Traditional Vs Online Wom Marketing Essay

Published Date: 23 Mar 2015

In 2001 Bickart and Schindler argued that OWOM is more effective than WOM as it involves personal experience and opinions expressed through written words because people can seek information at their own pace. According to Marshall McLuhan (as cited in Griffin, 2003),According to Marshall McLuhan (as cited in Griffin, 2003), "written communication is also more logical than oral communication, as letter follows letter in an orderly line in writing, and logic is modeled on that step-by-step linear progression."

New media technology has changed the form of classic interpersonal communication (sender-message-receiver) by introducing a new form of communicator, a forwarder or transmitter (Gumpert & Cathcart, 1986).

Compared to traditional WOM, online WOM is more influential due to its speed, convenience, one-to-many reach, and its absence of face-to-face human pressure (Phelps et al., 2004). Moreover, by using search engines one can seek out the opinions of strangers. This seldom happens in conventional interpersonal contexts where opinion providers are embedded in social networks and well-known people may be more credible.

Traditional WOM communication has received scholarly attention in the research areas of opinion leadership, interpersonal influence, and diffusion of innovation. WOM involves unpaid interpersonal communication between people connected through a communication channel (Godin, 2001; Reingen & Kernan, 1986). Studies have found that WOM communication is more influential in a person's decision to adopt an innovation, while mass communication is more important in increasing people's awareness of innovations (Katz & Lazarsfeld, 1955; Rogers, 1995; Williams, Strover, & Grant, 1994).

WOM communication is likely to be perceived as more persuasive because information from personal sources is considered more credible than information from mass media or marketing sources (Bickart & Schindler, 2001; Brooks, 1957). Information from personal sources is both custom-tailored and independent of the intention of an organization to sell something (Silverman, 2001). All of the above factors may contribute to the trustworthiness of WOM communication channels, although consumer comments posted on an independent online forum might not be more persuasive than those posted on a corporate website (Xue & Phelps, 2004).

Some researchers regard WOM as a driving force behind actions while others consider it to be an outcome of past experiences (Godes & Mayzlin, 2004).

WOM communications have been shown to exert a strong influence on consumers' judgments of products (Herr et al., 1991). This influence is particularly prevalent when considering the purchase of a new product or service (Brown and Reingen, 1987; Scott, 2003). As such,WOM can have a strong bearing on a purchase outcome. Prior research on WOM has focused on interpersonal (or face-to-face) influence (Anderson, 1998; Bearden and Etzel, 1982; Rogers, 1983) and has largely neglected OWOM.

Consumers are increasingly turning to computer-mediated communication for information to use in their decision making process (Kozinets, 2002). Since the late 1980s, virtual communities have emerged, highlighting the importance of connections that are created when people interact with each other online. One such example is that of ''The Well'' - a well known, vibrant and engaging online community of leading-edge thinkers that interacted with each other through the postings on its electronic discussion board (Hagel III and Armstrong, 1997). Over time, these accumulated postings became a wealth of information with a captive audience which was active in commenting and contributing to the cumulative knowledge. Other examples of such virtual communities have since flourished on the Internet and researchers are increasingly recognizing that consumers partake in such discussions to inform and influence fellow consumers about products and brands (Kozinets, 1999; Muniz and O'Guinn, 2001).

Traditional (offline) word-of-mouth has been shown to play a major role for customers' buying decisions (Richins & Root-Shaffer, 1988). The advent of the Internet has extended consumers' options for gathering unbiased product information from other consumers and provides the opportunity for consumers to offer their own consumption-related advice by engaging in electronic word-of-mouth (eWOM). Given the distinct characteristics of Internet communication (e.g., directed to multiple individuals, available to other consumers for an indefinite period of time, and anonymous), eWOM deserves the serious attention of marketing researchers and managers.

