CONSUMER-TO-CONSUMER INTERACTIONS IN A NETWORKED
SOCIETY: WORD-OF-MOUTH THEORY, CONSUMER EXPERIENCES, AND
NETWORK DYNAMICS
by
Kerimcan Ozcan
A dissertation submitted in partial fulfillment
of the requirements for the degree of
Doctor of Philosophy
(Business Administration)
in the University of Michigan
2004
Doctoral Committee:
Professor Venkatram Ramaswamy, Chair
Professor Michael D. Johnson
Professor Coimbatore K. Prahalad
Professor Carl P. Simon
©
Kerimcan Ozcan
All Rights Reserved
2004
DEDICATION
I would like to dedicate this dissertation to two great human beings, who meant the world
to me and Venkat and are not with us anymore:
Gurbuz Ozcan (1942-2000)
Shiva Shankar Ramaswamy (2000-2000)
ii
ACKNOWLEDGMENTS
I wish to thank my dissertation chair Professor Venkat Ramaswamy for his unwavering
support and guidance throughout my doctoral studies and dissertation work; and my
committee members Professors Michael D. Johnson, C.K. Prahalad, and Carl P. Simon
for their invaluable comments and suggestions.
iii
TABLE OF CONTENTS
Dedication
ii
Acknowledg ments
iii
List of Tables
vii
List of Figures
viii
List of Appendices
ix
Chapter I.
Consumer-to-Consumer Interactions in a Networked Society
1
The Rise of the Network Society
1
Consumer-to-Consumer Interactions and Individual Choice
8
Overview of Dissertation
12
Word-of-Mouth Theory
13
Overview of Word-of-Mouth Theory
14
Micro- level Theory of Word-of-Mouth Supply
16
Micro- level Theory of Word-of-Mouth Demand
24
Macro- level Theory of Word-of-Mouth
31
Chapter II.
Word-of-Mouth as a Central Construct: Limitations
of Extant Research
33
A New Perspective on WOM: Dialogic Discourse
iv
39
Chapter III. Consumer Experiences and Pe rsonal Meaning
53
Consumer Experiences
53
Interactions, Experiences, and Personal Meaning
59
Discourse and Derivation of Personal Meaning
69
Towards a Discursive Theory of Consumer Value
72
Chapter IV. Dynamics of Consumer Networks
83
A Theoretical Model of Word-of-Mouth
83
Comparative Statics
84
Information Aggregation
87
Structural Mediation in a Triad
92
Modeling Consumer-to-Consumer Interactions
in Large Networks
95
Agent-based Modeling of Consumer Networks versus
Social Network Analysis
98
Small World Networks
103
Computational Experiments: Adoption Dynamics
104
Constructionist Network Models of Communities
107
v
Chapter V.
Conclusions and Directions for Future Research
115
Word-of-Mouth as Dialogic Discourse:
Implications for Research and Practice
115
Consequences of a Discursive Theory of Consumer Value
119
Extending the Structural Models and Analyses
126
Consumer Communities as an Emerging Force
129
Appendices
144
Bibliography
153
vi
LIST OF TABLES
Table
1.1
Approaches to Consumption Organizations
3
1.2
Spectrum of Consumer-to-Consumer Interactions
10
3.1
From Products to Experiences
56
4.1
Qualitative Summary of Simulation Results
105
5.1
From Segments to Communities
140
vii
LIST OF FIGURES
Figure
2.1
Micro- level Theory of Word-of-Mouth
15
2.2
Typology of Word-of-Mouth
37
3.1
TAKE Framework of Personal Meaning
65
3.2
The Discursive Consumer
70
3.3
Towards a Discursive Theory of Consumer Value
79
4.1
Some Illustrative Structures of Consumer Networks
104
4.2
General Approach of Constructionist Network Experiments
110
viii
LIST OF APPENDICES
Appendix
A
Experimental Setup for Small World Network Models
145
B
Small-World Network Results with SWARM Experiments
146
C
Experimental Setup for Constructionist Network Models
148
D
Constructionist Network Results with SWARM Experiments
149
E
Pseudo-Code of the SWARM Experiments
151
ix
CHAPTER I
CONSUMER-TO-CONSUMER INTERACTIONS
IN A NETWORKED SOCIETY
The Rise of the Network Society
A confluence of recent technological, economic, socio-political, and cultural
developments is signaling a broad transformation from an industrial society that has
characterized the last 150 years into, what is tentatively called, the “network society”. It
has been noted that “the telling feature of the modern world is not so much the size of its
GDP or the destructive power of its weapons systems but rather the fact that it is so much
more joined together than before” (Mulgan 1998), that “Everything is becoming
electronically connected to everything else: products, people, companies, countries,
everything” (Davis and Meyer 1998), that “Communication is the economy” (Kelly
1998), and that “The Internet is enabling conversations among human beings that were
simply not possible in the era of mass media… These networked conversations are
enabling powerful new forms of social organization and knowledge exchange to emerge”
(Levine 2000).
Manuel Castells, a sociologist who has dissected this phenomenon, notes that this
new social reality is taking shape around: (i) a new technological paradigm, whereby
knowledge-based, information technologies enhance and accelerate the production of
further knowledge and information in a virtuous circle; (ii) a new economy, that is
informational, global, and networked at its roots; (iii) a new cultural complex, that is
organized around electronic media (including the Internet) and saturated with a diversity
of messages and resources; and (iv) a new understanding of time-space, that tries to
1
annihilate time by compression and de-sequencing and shifts the notion of space from
places to flows (Castells 1996, 1997, 1998). The implication of this new social reality is
quite profound as it suggests an ongoing shift from the dominant paradigm of “marketbased” organizational form of consumption to a “network-based” one.
