Is the Electronic Word of Mouth Effect Always Positive on the Movie?

Article excerpt

INTRODUCTION

Word-of-mouth(WOM) and electronic word-of-mouth (eWOM), which are forms of customer-to-customer information exchange, have become subjects of interest for companies and marketing researchers as possible alternatives for traditional mass-media commercial advertisements, which have been losing their appeal due to increased competition.

WOM is distinct from traditional sources of information, such as commercial advertisements, in two ways. First, WOM provides more credibility to customers than other sources of information. Beck (1992) explained the uniquely credible status of WOM as an information source, by arguing that WOM has a stronger influence on the purchasing decisions of customers because it is perceived as advices from other customers faced with similar circumstances. In particular, WOM has been found to be especially influential when customers make purchasing choices about newly-released products that they are aware of but are not well-informed about (Mahajan, Miller, and Kerin, 1984). Films, by nature, exhibit characteristics that are largely similar to those of newly-released products, and it has also been well established that WOM generally has a significant effect on the movie-going choices of customers (Austin, 1989; Bayus, 1985; Faber and O'Guinn, 1984; Neelamegham and Chintagunta, 1999).

Second, unlike advertisements, which are transmitted to customers via mass-media, WOM information is easily accessible for customers via social networks (Benerjee, 1992; Brown and Reingen, 1987; Murray, 1991). The accessibility of eWOM has vastly expanded due to the rapid growth of the Internet population and is now available via various channels and forms such as Internet messengers, online forums, communities, or purchase reviews posted on shopping websites. The resulting eWOM is exerting an even larger influence on the information searching and purchase decision-making actions of customers than the offline WOM of the past (Bussiere, 2000; Chatterjee, 2001). Many websites are being used not only as providers of product information, but also as forums for information exchange, and heavily influence the purchasing decisions of customers. A few marketing studies that have been conducted on the subject of WOM data include: one study on the effect of WOM information from Usenet newsgroups on television shows (Godes and Mayzlin, 2004); one study on the effect of eWOM information on revenue, which analyzed the customer review data accumulated in the two online bookstores of Amazon.com and BarnesandNobles.com (Chevalier and Mayzlin, 2006); and one study on the effect of movie reviews posted on Yahoo.com on box-office revenue (Liu, 2006).

This study has two objectives. The one is to identify the effects between box-office revenue and the volume as well as valence of movie reviews posted in the film sections of portal websites. The structure in the first analysis was more elaborate model in the previous studies (Bae et al. 2010). The other is to find out if the eWOM effects in the former result are equally applied to all the movies regardless of their revenue difference.

THEORETICAL BACKGROUND

Definition and Characteristics of WOM and EWOM

The term "word-of-mouth(WOM)" was first used in a marketing study by Whyte, which was published in a 1954 edition of the Fortune magazine. Each researchers have adopted different definitions of WOM, but all agree that it consists of oral interpersonal communication. Zaltman and Wallendorf (1979) defined WOM communication as a non-profit interpersonal activity involving the direct conveyance and acquirement of information via conversation. Arker and Myers (1982) defined WOM as a form of advertising communication in which the advertisement recipient becomes an information source to those around him. Ritchins (1983) understood WOM as a process of information exchange concerning a product, which occurs in the consumer market. …