However, only limited research on consumers' eWOM communication has been publishedto date. Existing publications tend to be predominantly practice oriented and deal with what is often referred to as "viral marketing" (i.e., using consumer communication as a means of multiplying a brand's popularity through customers spreading the brand name of a product or name of a company). However, online community research typically focuses on either the managerial aspects of such communities (Armstrong & Hagel, 1996) or on the sociopsychological aspects of the formation and existence of online communities (e.g., Fischer, Bristor, & Gainer, 1996; Granitz & Ward, 1996). Online community research has not yet analyzed the product-related communication behaviour between community members nor the resulting marketing implications.

eWOM communication can take place in many ways (e.g., Web-based opinion platforms, discussion forums, boycott Web sites, news groups). In this study, we focus on eWOM communicated via Web-based consumer-opinion platforms for the following reasons. First, Webbased opinion platforms are the most widely used of the existing eWOM formats. World

wide, approximately nine to ten million productor company-related comments from consumers are available to Internet users on Web-based consumer- opinion platforms (e.g., epinions.com, consumerreview.com, and rateitall.com),1 which provide consumers with the opportunity to read other consumers' consumption opinions and experiences as well as write (i.e., publish) contributions by themselves.

Second, eWOM communication articulated on Web-based consumer-opinion platforms can be expected to exert a stronger impact on consumers than eWOM published through other means because unlike news groups, such Webbased consumer-opinion platforms are relatively easy to operate and require less Internetrelated knowledge on the part of the consumer to obtain information.

In this social 3D Internet environment

the avatars are involved in spreading the Word-of-Mouth

(WOM) about both real and purely virtual brands. Word-of-

Mouth is "informal, evaluative (positive or negative) talk

between two or more people, online or offline, about an organization,

brand, product, or service, which may or may

not include a recommendation" [6]. These article is focused

on analysizing the nature of spreading WOM about real

brands within virtual worlds, this means that the subject of

examination is purely digital WOM (WOM in virtual

world: vw-WOM). The empirical data presented in this article

was obtained from the largest social virtual world for

adults - Second Life.

WOM has a strong influence on product and service perceptions, leading to changes in

judgments, value ratings and the likelihood of purchase (Arndt, 1967; Fitzgerald Bone,

1995; Peterson, 1989). Martilla (1971) found that WOM was more important in the final

stages of the purchase process as it reassured consumers and reduced post-purchase

uncertainty.

Other outcomes are also likely. Research has suggested electronic WOM (eWOM),

such as online customer forums, generates greater empathy, credibility and relevance,

than does information generated by the organisation itself, such as through a corporate

webpage, apparently because eWOM relates personal experiences and stories (Bickart

and Schindler, 2001).

In general, word-of-mouth is defined as informal, noncommercial,

oral, person-to-person communication about

a brand, a product or a service between two or more consumers

[1]. WOM among consumers incorporates three

different activities. First, information is sought for immediate

use aimed at risk reduction. Second, information is

obtained and stored for future usage and, third, information

is shared in order to influence other people's decisions

[25]. WOM is used when buyers lack the information

necessary for a purchase or when they perceive the

risk associated with the purchase as high [22]. Consumers

have been found to turn to personal contacts for reassurance

and to loose contacts for their expertise [15].

Since people are basically willing to heed the advice

of strangers, the anonymity of the WWW is by no means

an obstacle to the success of eWOM.

In general, consumers are influenced by and rely on

what others say about a product before they buy it [32]. If

there is not enough information about the product available

from other sources and the risk involved for the

buyer is therefore high, the influence of WOM on

consumers' purchasing decisions is also high [20].

However, product information provided by companies is

less influential among consumers than information

provided on consumer opinion sites or discussion boards

[5]. Also, consumers consider negative WOM information

more helpful than positive information in distinguishing

between high-quality products and products of low quality

[24]. To companies, eWOM may serve as a feedback

mechanism that helps them to improve the quality of their

products and to acquire new customers [12]. Companies

may even offer consumer opinion forums on their own

Web sites to strengthen customer loyalty and reduce

service costs [7]. The feedback companies obtain should

become

2.2.1 Definition

Arndt defines WOM as "... oral person-to-person communication between a receiver and a communicator whom the receiver perceives as non-commercial, regarding a brand, product or service." (1967, p. 291) However, it is important to point out that WOM need not necessarily be brand, product or service-focused. It may also be organisation-focused. Neither need WOM be face-to-face, direct, oral or ephemeral. The electronic community, for example, generates virtual WOM which is not face-to-face, not direct, not oral, and not ephemeral (Buttle, 1998).