Organizational form of consumption, here, refers to the way consumers stand
against producers and the way they stand against each other. To understand why the shift
from “market-based” to “network-based” organizational forms of consumption is not a
simple one, we can compare the two based on the central constructs of each approach,
organized around four dimensions:
1. emergent logic: concepts that seem to have given rise to or arisen out of the
phenomenon of interest. Typically, constitutive parts or conditions of a process
that are returned as outputs lend agility and resiliency to the phenomenon. Two
concepts, organizing principle and organizing theme (roughly analogous to
antecedent and consequent), serve to define the emergent logic of a phenomenon.
2. structural categories: organize the concepts of action and structure. Here, the
objective is to circumscribe the elementary action that constitutes the entity, and
its structural environments.
3. systemic features: concepts that have been generally associated with systems
theoretic research (Parsons and Smelser 1956): adaptation, goal-attainment,
integration, and latent-pattern maintenance. Adaptation refers to the part or
process through the realization of which the system remains resilient in the face of
external challenges and failures. Goal-attainment refers to that part or process
through which the goals of the system are determined and enforced (i.e.,
2
governance). Integration refers to the part or process, through which all internal
parts or processes are practically coordinated into a whole. Latent-pattern
maintenance refers to the part or process, through which all internal parts or
processes are provided a sustained motivational energy (i.e., constitution).
4. access properties: concepts aimed to capture the ways, by which actors from
within and without the entities access and inter-act with the entities. Three such
concepts are the information content, consumer’s attitude, and producer’s
attitude.
The contrast between “market-based” and “network-based” forms of
organizational consumption, on these conceptual dimensions, is shown in Table 1.1
below.
Table 1.1 Approaches to Consumption Organizations
Central Construct
Conventional Paradigm
Markets
Emerging Paradigm
Networks
Organizing principle
Organizing theme
Transaction
Equilibrium
Relationship
Disequilibrium
Structure
Action
Decentralized
Reciprocal exchange
Multiple centers
Directed exchange
Adaptation
Goal-orientation
Integration
Latent-pattern maintenance
Commodification
State
Transparency
Law
De-commodification
Emergent
Trust
Ethos
Information content
Consumer’s attitude
Producer’s attitude
Price
Teleological
Strategic
Quality
Communicative
Communicative
Market-based organizational form of consumption is built on the principle of
transactions . One-time encounters (i) between the producers and the consumers and (ii)
3
amongst consumers themselves, without any trace of prior involvements or future
commitments, create a tendency toward equilibrium, as (i) producers get to understand
the full variety of consumer wants and preferences and consumers get to check out the
full variety of offerings in the market, and (ii) any information a consumer might possess
about a certain aspect of consumption is randomly diffused across the consumer
population.
These transactions necessarily take the form of reciprocal exchange in a
decentralized structure. Immediate reciprocity makes an expansion of points of
transaction in space and time possible. Conversely, transactions in expanded spatial and
temporal regions require reciprocity. Because of the condition of reciprocity, transactions
between consumers are limited to very general aspects of consumption such as price and
place information.
Markets are resilient to challenges from other organizational forms of
consumption, by virtue of their capability to commodify any object or activity, which
might try to defy the market logic. Since consumers stand against each other in the form
of a market, they are commodified as well (labor market, marriage market, etc.). In a
world where many objects and activities have already been commodified, price becomes
the single valid currency. A non-commodity receives its valuation with reference to
commodities and hence receives an imputed price. Once this happens, the way is opened
for its commodification.
State has a vested interest in ensur ing the full efficiency of the markets, as the
health of economy, and hence the state’s legitimation, depends on maintaining a balance
between supply and demand. When there is sufficient transparency for others to observe
4
the reciprocal exchanges that transpire, reciprocal exchanges concatenate and establish a
binding norm. There is a practical understanding shared by all market participants that the
laws set clear guidelines on what constitutes a legal transaction. However, they rarely
have to be invoked explicitly.
When coming to the market to transact, consumers have a teleological attitude,
fulfilling their needs. On the other hand, producers have a more strategic attitude, i.e.,
convincing the consumer to make the purchase.
Network-based organizational form of consumption exhibits divergences from its
market version in several respects. In networks, consumer-consumer and consumerproducer relationships take an institutional character. Since producers and consumers
(and consumers against each other) are not joined in a frictionless market, the knowledge
of each party about the opposite side (taken in its entirety) is less than what it is in a
market. Producers (consumers) have to fight vigorously to lure consumers away from
existing relationships, both in terms of innovative activity and marketing activity. Hence,
there is a tendency towards disequilibrium.
These relationships necessarily take the form of directed exchange in multiple
centers , where one side of the exchange can have a positive or a negative balance at any
particular time (credits vs. obligations). Temporal displacement of exchange payments
makes it imperative for the parties to remain in spatial proximity. Hence, both producers
and consumers and consumers against each other swarm around certain centralized
locations. Conversely, relationships in centralized spatial locations allow for temporal
displacements in payments and hence for directed exchanges. Since relationships can be
sustained in a directed exchange format, relationships between consumers can go beyond
5
the general aspects of consumption and include more substantive issues such as quality,
reliability, and durability.
Networks are resilient to challenges from other organizational forms of
consumption, by virtue of their capability to de-commodify objects or activities, which
might try to defy the network logic. Since consumers stand against each other in the form
of a network, they are de-commodified as well. In a (liberated) network world, where
some objects and activities have been de-commodified, quality comes to pass as the valid
currency. A commodity receives its valuation with reference to non-commodities and
hence receives an imputed quality. Once this happens, the way is opened for its decommodification. No particular party has a vested interest in ensuring the full efficiency
of the network, hence, goals of the network emerge as a collective effort. When there is
sufficient trust for others to observe the directed exchanges that transpire, directed
exchanges concatenate and establish a binding norm. There is a practical understanding
shared by all network participants that the ethos sets clear guidelines on what constitutes
an ethical relationship. However, they rarely have to be invoked explicitly.
