Articles

Herding and Social Media Word-of-Mouth: Evidence from Groupon

X. LI, L. WU

MIS Quarterly

December 2018, vol. 42, n°4, pp.1331-1351

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: Herding, word-of-mouth, social media, interaction effect, complementarity

https://misq.org/herding-and-social-media-word-of-mouth-evidence-from-groupon.html


Modern online retailing practices provide consumers with new types of real-time information that can potentially increase demand. In particular, showing past product sales information can reduce uncertainty about product quality, inducing consumers to herd. This effect could be particularly salient for experience goods due to their inherent high uncertainty about product quality. Social media word-of-mouth (WOM) can increase product awareness as product information spreads via social media, increasing demand directly and also amplifying existing quality signals such as past sales. This study examines the mechanisms behind the strategy of facilitating herding and the strategy of integrating social media platforms to understand the potential complementarities between the two strategies. We conduct empirical analysis using data from Groupon.com which sells goods in a fast cycle format of “daily deals”. We find that facilitating herding and integrating social media platforms are complements in generating sales, supporting that it is beneficial to combine the two strategies on social media-driven platforms. Furthermore, we find that herding is more salient for experience goods, consistent with our hypothesized mechanisms, while the effect of social media WOM does not differ between experience goods and search goods


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