2.2.2 Scope and Significance

One of the most widely accepted notions in consumer behaviour is that WOM plays an important role in shaping consumers' attitudes and behaviours. In an early study, Whyte (1954) investigated the diffusion of air conditioners in a Philadelphia suburb. He concluded, on the basis of anecdotal evidence, that the pattern of ownership could be explained only be the presence of a vast and powerful network consisting of neighbours exchanging product information. In a more formal study, Katz and Lazarsfeld (1955) found that WOM was the most important source of influence in the purchase of household goods and food products. It was twice effective as radio advertising, four times as effective as personal selling, and seven times as effective as newspapers and magazines.

Subsequent investigations of the WOM phenomenon have confirmed the dominance of personal influence in choice decisions. Engel et al. (1969), for example, found that almost 60 percent of consumers cited WOM as the most influential factor regarding their adoption of an automotive diagnostic centre. Similarly, Arndt (1967) showed that respondents who received positive WOM about a new food product were three times more likely to purchase it as those who received negative WOM. More recent research is provided by Herr et al. (1991). They observed that WOM communication had a much stronger impact on brand evaluations than information from neutral sources such as the 'Consumer Reports' magazine.

The power of WOM communication stems from various factors. First, consumer recommendations are usually perceived as being more credible and trustworthy than commercial sources of information (Day, 1971). It is common to assume that another consumer has no commercially motivated reasons for sharing information (Engel et al., 1993). Also the discussions with either friends or family tend to be friendly and can offer support for trying certain behaviours. Second, the WOM channel is immediately bi-directional and interactive which allows for a 'tailored' flow of information to the information seeker (Gilly et al., 1998). The third strength of consumer WOM comes from its 'vicarious trial' attributes. Potential consumers of a product, for example, can gain some of the product experience by asking somebody who has an actual experience with the product.

WOM is of particular importance to the services sector. The typical characteristics of services such as intangibility, simultaneous production and consumption, perishability, heterogeneity and the need for the consumer participation results in the fact that suppliers are not able to present the product in advance of the purchase (Helm and Schlei, 1998; Zeithaml and Bitner, 1996). Services, therefore, are high in experience and credence properties which the consumer can only ascertain after purchase and use (Zeithaml and Bitner, 1996). As a consequence, consumers of services rely to a large extent on personal communication and the exchange of experiences with other customers since their experiences of serve as a 'vicarious trial' (Engel et al., 1993). Empirical support for the importance of WOM when purchasing services is provided by Murray (1991) who found that services consumers prefer to seek information from family, friends and peers rather than sponsored promotional sources.

Wom only

Literature review

Researchers and practitioners have long recognized the

importance of person-to-person WOM (e.g., Coleman 1966;

Katz and Lazarsfeld 1955; Rosenzweig and Foster 1995). The

use of the Internet for publicizing feedback and recommendations

on products and businesses has broadened the reach of

WOM and sparked an interest in re-examining the effect of

WOM in the digital age (Chen and Xie 2004; Dellarocas 2003;

Senecal and Nantel 2004; Zufryden 2000).

[9]. Virtual communities can be considered word-of-mouth networks, i.e.,

consisting of multiple dyads.

The impact of word-of-mouth communication within virtual communities

depends on both the structural and the interactional characteristics of the

network [45]. The structural characteristics include factors such as the size

of the network, number of connections between one person and all

others, and the number of actual relationships relative to the potential

number,whereas the interactional characteristics include tie strength and

degree of homophily among members of the network [11]. The potential

impact of virtual communities is large; recommendations can bemade at

virtually no costs, and they can spread quickly within and outside the

virtual community network. Moreover, virtual community members

share an interest, which produces affinity and creates a bond. These social

network qualities coupled with the perceived credibility of consumer

evaluations, make the virtual community a powerful platform for

exploiting consumer-to-consumer recommendations, for example, by

means of viral marketing campaigns, i.e., using online consumer-toconsumer

referrals as a means of multiplying the popularity of a brand,

product, or company [24,84].

Several researchers have investigated what motivates consumers to

make contributions to the online knowledge reservoirs that virtual

communities constitute. Hennig-Thurau et al. [37] find evidence for eight

different motivations that largely correspond to motivations found for

engaging in word-of-mouth communication in the traditional, face-toface

setting: (1) venting negative feelings, (2) concern for other

consumers, (3) self-enhancement, (4) advice seeking, (5) social benefits,

(6) economic incentives, (7) platform assistance, and (8) helping the

company. Hennig-Thurau et al., furthermore, examine to what extent the

frequency of visits, as well as the number of comments written, are a

function of these eight motivations. It is social benefits that motivate

consumers most strongly, both to visit the platform and to articulate

themselves. Finally, the authors develop a motivation-based segmentation

of electronic word-of-mouth senders that distinguishes self-

interested helpers who are driven by economic incentives, consumer

advocates who act out of concern for other consumers, true altruists who

are motivated to help both other consumers as well as companies, and

multiple-motive consumers.