When they attach to the network to relate, consumers carry a communicative
attitude, pursuing their personal projects. Similarly, producers have a communicative
attitude too. This “convergence” in both the consumer’s attitude and the producer’s
attitude forms the basis of the framework proposed by Prahalad and Ramaswamy (2004)
entailing “co-creation” of value jointly by firms and consumers, where the nature of the
relationship between producers and consumers entails intense and purposeful interactions
from the consumer’s perspective.
6
The core underlying dynamic of the network society is the increased scale and
scope of interactivity between individuals. This difference turns out be more than trivial
for not only the phenomena we witness, but also the science we use to study the
phenomena. What is called the network perspective, that is emerging in multiple
scientific circles, is a third alternative that respects the socially embedded nature of
human action (Polanyi 1957) in social science, which has instead traditionally veered
between two opposite explanatory poles: an oversocialized view of human action with
cultural norms and values as the sources of solidarity and conflict versus an
undersocialized view with individual attributes and interests as the sources of cooperation
and competition (Granovetter 1985). In the network view, however, the location in a
pattern of social relations shapes the behavior of individual units (Powell and SmithDoerr 1994). In contrast with rational choice models, human preferences are taken to be
endogenous and in need of explanation (Mizruchi 1994). Hence, whereas earlier
approaches sorted individuals into categories based on attributes and attitudes, networkoriented studies focus on relations between individuals, not as “multiple duets” but as a
totality of network interactions (Wellman 1988).
Hence, at the core of this dissertation I will examine interactions in general, and
consumer-to-consumer interactions in particular. The next section clarifies the scope of
theoretical possibilities once this premise has been acknowledged.
7
Consumer-to-Consumer Interactions and Individual Choice
Researchers have extensively studied firm-to- firm interactions to understand
market structure and dynamics. The phenomenon of interest has been the set of strategic
choices firms make. Game theoretical methodology has provided much of the technical
infrastructure for such studies (Fudenberg and Tirole 1991). Within the theory of
industrial organization, in particular, this has typically meant looking at price and quality
competition, vertical control, entry and exit, reputation, patent races, etc. (Tirole 1988).
As part of this endeavor, firm-to-consumer interactions have been conceptualized,
measured, and analyzed as well. However, there has not been a comparable effort to
systematize and formalize consumer-to-consumer interactions in relation to the choices
consumers make. Consumers are typically assumed to make choices for themselves from
among a set of alternatives provided by the producers. Interactions with other consumers
are only of a side interest; any such structural phenomena are relegated to social
psychological or sociological research as deviations from the ideal. However, as we will
show, consumer-to-consumer interactions can have a fundamental and central role in
individual choices and market mechanisms. To see why, let us take a closer look at
choices and markets.
Understanding and modeling of how individuals and organizations make choices
is a fundamental research enterprise in many branches of social science. Marketing, in
particular, is uniquely positioned in this endeavor, since consumption is one of the few
domains, in which a modern individual gets to make many choices on a daily basis. Some
recent developments such as industry deregulation, globalization, information revolution,
and the Internet, have compounded and complicated the choice problem, both for the
8
consumers and the analysts. Each passing day, category boundaries are blurring,
competitive offers are increasing, stocks of information are accumulating, and
media/retail channels are expand ing. Marketing theory and practice have responded to
these challenges with a variety of innovations in collecting (e.g. scanner, click-stream),
storing (e.g. single-source, database), analyzing (e.g. data mining, Bayesian methods),
and theorizing (e.g. random utility theory, behavioral decision theory) consumer choice
data. There is one aspect, however, which has not sufficiently figured in prior research,
namely, the increasingly networked character of society, ramifications of which go
beyond choice proper, morphing consumption at large.
Market societies are governed by the logic of markets, which stipulates the social
harmonization of competing ends and scarce means through the institution and mediation
of markets, i.e., frictionless strata of exchange accessible to all interested parties. Here,
individuals and organizations make choices independently of each other via the mandate
of the price mechanism. Network societies, in contrast, operate under the logic of
networks, which promises social order through the cultivation and activation of networks,
i.e., viscous webs of dialogue attachable to all qualified parties. Choices of individuals
and organizations are interdependent, concretely accomplished through the practice of
interpretation (hermeneutics). In many places of the world and in many domains of
human activity, market is the dominant form of social organization. Increasingly, network
comes to supplement and even supplant the market form of organization. For purposes of
practical relevance, we want to look at this hybrid phase, where majority of human
choices occurs within and through markets, with networks mediating important choice
processes.
9
Looking at the broad spectrum of phenomena pertinent to consumer choice, we
can already recognize a string of hybrid types, in which features of a network
organization become increasingly prevalent: network externalities, information cascades,
fashions, word-of- mouth, and consumer communities (as shown in Table 1.2).
Table 1.2 Spectrum of Consumer-to-Consumer Interactions
Perfect Market
Network
Externalities
Information
Cascades
Fashions
Word-of-Mouth
Plans
Independent
Interdependent
Mechanism
Price
Price
Institution
Exchange
Exchange
Interdependent
(partially)
Interdependent
Price +
Interpretation
Price +
Interpretation
Price +
Interpretation
Exchange
Interdependent
Exchange
Exchange +
Dialogue
Network externalities are said to exist in a particular context, when the expected
utility associated with an alternative depends directly on the choices made by other
consumers (Katz and Shapiro 1985). Although the label can be misleading, choices
associated with network externalities are qualitatively closest to the ideal type of choice,
characteristic to market societies: except for the interdependency of choices across
individuals, this scenario maintains the familiar characteristics of a market organization,
namely, exchange as the arbiter of supply and demand, and price mechanism as the
common reference frame for choices.
