indicate that a unique aspect of the WOM effect is the presence of a positive feedback mechanism between WOM and sales.”
Social Media, Traditional Media, and Music Sales (2014, background): “A number of papers have examined the influence of product reviews on sales, such as Godes and Mayzlin (2004) for TV show ratings, Chevalier and Mayzlin (2006) for books, and Liu (2006), Dellarocas et al. (2007), Duan et al. (2008), Chintagunta et al. (2010), and Moon et al. (2010) for movies.”
The Limits of Popularity-Based Recommendations, and the Role of Social Ties (2016, background): “, 10, 23], but the paucity of available data makes them tentative.”