Wiertz and De Ruyter [99] investigate contribution behavior to firmhosted

commercial online communities, inwhich customers interact to

solve each other's service problems. They extend a model of social

capital based on Wasko and Faraj [96] to examine the direct impact of

commitment both to the online community and the host firm, aswell as

reciprocity, on quality and quantity of knowledge contribution. They test

their framework using self-reported and objective data from 203

members of a firm-hosted technical support community. Surprisingly,

their results indicate no relationship between members' perception of

the normof reciprocity and contribution behavior. Also, they do not find

a significant relationship between commitment to the firm and quantity

and quality of contributions. Instead, this study shows that consumers

who contributemost in terms of quantity and quality are driven by their

commitment to the community,which is another indicator of the power

of virtual communities as networks of companionship. Besides

commitment to the community, Wiertz and De Ruyter find that

member's online interaction propensity (i.e., a prevailing tendency of

an individual to interact with relative strangers - people they have

never met offline - in an online environment), and the informational

value s/he perceives in the community are the strongest drivers of

knowledge contribution.

Other researchers have focused on the effects of online word-ofmouth

communication. Chatterjee [17] reports the results of an

experiment that examines the effect of negative online reviews. This

study shows that existing theories about interpersonal influence in

the traditional setting also apply to the online context; consumers are

more likely to search for and accept (negative) online word-of-mouth

communication in a situation in which they lack information and

experience, as well as in a situation in which risk is higher [39,77,78].

Chevalier and Mayzlin [18], aswell as Dellarocas et al. [21], address the

value of online word-of-mouth recommendations in terms of their

financial impact and their revenue forecasting potential. Chevalier and

Mayzlin show that the number of online consumer reviews about a

book is related to book sales. Besides, they find that negative reviews

have a stronger effect than positive reviews; this effect has been

shown before in the offline context [76]. Dellarocas et al. show that

online consumer reviews about movies are representative of the

movie-going audience at large, and that the online consumer reviews

are better forecasters of movie revenues than professional critic

reviews. Together, these findings support the viewpoint that online

forums function as alternative and influential sources of information.

The existing literature about virtual communities and interpersonal

influence gives a first insight in the functioning of virtual

communities as reference groups and word-of-mouth networks, but

many questions remain. In the following sections, we start with

answering the most basic ones. Section 3 examines the determinants

and effects of virtual community influence on consumer decisionmaking.

Our research framework is based upon existing theories of

interpersonal influence and word-of-mouth recommendation. We

explore in what respect these theories can be extended from the

traditional context to the computer-mediated context of virtual

communities.

Word-of-Mouth Communication in Online Environments

It is widely accepted that word-of-mouth communication plays an important role in shaping consumers' attitudes and behavior (Brown and Reingen 1987). Word-of-mouth has been shown to have a substantial impact on product choice (Kiel and Layton 1981), as well as in choosing services (Ennew, Banerjee, and Li 2000; Keaveney 1995). For example, Katz and Lazarsfeld (1955) found that word-of-mouth was the most important source of influence in the purchase of household goods and food products. Their research revealed that word-of-mouth was actually much more effective in influencing consumers' behavior than mass media (newspapers, magazines, and radio advertising) or personal selling. However, word-of-mouth is gaining new significance by the unique properties of information and communication technologies, like the Internet (Dellarocas 2003), and thus it is important to explore how the electronic environment may affect word-of-mouth behavior.