Information cascades are set into motion when consumers make choices using
others’ choices as a diagnostic for choice-relevant information that is publicly
unavailable (Banerjee 1992; Bikhchandani, Hirshleifer, and Welch 1992). Exchange
10
remains the sole institution of supply/demand adjustment. There is partial
interdependence between the choices of individuals on the cascade, i.e., later choices
depend on the earlier ones but not vice versa. Choices, in the aggregate, reflect the
workings of the price mechanism and the interpretative activities of consumers, as
consumers infer information from observed choice.
One step closer to the network form, fashion defines a cyclical process in which
trendsetters choose a novel alternative, followed by mainstreamers once sufficient
legitimacy appears to exist, at which time trendsetters abandon the alternative and choose
another novelty (Miller, McIntyre, and Mantrala 1993). Not only is there full
interdependence between the choices of consumers within and across trendsetter and
mainstream populations, but also interpretation operates alongside with the price
mechanism in the consummation of choices, as consumers need to understand the
meaning of a fashion statement and the identity of the consumer carrying that statement
in order to determine the incidence and timing of their choices. Once again, it is only
through exchange that competing ends and scarce means are harmonized.
Word-of- mouth differs from the previous types of network phenomena in that
dialogue between consumers becomes instrumental in adjusting supply and demand in
addition to exchange (Arndt 1967a; Reingen and Kernan 1986). Choices are
interdependent as choice-related information, opinion, and influence flow between
consumers. Similarly, choices are realized through the price mechanism and
interpretative methods. At a minimum, word-of-mouth requires the existence of specific
and sustained social relationships between consumers. In a networked society, word-ofmouth emerges as a central (not peripheral) phenomenon. The need and potential for
11
word-of-mouth among consumers has dramatically increased with the challenging choice
environments and revolutionary communication technologies existing now. Moreover,
word-of-mouth functions as a stepping stone for understanding the more complicated
network phenomena of “consumer communities” ” that can challenge the traditional firmcentric view of value creation (Prahalad and Ramaswamy 2004). As noted by Prahalad
and Ramaswamy, consumers now have the ability to be originators of their relationship
with companies. The market becomes a “forum” in which consume r-to-consumer
interactions shape the interactions between firms (producers) and individuals
(consumers). Dialogue (not just exchange) emerges as a theoretical basis for word-ofmouth and individual choice, as discussed in the next chapter.
Overview of Dissertation
The rest of this dissertation is organized as follows: In chapter 2, I discuss the
process of consumer-to-consumer interactions through word-of- mouth. In chapter 3, I
discuss the content of consumer-to-consumer interactions. In chapter 4, I discuss the
(network) structure of consumer-to-consumer interactions. Finally, I conclude this
dissertation with a discussion of results and directions for future research.
12
CHAPTER II
WORD-OF-MOUTH THEORY
As I suggested in the previous chapter, marketing scholars have extensively
studied firm- to-firm and firm-to-consumer interactions to understand and influence
market structure and dynamics. These problems are taken up in disparate sub-areas such
as marketing strategy, distribution channels, services marketing, and personal selling.
However, there has been relatively little effort to systematize and formalize consumer-toconsumer interactions, other than studying it as an extension (e.g. diffusion) or diversion
(e.g. brand communities) of the conventional marketing paradigm. This is a substantial
gap in the marketing literature since the space of consumer-to-consumer interactions,
especially of word-of- mouth, has expanded to mind-staggering levels in the Internet era
in terms of sheer range and volume.
A spate of recent articles and books in popular press already notes an increasing
interest in word-of- mouth (Dye 2000; Gladwell 2000; Godin 2001; Khermouch and
Green 2001; Rosen 2000; Silverman 2001). These accounts rely exclusively on anecdotes
and speculations. Word-of- mouth is used as a catchall term to explain mysterious
marketplace forces. There is little understanding or consensus about what word-of- mouth
is, how, when, and why it works. Scholars, too, have repeatedly lamented about the
paucity of a common theoretical basis (Arndt 1967b; Bayus, Carroll, and Rao 1986;
Goldenberg, Libai, and Muller 2001; Holmes and Lett 1977; Rogers 1995).
In this chapter, I will argue for making the Word-of-Mouth (WOM) construct
more central to marketing, and making the form, content, and practice of consumer-to-
13
consumer interactions as an integral domain of marketing phenomena. As the role of the
consumer shifts from a traditional passive role to a more active role, consumer-toconsumer interactions, word-of- mouth, and consumer communities become central, not
peripheral to the development of marketing strategy (Prahalad and Ramaswamy 2000,
2004).
In the next section, I present a review of the extant literature on word-of- mouth
theory. I will provide the conceptual framework with a typology and definition of wordof- mouth, a theoretical synthesis of existing literature, and a critical assessment of the
theory, methodology, and empirical work. Then, I will propose a new perspective of
word-of-mouth based on the concepts of dialogue and discourse.
Overview of Word-of-Mouth Theory
Let us begin by considering a WOM episode between two individual consumers,
at the micro level. Word-of-mouth studies at the micro level tend to make a distinction
between WOM supply and demand based on the assumption that one of the parties is a
net source and the other is a net recipient of word-of- mouth, although in any actual wordof- mouth episode, recommendations, opinions, information, and influence are likely to
flow both ways.
As shown in Figure 2.1, we can analyze the literature in terms of the antecedents,
consequences, and moderators of word-of- mouth, based on four general constituent
factors for word-of- mouth at the level of the participant: Product (covering the
consumption entity), self (related to the human entity), other (corresponding to the social
relation) and context (accounting for everything else).
