The impact of social media conversations on consumer brand choices
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The impact of social media conversations on consumer brand choices Yizao Liu & Rigoberto A. Lopez
# Springer Science+Business Media New York 2014
Abstract This paper estimates the impact of social media conversations on consumer valuation of brand characteristics and demand for carbonated soft drinks (CSDs). We formulate a random coefficient, discrete choice model of consumer demand that includes social media conversations, and estimate it matching Nielsen sales data on carbonated soft drinks to social media conversations on Facebook, Twitter, and YouTube. Empirical results indicate that consumers’ conversations about brands and nutritional aspects of CSDs have a significant impact on their valuation of brand characteristics and ultimately on their choices of CSDs. These findings have important implications not only for firms using social media as a strategic tool for effective brand promotion and product design but also for public health policies aimed at reducing the consumption of sugary beverages and high-calorie foods. Keywords Social media . Word-of-mouth . Demand . Consumer behavior . Internet . Carbonated soft drinks JEL Classification D12 . M37 . L66
1 Introduction Word-of-mouth (WOM) via social media has become a key driver of brand recommendation among consumers, prompting an increasing number of companies to promote their products and services through social media in order to stimulate consumer
Y. Liu (*) Department of Agricultural and Resource Economics, University of Connecticut, Storrs, CT 06269, USA e-mail: [email protected] R. A. Lopez Department of Agricultural and Resource Economics, Director of the Zwick Center for Food and Resource Policy, University of Connecticut, Storrs, CT 06269, USA e-mail: [email protected]
Mark Lett
conversations, increase consumer loyalty, and acquire new customers (Hoffman and Fodor 2010; Financial Times Special 2012). 1 By facilitating WOM, social media have significantly altered the balance of marketing communication from unidirectional (firms to consumers as in traditional advertising) to bidirectional (among consumers) in many consumer markets. Social media consumer-to-consumer exchange is a relatively new type of online WOM. Most previous studies have focused on the effects of Internet penetration and the interaction between online and offline company advertising (e.g., Trusov et al. 2009; Smith and Telang 2010; Goldfarb and Tucker 2011; Orlov 2011; Liebowitz and Zentner 2012). Regarding WOM, studies have focused on the effects of online WOM on product sales. For instance, Onishi and Manchanda (2012) found that prelaunch TV product advertising spurs blogging and acts synergistically in product sales. Bruce, Foutz, and Kolsarici (2012) showed that advertising and WOM on the theater-thenvideo sequential distribution of motion pictures exert dynamic and diverse effects on sales of new products. Rui, Liu, and Whinston (2013) found that chatter on Twitter affects movie sales, but the magnitude and direction of the effect depend on the source and nature
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