Table 1. Comparison of Definitions of Viral Marketing

2.1 WOM

WOM has received considerable attention in the marketing literature and it is widely recognized to be a powerful marketing force (Silverman, 2001). WOM communication refers to "informal communications directed at other consumers about the ownership, usage, or characteristics of particular goods and services and/or their sellers" (Westbrook, 1987, p. 261). The interest among researchers in this phenomenon arises from the high occurrence of WOM in the marketplace (Sundaram, Mitra, & Webster, 1998) and its proven impact on the awareness, beliefs, attitudes and actual decisions of those who receive it (Brown & Reingen, 1987). This form of interpersonal information exchange has been found to be particularly important with regard to services (e.g., Baron, Harris, & Davies, 1996; Harris & Baron, 2004; Zeithaml & Bitner, 2003) and the diffusion of innovations (Arndt, 1967). WOM communication involves dyadic exchanges and in the WOM process, there is a sender as well as a receiver. Both benefit from the exchange. The receiver gets more information that is helpful for the decision process, relatively fast. After purchase, WOM can help to reduce cognitive dissonance that occurs when consumers question if they made the right purchase decision. In this case, WOM communication can comfort consumers. Likewise, the sender increases its confidence about his/her own behavior or product choices by convincing others to do the same. They also receive benefits of feeling powerful and helpful by providing others with information and thereby influencing the behavior of other consumers (Blackwell, Miniard, & Engel, 2001). The benefits resulting from WOM communication for both parties in the process are summarized in Figure 2.1. 7 Figure 2.1 Benefits of WOM. (Blackwell et al., 2001, p. 405) WOM communication often occurs as part of external search activities undertaken by consumers in their decision-making process (Sénécal & Nantel, 2001). Consumers may engage in these external search activities either as part of prepurchase search, i.e. information search related to a specific purchase, or as part of ongoing search, which refers to search for information that is independent of specific purchase needs or decisions (Beatty & Smith, 1987). Ongoing search activities are rather meant to enhance knowledge of particular brands and/or product classes, but without any purchase intent at the time of search. When performing external search, WOM sources are only one of many information sources available to customers. Beatty and Smith (1987) distinguished between media search (e.g. television and radio ads), retailer search (e.g. phone calls to retailers, trips to retailers), interpersonal search (e.g. friends, neighbors) and neutral sources (Consumer Reports). In studying the determinants of consumers' external search effort, Peter and Olson (2005) reported, similarly to Beatty and Smith (1987), that the extent of search depends on product characteristics such as price and complexity, marketplace and situational characteristics such as store distribution and time pressure, and also on consumer related variables such as selfconfidence and attitude towards search and shopping. 8 It has to be noted that WOM can be very positive and in this case it can represent the marketer's greatest assets, but it can also have a destructive effect when consumers spread negative WOM, which seems to occur even more than favorable WOM. Previous research has found that people are three to ten times more likely to tell others about a negative than a positive experience and satisfied customers spread the word to about three other people, while dissatisfied customers tell approximately eleven others (Silverman, 2001). Arndt (1967), for instance, showed that both positive and negative WOM influences the probability of purchase, whereby favorable WOM increases purchase likelihood and unfavorable WOM decreases the probability. Besides purchase likelihood, short-term and long-term product judgments are also influenced by WOM communication as found by Bone (1995).

It is argued that WOM is becoming ever more prevalent nowadays, partly due to the

enormous product variety coupled with limited product differentiation and information

overload that customers face. This has made information search more challenging

(Ramaswami & Varghese, 2003) and WOM can help to reduce uncertainty and the amount of information that is involved in making a decision. Consumers are no longer passive, but become active information seekers. Therefore, several researchers suggest making WOM more central to marketing and to the development of marketing strategy (Ozcan, 2004; Prahalad & Ramaswamy, 2004).

Two characteristics that distinguish WOM from other information sources is that, in contrast to manufacturer/seller sources like product advertising or labeling, or even independent, third party sources like Consumer Reports, WOM is usually perceived as more credible and trustworthy. Second, WOM is more readily available through social networks (Yong, 2006).

WOM is spread by people who do not represent a commercial selling source, so they are perceived to have little interest in promoting the company and they have no direct gain from altering the truth in favor of the product or service (Jin, Bloch, & Cameron, 2002; Silverman,

2001). It provides people with a source of information that is independent of the seller or producer and hence it represents a rather objective point of view. Besides the perceived credibility of WOM, it has also been argued that WOM information from other consumers is of greater relevance. It often describes product features in terms of usage situations and performance from the user's perspective, whereas information provided by the seller focuses more on technical specifications and technical standards for product performance (Chen & Xie, 2004). WOM provides product experiences of other consumers, without having to buy 9 the product immediately. Past research has underscored the predominance of others as a source of information. In a study on external search effort, Beatty and Smith (1987), for example, found that information from friends was sought especially in cases where the individual has a lack of product knowledge. Herr, Kardes and Kim (1991) showed that WOM communications have a greater impact on product judgments than information presented in printed format, because information received face-to-face is more vivid as compared to marketer-provided information, such as advertisements. A majority of the research concerning