14
Figure 2.1 Micro-level Theory of Word-of-Mouth
Antecedents:
Product
Decision-making: cognitive clarity,
decision support and justification,
cognitive dissonance
Affects: joy, interest, anger, disgust,
contempt, surprise, sadness
Attitudes and judgments: brand, quality,
value, convenience, satisfaction
Behaviors: intention, commitment,
loyalty, complaint
Involvement: enduring, situational,
product importance
Moderators:
Information search
Decision type: information value,
perceived risk
Cognitive clarity
Marginal cost/benefit analysis
Product type: compatibility with
norms, relative advantage,
complexity, visibility
Decision anxiety
Task difficulty
Social definition of consumption
Evaluative cues
Marketing stimuli: advertising,
sales call
Initiative
Consequences:
Prior affective disposition and
interest
Evaluation stage
Moderators:
Failure: severity, controllability,
stability, blame
Recovery: likelihood, timeliness,
justice, repatronage intention
Consequences:
Loyalty
Interest and consideration
Attitudes and judgments
Self
Self-confirmation
Schema congruency
Accessibility/diagnosticity of other
information
Beliefs and expectations
Antecedents:
Product
Antecedents:
Product expertise
Intention and purchase
15
Ego-defense and
projection
Instrumental motives
Antecedents:
Social status and power
seeking
Status seeking
WOM
Supply
Moderators:
Demographics: age, size
(business), ownership (business)
Personality: opinion leadership,
market maven, innovativeness,
self-consciousness
Consumer
to
Consumer
Interaction
Moderators:
WOM
Demand
Innovativeness
Centrality
Ability to evaluate
Attitudes: complaining
Moderators:
Time availability
Native culture
Status, prestige, social class
Moderators:
Context
Collectivism
Exchange spirit: altruism, sensitivity
to resource distribution, ability to
support sequential exchange,
opportunity cost, schedule of
information arrival
Self
Antecedents:
Other
Other
Antecedents:
Moderators:
Social obligation
Attractiveness, similarity
Collective choice
Credibility, expertise,
commitment
Involvement
Moderators:
Other’s purchase,
outcome, satisfaction
Obligation
Tie strength
Larger conversation
Perceived need
Risk of failure
Adopter category
Tie strength
Clarity of communication
Context
Absolute/relative location
Competitive environment
Group norms
Micro-level Theory of Word-of-Mouth Supply
PRODUCT
Antecedents. Early on during the information search process, a consumer can
receive product information that is incongruent with other information in the environment
or his existing cognitive schema. This will motivate him to interpret, simplify, and
restructure the meanings and implications of the ambiguous situation by engaging in
verbal exchange with another consumer (Arndt 1967b). As the consumer moves closer to
purchase, he might feel the need for support, justification, and legitimization, hence a
conversation with another consumer will help meet those needs (Gatignon and Robertson
1986). Following a purchase, which has created significant levels of cognitive dissonance
for the consumer, the consumer will attempt dissonance-reducing activities, such as
talking to dissident associates to win them over, engaging in conversations with
similarly- minded others to gain their backing, or persuading neutrally-standing members
of the social group in his favor (Arndt 1967b).
Westbrook (1987) has demonstrated that positive (i.e., joy, interest, surprise) and
negative (i.e., anger, disgust, contempt, surprise) affects following a product success or
failure can create a tens ion that calls for discharge often in the form of word-of- mouth
behavior (see also: Mooradian and Olver 1997). More recent research has added sadness,
satisfaction, and pleasure to this list of affects (Neelamegham and Jain 1999; Nyer 1997).
Affectively charged encounters and relations between a consumer and a service provider,
such as bonds of empathy, care, rapport, and trust, have similarly been shown to lead to
positive word-of- mouth behavior (Bloemer, Ruyter, and Wetzels 1999; File, Judd, and
Prince 1992; Gremler and Gwinner 2000; Gremler, Gwinner, and Brown 2001; Zeithaml,
16
Berry, and Parasuraman 1996). As people prefer to maintain a positive tone in their
conversations with other people, favorable overall attitudes toward a brand can result in
higher levels of word-of- mouth activities (Holmes and Lett 1977).
The link between judgment of quality and word-of- mouth has also received
considerable research attention (Bloemer et al. 1999; File et al. 1992; Harrison-Walker
2001; Hartline and Jones 1996; Zeithaml et al. 1996). In this stream of research, word-ofmouth is seen as a behavioral response to an outcome of quality along the lines of
Hirschman’s (1970) exit- voice- loyalty scheme. For some consumers, word-of- mouth is
an “exit” response to frustration with quality, a way to vent off feelings of anger before
complete abandonment of the provider. For some, it is a behavioral manifestation of a
latent “loyalty” construct, an act of evangelism. For some others, it is a “signal” or
“voice” consumers try to indirectly communicate to the firm as regards to their bonding
or leaving intentions, when direct communication channels for feedback or complaint to
provider are difficult to utilize or nonexistent. In service contexts, several variables that
are thought to be dimensions of service quality, such as reliability, assurance, tangibles,
recovery, responsiveness, have been also found to correlate highly with word-of- mouth
behavior (Athanassopoulos, Gounaris, and Stathakopoulos 2001; Bloemer et al. 1999;
File et al. 1992; Hartline and Jones 1996; Richins 1983; Swanson and Kelley 2001;
Zeithaml et al. 1996).
Satisfaction or dissatisfaction with a product or service is probably the single most
widely studied and confirmed antecedent of word-of- mouth in marketing literature
(Anderson 1998; Athanassopoulos et al. 2001; Biyalogorsky, Gerstner, and Libai 2001;
Blodgett, Granbois, and Walters 1993; Bowman and Narayandas 2001; Brady and
17
Robertson 2001; File, Cermak, and Prince 1994a; Lau and Ng 2001; Marquis and
Filiatrault 2002; Meuter et al. 2000; Mooradian and Olver 1997; Richins 1983; Singh and
Pandya 1991; Soderlund 1998; Swan and Oliver 1989; Westbrook 1987; Yu and Dean
2001). As in quality judgments, satisfaction can lead to word-of-mouth via an exit- voiceloyalty logic. Satisfaction/dissatisfaction research, largely, adopts the view that negative
word-of-mouth is a species of complaint behavior. To the extent that satisfaction has
affective bases (e.g., Westbrook and Oliver 1991), the argument given earlier about the
affect to word-of- mouth route has validity as well (Westbrook 1987). Satisfaction can
lead to word-of-mouth supply via other routes, when joined with other antecedents due to
“self” and “other.” In those instances, satisfaction judgments become resources that
facilitate those other mechanisms.
