Abstract
In this study, we carry out an empirical analysis on how electronic word-of-mouth (hereinafter “e-WOM”) marketing on e-WOM websites and electronic-commerce websites on the Internet boosts consumption on a macro-level. In our analysis, we conduct a model analysis of consumer behavior using data composed of more than 30,000 questionnaire surveys and quantitatively find the elasticity coefficient of the boost to consumption by performing a two-step GMM (generalized method of moments), which uses instrumental variables. The results of the analysis show e-WOM significantly increased expenditures in six fields: computers, electrical appliances, etc.; music; hobbies; clothing, accessories, etc.; beauty products, etc.; and goods for everyday life, etc. Furthermore, there was no field that had a significantly negative value. These results showed that, in the majority of the target fields, e-WOM had not only the effect of winning customers from the competition, but also the effect of boosting consumption on a macro-level. In addition, even from people’s subjective evaluations, there were many in all the generational groups who said that e-WOM boosted expenditures.
Highlights
In our present society, the Internet, and the popularization of social media in particular, has made it possible for people to write and share various kinds of information at a low cost
We use the method of instrumental variables based on the above to estimate formula (1) for the computers, electrical appliances, etc., field, and Table 6 shows these results
In addition to conducting model analysis relating to consumer behavior using the data of more than 30,000 completed questionnaires, we quantitatively verified the elasticity coefficient of the boosting effect on consumption by applying a two-step generalized method of moments (GMM) that used instrumental variables
Summary
The Internet, and the popularization of social media in particular, has made it possible for people to write and share various kinds of information at a low cost. Such an analytical viewpoint is most important in discovering what effect word-of-mouth has on the sales of specific products and services from the short-term perspective of marketing These studies do not identify whether the customers have been snatched from the same market, or whether the reviews have served to stimulate consumer appetite and boost the level of consumption in the entire market. The second is the potential effect of increasing expenditures by way of a person who was not planning to consume, or who was planning to eat more cheaply, looking at word-of-mouth and having his or her appetite for consumption stimulated resulting in a higher priced purchase.
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