WOM focuses on personal sources of information, whereby the sources have been classified according to the closeness of the relationship between the WOM source and the WOM receiver (Duhan, Johnson, Wilcox, & Harrell, 1997). Strong tie sources are for example friends and family, while weak tie sources include acquaintances and strangers. In their study, Duhan et al. (1997) reported that perceived tie strength influences the selection of these sources and that consumers have different motivations for the use of weak versus strong tie sources. Price and Feick (1984) studied the use of interpersonal sources and found that about

91 percent of their respondents were likely to use knowledgeable friends, relatives, or acquaintances as information sources in product purchases.

Given the strong influence of WOM on consumers, companies have a great deal to gain from understanding and stimulating WOM communication and they seem to start recognizing this, as firms are increasingly seeking to increase positive WOM (Villanueva, Yoo, & Hanssens, 2006). As mentioned before, both positive and negative WOM can influence consumer behavior and subsequently business performance. Positive WOM can help to create a

favorable image for the brand and the company, while negative WOM is likely to deter consumers from buying a certain product or brand, and hence can damage the reputation and performance of a company (Sundaram et al., 1998). In contrast to the high marketing costs of acquiring new customers though advertising and other promotions, WOM does not require investments from the companies' marketing resources. In fact, satisfied customers become some kind of sales assistants free of charge. Villanueva et al. (2006) reported evidence for the link between WOM and firm performance. They found that customers acquired through marketing contribute more to firm's performance in the short run than customers acquired through WOM. However, the latter group tends to stay longer as active customer and thus generate more value over time. Moreover, customers acquired through WOM are better at future WOM generation. They bring approximately 3.23 new customers, while those acquired through marketing investments bring in only around 1.59 new customers (Villanueva et al.,10 2006). As the authors found, in the long run, this results in the fact that customers acquired through WOM have double the impact than customers acquired by marketing-induced channels. Furthermore, in the literature, WOM has been found to be strongly correlated with satisfaction and loyalty (e.g., Hennig-Thurau, Gwinner, & Gremler, 2002; Magnus, 1998;Zeithaml & Bitner, 2003). Loyal customers tend to recommend a product or service to others.Reichheld (2003) reported that in many industries, getting customers enthusiastic enough about a company so that they spread WOM to others, is crucial to growth. In his study, the percentage of these so-called promoters directly correlated with growth rates. In the UK, especially for retail banks, car manufacturers, mobile phone networks and supermarkets, Marsden, Samson, and Upton (2005) found WOM to be a predictor of sales growth. So overall, previous research has showed the significant contribution of WOM to the long-term success of companies.

The potential for WOM among customers has dramatically increased in the Internet era, which has led to the rise in research focusing on WOM communication through this medium. The next section will discuss this recent stream of literature.

2.2 Online WOM

The Internet is becoming an important medium to transmit WOM and search for information, since it facilitates connections among consumers and is a forum for exchange of information among them (Bailey, 2005). Hence, researchers and practitioners are interested in the topic of how consumers use the Internet as a new source of information and research in this area is emergent. The online equivalent of WOM communication is visible in for example discussion forums, chat rooms, community discussions, and news groups. Consumers can now share their opinions, complaints and recommendations concerning products and services online, thereby engaging in online WOM or sometimes referred to as electronic WOM (eWOM). Online WOM is defined 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" (Hennig-Thurau, Gwinner, Walsh, & Gremler, 2004, p. 39). Amazon.com was the first one that offered consumers the opportunity to post their product comments on its website (Chen & Xie, 2004). Since then the number of websites where consumers can provide and read product reviews, and voice their complaints and opinions about all kinds of products and services, has expanded. It includes both online sellers

11 as well as third-party sites, such as Epinions.com. The result of the rise of these websites is that consumers have an enormous amount of information at their availability in order to make purchase decisions and it suggests that these online customer communications may have a significant influence on product search and product choice.