Several behavioral constructs centered on the product are very effective in
motivating a consumer to pass along word-of- mouth advice or warnings. Having engaged
in a complaining behavior episode recently makes those thoughts and emotions about the
product salient in one’s short-term memory. They will most likely resurface in one’s
conversations with others (Westbrook 1987). Commitment and loyalty about a product,
on the other hand, are similarly charged and salient, but positive, psychological states that
will find their way into word-of- mouth conversations, if for no other reason than
reconfirming one’s cognitive, affective, and behavioral investments (Gremler and Brown
1999; Hennig- Thurau, Gwinner, and Gremler 2002; Reynolds and Arnold 2000).
Involveme nt with a product, a hybrid psychological modality, equips a consumer
with the ability and motivation to initiate product-related conversations with others.
Dichter (1966) observed that one’s frequent and/or intense occupation with a product or
18
service produces excess thoughts and emotions that can be easily recalled in word-ofmouth episodes, oftentimes willfully so, in order to relieve the tension or relive the
experience. Intense involvement with advertising messages, likewise, creates a readiness
and willingness to engage in word-of- mouth about the message or the product.
Reviewing prior empirical evidence, Arndt (1967b) confirmed this association between
involvement and word-of-mouth transmission. Furthermore, Holmes and Lett (1977)
found that usage rate, an antecedent of involvement, and purchase intention, a
consequence of involvement, are both positively associated with word-of- mouth
behavior. The latter association was corroborated by other researchers as well (Blodgett
et al. 1993; Bloemer et al. 1999). However, a distinction between enduring involvement
which results in word-of- mouth about product news versus situational involvement
following a recent purchase which produces word-of- mouth about personal experience,
seems to be warranted (Richins and Root-Shaffer 1988). Dissatisfaction with a product
deemed to be important by the consumer is especially loaded with word-of- mouth
potential (Blodgett et al. 1993).
Consequences. No empirical study has been conducted so far, to our knowledge,
to study the consequences of word-of-mouth communication on the source. Several
recent studies have suggested a positive association between word-of- mouth and loyalty
but a causality relation cannot be reliably asserted at this time (Gremler and Gwinner
2000; Hennig- Thurau et al. 2002; Kim, Han, and Park 2001; Soderlund 1998).
Moderators . Researchers have been able to isolate several factors that moderate
the incidence, extent, and valence of word-of- mouth activity. Price sensitivity for the
product, for one, has been found to correlate highly with word-of- mouth transmission.
19
Following a dissatisfactory experience, consumers have been shown to engage in more or
less word-of-mouth conversations depending on the severity (Brown and Beltramini
1989; Richins 1983), inconvenience (Brown and Beltramini 1989), controllability
(Blodgett et al. 1993; Blodgett, Wakefield, and Barnes 1995; Brown and Beltramini
1989), and stability of the problem (Blodgett et al. 1993; Blodgett et al. 1995; Swanson
and Kelley 2001), as well as the perceived likelihood of a successful redress (Blodgett et
al. 1993; Blodgett et al. 1995). Consumers’ attribution of failure on their selves versus on
the marketing organization will have a moderating effect on word-of-mouth behavior as
well (Meuter et al. 2000; Richins 1983; Swanson and Kelley 2001). Positive outcomes
regarding complaint handling and redress, such as the distributive and interactional
justice of the redress arrangement and the timeliness of recovery, can yield favorable
consequences for a provider as consumers tend to say more positive things about the
provider (Blodgett and Anderson 2000; Blodgett et al. 1993; Blodgett et al. 1995; Swan
and Oliver 1989; Swanson and Kelley 2001).
SELF
Antecedents. Word-of-mouth conversations can be entered into in order to
advance the interests of the self. In these situations, product-related comments, opinions,
disclosures, and recommendations serve as mere accessories. Whyte (1954) vividly
documented how consumers used latest product news or experiences as “conversational
gambits” in social exchanges with their neighbors. Dichter’s (1966) research revealed
that consumers construct, assert, and affirm their sense of self as they use word-of- mouth
as a tactic to gain attention, exhibit connoisseurship, suggest pioneering spirit,
demonstrate insider information, connote status, evangelize, confirm own judgment, and
20
assert superiority. Arndt (1967b) cited evidence from prior rumor literature on egodefense and projection motives of word-of- mouth behavior, i.e., deflecting blame onto
products and services in an effort to maintain self-esteem and to save face. Gatignon and
Robertson (1986) argued that social exchange theory would predict word-of- mouth
supply to be motivated by status and power needs.
Moderators : Several demographic, psychographic, and personality variables
have been studied to establish their moderating influence on word-of-mouth behavior.
Age moderates word-of- mouth as older consumers tend to supply more referrals, most
probably because of their larger social networks built over the years (File, Mack, and
Prince 1994b; Gremler and Brown 1999). In business-to-business contexts, buyers of
privately or family owned firms transmit more word-of- mouth as do buyers of smaller
and less-experienced firms (File et al. 1994a; File et al. 1994b). Consumers under high
time pressures will be less likely to enter into word-of- mouth conversations (Gatignon
and Robertson 1986). Some empirical evidence suggests that higher social status and
social class restrains word-of- mouth communications (to consumers lower in status and
class) whereas higher prestige seems to facilitate word-of-mouth submissions (see Arndt
1967b for a review).
Research has shown that, following dissatisfaction, consumers with favorable
attitudes toward complaining will take their case to the company first and only if that
fails will they engage in word-of- mouth behavior (Blodgett et al. 1993; Blodgett et al.
