Abstract
Cooperative (co-op) advertising investments benefit brand goodwill and further improve supply chain performance. Meanwhile, online word-of-mouth (OWOM) can also play an important role in supply chain performance. On the basis of co-op advertising, this paper considers a single supply chain structure led by a manufacturer and examines a fundamental issue concerning the impact of OWOM on supply chain performance. Firstly, by the method of differential game, this paper analyzes the dynamic impact of OWOM and advertising on supply chain performance (i.e., brand goodwill, sales, and profits) under three different supply chain decisions (i.e., only advertising, and manufacturers with and without sharing cost of OWOM with retailers). We compare and analyze the optimal strategies of advertising and OWOM under the above different supply chain decisions. Secondly, the system dynamics model is established to reflect the dynamic impact of OWOM and advertising on supply chain performance. Finally, three supply chain decisions under two scenarios, strong brand and weak brand, are analyzed through the system dynamics simulation. The results show that the input of OWOM can enhance brand goodwill and improve earnings. It further promotes the OWOM reputation and improves the supply chain performance if manufacturers share the cost of OWOM with retailers. Then, in order to eliminate the retailers from word-of-mouth fraud and establish a fair competition mechanism, the third parties (i.e., regulators or e-commerce platforms) should take appropriate punitive measures against retailers. Furthermore, the effect of OWOM on supply chain performance under a strong brand differed from those under a weak brand. Last but not least, if OWOM is improved, there would be more remarkable performance for the weak brand than that for the strong brand in the supply chain.
Highlights
Advertising, as a traditional tool of marketing communication, motivates consumer purchasing behaviors by persuasion and interest stimulation and increases product sales
To fill this research gap, this paper considers a single supply chain structure led by the manufacturer, and examines a fundamental issue about the dynamic impact of advertising and online word-of-mouth (OWOM) on supply chain performance
We considered a single supply chain structure which is led by the manufacturer, 5
Summary
Advertising, as a traditional tool of marketing communication, motivates consumer purchasing behaviors by persuasion and interest stimulation and increases product sales. Except for advertising, OWOM has deeply influenced consumers’ purchasing decisions and further affected supply chain performance (i.e., brand goodwill, sales, and profits) [12,13,14]. On the other hand, regarding the relationship between OWOM and advertising, Chen and Xie (2005) showed that manufacturing firms should choose advertising rather than price as a strategic variable in response to product reviews when there are enough consumers to evaluate the product’s attributes. To fill this research gap, this paper considers a single supply chain structure led by the manufacturer, and examines a fundamental issue about the dynamic impact of advertising and OWOM on supply chain performance (i.e., brand goodwill, sales, and profits). All proofs of results are in Appendixs A and B
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