2.2.1 Comparing WOM and online WOM

There are several differences between traditional WOM and its Internet analogy. Traditional WOM is highly interactive in that people are communicating face-to-face with each other via spoken words and they can ask for immediate clarification or feedback (Sun et al., 2006). In contrast, online WOM is characterized by written communication and limited interactivity, since it is mainly one-to-many communication. Besides opinion exchange in chat rooms, most online communication does not occur simultaneously. Furthermore, the influence of traditional WOM is mainly limited to a social network (Brown & Reingen, 1987), whereas the Internet reaches far beyond local communities and allows people to share their opinions and experiences with others from all over the world (Chen & Xie, 2004). As a result, the WOM information available online is far more voluminous in quantity compared to information obtained from traditional contacts in the offline world. While tie strength can be either strong or weak in traditional WOM, in the online medium the information almost always comes from weak tie sources (Chatterjee, 2001). In addition, participation in online WOM is mainly anonymous (e.g., Jin et al., 2002; Ramaswami & Varghese, 2003). In most instances the identities of people who posted a product review are not revealed, so that for example age and gender are not known to the information seeker and cannot be used as cues to judge the trustworthiness and/or relevance of the review. However, trust is necessary for consumer reviews to be effective as decision-making aids (Smith, Menon, & Sivakumar, 2005). The online WOM receiver faces greater difficulty in judging the credibility of online product reviews, since the antecedents that are common in traditional WOM to determine information credibility, such as source similarity, expertise and accessibility (e.g., Fieck & Higie, 1992), are not very appropriate in the online context. Any evaluation of reviewer credibility or helpfulness is likely to come from the reviews themselves. Only recently, e-retailers such as

Amazon.com have attempted to address this problem by offering rating systems in which consumers provide feedback about the quality of information provided by a particular recommender. Others, such as Epinions.com, are going even further by giving reviewers the ability to make a profile in which he/she describes his/her background and interests. 12 On the other side, there are also similarities between offline and online WOM. One important resemblance is the unbiased nature of the information source. In general, consumer reviews are posted by people who do not have a stake in the organization, as is the case with conventional WOM and hence, they will state a rather objective opinion. This yields online product reviews being favored over marketer-dominated sources of information, as found by

Smith et al. (2005). The results of their empirical study on the relevance of peer

recommendations in decision making showed that respondents clearly preferred peer recommendations to sponsored ads. Moreover, the results suggest that many online customers adopt consumer reviews in order to reduce the amount of effort exerted during the online search process, irrespective of the reviewer's personal characteristics. Verifying this positive evaluation of consumer-driven sources of information on the Internet, Bickart and Schindler (2001) found that consumers who gathered information from online discussions (internet forums or bulletin boards) reported greater interest in the product topic than did those consumers who accessed marketer-generated sources of product information (i.e., corporate

web pages).

2.2.2 Empirical background on online WOM

Bailey (2005) examined whether consumers are aware of product review websites and the extend to which these sites are used in decision making. The results showed that 87 percent of the respondents were indeed aware of the existence of this online information source and a majority of the respondents were likely to visit product review websites either before or after product purchase, mainly for reassurance and as source of additional information. The impact of online recommendations on consumers' online choices was also the topic of research conducted by Sénécal and Nantel (2004). Their results showed that products were selected twice as often when they were recommended. The type of website on which the recommendation is published (i.e., retailer website versus independent third party website) did not have an influence on perceived trustworthiness and consumers' tendency to follow the recommendations. This suggests that customers seem to focus more on the recommendation itself than on the website where it appears. Research has also studied the effect of online WOM on companies' sales. In a comparison of Amazon.com and BN.com, two online book sellers, Chevalier and Mayzlin (2006) found that 13 the addition of a new favorable review at one site resulted in an increase in the book sales at that website relative to the other one. Furthermore, their findings suggest the strong impact of negative online WOM as compared to positive online WOM, since an incremental negative review was more powerful in decreasing book sales than an incremental positive review was in increasing sales. Similar effects of online WOM on sales have been found in the movie market. Online user-generated movie WOM significantly impacted aggregate and weekly box office revenues as reported by Liu (2006). These findings support the fact that firms can take advantage of stimulating active WOM communication among its consumers.

As explained before, WOM is a two-way communication process between opinion seekers (those who consult WOM) and opinion givers (those who spread WOM), both of which are essential to the construct of WOM (Flynn, Goldsmith, & Eastman, 1996; Reynolds & Darden, 1971; Sun et al., 2006). In the next sections, these two concepts will be discussed.