1995; Singh and Pandya 1991).
Over the years, significant research attention has been devoted to determining the
personality-related moderators of word-of- mouth supply behavior. Lazarsfeld et al.
21
(1944) had introduced the two-step flow theory of communication which had a group of
people they called “opinion leaders” as its linchpin. Subsequent research identified the
personality characteristics and word-of- mouth propensity of opinion leaders (King and
Summers 1970; Myers and Robertson 1972; Richins and Root-Shaffer 1988). Similarly,
innovativeness has been advanced as a personality trait that is associated with high levels
of word-of- mouth generation potential (Engel, Kegerreis, and Blackwell 1969; Midgley
and Dowling 1978; Rogers 1962). Recently, researchers have suggested “market maven”
as a category of people who tend to disseminate word-of- mouth in many product
categories (Feick and Price 1987).
Finally, the personal ethical philosophy one adopts has a moderating influence on
word-of-mouth behavior as well. People with altruistic ethical convictions tend to
participate more in word-of- mouth activities (Arndt 1967b; Frenzen and Nakamoto 1993;
Price, Feick, and Guskey 1995).
OTHER
Antecedents. One’s involvement and concern with other consumers can result in
word-of-mouth behavior as well. Dichter (1966) proposed sentiments of neighborliness,
care, friendship, and love as motives for sharing with other consumers enthusiasm in and
benefits of products and services used. Following their social exchange model of
interpersonal communication, Gatignon and Robertson (1986) hypothesized that word-ofmouth information and advice would be transmitted or suppressed depending on the stock
of obligations one has towards, or expects from, another consumer. Simply observing
another consumer’s need that can be fulfilled with a product or service one is familiar
22
with can result in word-of- mouth occasions as well (Mangold, Miller, and Brockway
1999).
Moderators : Research done by Festinger et al. (1950) showed how the
transmission of information and opinions between individuals depended on the relevance
of the topic for the group and its normative structure. Along similar lines, Katz et al.
(1955) demonstrated that situations of collective problem solving stimulate word-ofmouth conversations. A consumer’s propensity to engage in word-of-mouth might be
moderated by the strength of the social tie that exists between himself and the potential
recipient. This has been suggested and experimentally validated by Frenzen and
Nakamoto (1993) who argued that in informational environments beset with moral
hazards consumers would share valuable information with their close friends and
relatives only, avoiding distant acquaintances.
CONTEXT
Moderators . Social, economic, and cultural variables of the consumption
environment moderate the word-of-mouth supply behavior. Collectivistic cultures
encourage word-of- mouth referrals as demonstrated by Price et al. (1995). One’s
economic standing in terms of the resources controlled and the sensitivity to
distributional shifts as well as one’s ability to support sequential exchange as conditioned
by the economic environment determines the propensity of transmitting word-of- mouth
information as shown by Frenzen and Nakamoto (1993). These authors concluded that
the opportunity cost of information to be disclosed and the schedule of information
arrival will moderate the word-of- mouth dissemination. In social environments where
generalized exchanges can be sustained, however, reception of word-of- mouth from
23
someone on one occasion will encourage the transmission of word-of- mouth to someone
else on a different occasion (File et al. 1994a).
I will now review the demand side of WOM episodes.
Micro-level Theory of Word-of-Mouth Demand
PRODUCT
Antecedents. Several product-related antecedents that motivate a consumer to
seek word-of- mouth from a source have been identified in the literature. Contrary to
widespread belief, word-of- mouth conversations can be demanded not only during the
evaluation stage of a rational consumer decision- making process but also when there is
not even a recognized need for a product yet. Such conversations can be initiated by a net
word-of-mouth recipient upon exposure to an intriguing advertising message or sales call
(Bayus 1985; Dichter 1966; Mangold et al. 1999).
Dichter (1966) talked about the ‘aha’ experience which, contra mass
communications, only occurs through a word-of-mouth exchange when the consumer
genuinely comprehends the problem or the solution and why that solution is the right
solution for him through ‘expressive movements’, better understanding of needs, tangible
evidence, or secrecy/hesitation in conversational settings. Such ‘aha’ experiences are
appreciated and consciously sought after, hence consumers engage in word-of-mouth
conversations.
Researchers from the rational choice tradition, on the other hand, have argued that
information search is a mere matter of marginal cost/benefit analysis and consumers will
24
switch from mass media to personal sources if and when it is marginally better to do so
(Cox 1967; Gatignon and Robertson 1986; Hauser, Urban, and Weinberg 1993).
Another established tradition, diffusion of innovations, holds that one’s stage in
the adoption decision process will determine whether mass media or word-of- mouth
sources will be consulted to proceed further in the adoption process (Rogers 1962).
Accordingly, mass media is more useful in earlier stages of the adoption process (i.e.,
awareness and interest) whereas word-of- mouth is the preferred communication channel
for later stages (i.e., evaluation and adoption). The now-classical diffusion of medical
innovations study by Coleman et al. (1966) made the argument that word-of- mouth is
used not only to acquire vicarious learning experience that reduces risk and uncertainty
(more recently Bansal and Voyer 2000) but also to legitimize one’s decision by deferring
to the peer group, none of which is available through traditional mass media channels.
Other authors defined word-of- mouth’s role as one of clarifying the social meanings of
consumption objects, dispelling social ambiguity, and providing lifestyle guidance
(Gatignon and Robertson 1986; Katz et al. 1955; Whyte 1954).
Last but not least, word-of- mouth communication can relieve one of decision
anxiety which is typically what separates intention from adoption (Gatignon and
Robertson 1986).
Consequences. Following a word-of-mouth conversation, several consequences
obtain with respect to the product. In a recent study, Bickart and Schindler (2001) found
that exposure to word-of- mouth information from others increased consumers’ interest in
the topic as those sources are perceived to be more credible, relevant, and empathic.
25
Word-of- mouth has been shown to influence a recipient’s expectations with
regard to service quality (Webster 1991), a result which is likely to hold for products as
well.
In the context of movies, Eliashberg et al. (2000) have found that, upon receiving
positive word-of- mouth from others, consumers move from undecided status to
considerer status which might result in adoption if a movie-going occasion presents itself
before too long.
Arndt (1967b) observed that, because of its reliability, trustworthiness, social
support, pressure, and surveillance qualities, word-of-mouth leads to attitude and
behavior change or resistance. In simulated word-of- mouth experiments, for example,
Herr et al. (1991) found that exposure to word-of- mouth resulted in significant
differences in terms of product judgments vis-à-vis a control group. In a similar
experimental setup, Bone (1995) obtained significant effects for post-usage product
judgments as well. Finally, studies have also shown the influence of word-of- mouth
information on purchase intents (e.g., Hauser et al. 1993).
Moderators . Arndt (1967b) identified several product-related factors that
moderate the effects of antecedents on the decision to seek out word-of-mouth. Products
that are compatible with existing group norms, that have a relative advantage, and that are
more publicly visible (see also Bearden and Etzel 1982 on reference group research) have
greater word-of- mouth potential. Complexity of the product might go either way, as it
gets more difficult to hold word-of- mouth conversations with everyone to the same
degree of sophistication but the pressure to resolve the informational tasks is so much
greater. Duhan et al. (1997) showed that product decisions with higher levels of task
26
difficulty enlist word-of- mouth sources with stronger social ties. The same research,
however, also found that individuals with experience-based prior knowledge and
instrumental evaluative cues (as opposed to affective ones) in their decision environment
look out for word-of- mouth sources with weak social ties. Objective prior knowledge
about the product turns out to enlist sources with stronger ties whereas subjective prior
knowledge seems to go both ways.
A host of factors have also been found to moderate the effects of word-of- mouth
on its product-related consequences for the recipient. Arndt (1967a) found that positive
word-of-mouth tends to increase the likelihood of purchase but consumers’ risk
perceptions moderate this effect. Gatignon and Robertson (1985) proposed that word-ofmouth would affect recipients who initiated it (i.e., in an active information seeking
mode) more than those who did not, a hypothesis later corroborated by Bansal and Voyer
(2000).
An interesting moderating effect comes from the accessibility-diagnosticity
framework. Accordingly, the impact of word-of- mouth information on attitudes and
judgments will depend on the accessibility and diagnosticity of other relevant information
in memory (Herr et al. 1991). These researchers also established that word-of-mouth
gains it potency from being a vivid, rather than pallid, form of message presentation, and
therefore having secured attention and cognitive resources, it is highly accessible in
memory.
Along similar lines, it has been suggested and validated that the potency of wordof- mouth received is determined by its consistency with other existing information that
the consumer possesses (Bone 1995; Gatignon and Robertson 1986). A related cognitive
27
finding is that one’s familiarity with the brand moderates the impact of word-of- mouth on
purchase intentions and brand attitudes such that both positive and negative word-ofmouth has a bigger impact on consumers who are unfamiliar with the product (Sundaram
and Webster 1999). Gilly et al. (1998) found similar results with respect to the
moderating effect of recipient’s expertise on product evaluation consequences of wordof- mouth, in the durable goods category.
Affective states of the consumer can also moderate the impact of word-of-mouth
on later attitudes and behaviors. Wilson and Peterson (1989) demonstrated that prior
affective dispositions influence the potency of word of mouth on product evaluations and
purchase intentions. Neelamegham and Jain (1999) found latent product interest to
moderate the effect of word-of- mouth on overall utility.
SELF
Antecedents. Few prior researchers have looked at self-related factors of wordof- mouth demand behavior. One exception is Katz et al.’s (1955) observation that
consumers’ motivatio n to attain status steers them toward conformity with their social
group and as a result leads them to consult word-of-mouth channels for guidance on
adoption of products, practices, and behaviors.
Moderators . Arndt (1967a) found that consumers who are centrally positioned in
social networks tend to seek out more word-of- mouth from their peers. Reviewing
evidence from earlier studies, he concluded that later adopters more so than the earlier
adopters consulted word-of- mouth as the latter also rely on formal mass media
information sources unless it is a high risk experience good they are trying to evaluate
(Arndt 1967b).
28
OTHER
Antecedents. Sometimes it is one’s relation with another person that stimulates or
suppresses word-of- mouth seeking behavior. Mangold et al. (1999) observed several such
antecedents of word-of-mouth seeking behavior. Consumers, sometimes, in the course of
a larger conversation “coincidentally” find themselves talking about products and
services without prior planning or the existence of a prior motive to do so. More often
than not, however, a consumer will observe another consumer’s purchase or its outcome
and get curious, as a result of which he might inquire for the story. The word-of- mouth
source might not express his satisfaction or dissatisfaction explicitly but the recipient
might sense that and ask further questions about it too. There could also be situations in
which two consumers collectively try to select a service and word-of- mouth
communication ensues.
Gatignon and Robertson (1986) argued that, contrary to intuition, word-of- mouth
communication is not always a preferred course of action even if there is genuine
informational need for it and a possibility for the source to provide that information. They
suggested that, according to a social exchange logic, consumers might prefer not to
engage in word-of- mouth if there is potential for taking a subordinate position as a result
of receiving verbal comments from the source.
Moderators . Dichter (1966) established two conditions that will determine
whether a consumer will use another consumer as a word-of- mouth source, one of which
is the perception that the source genuinely cares for the interests and well-being of the
recipient, and other is that the source’s seeming experience with and knowledge about the
product is credible. The first condition is roughly satisfied by people of goodwill,
29
intimates, and sharers of interest whereas the second condition is satisfied by
connoisseurs, sales personnel, professional experts, and celebrities. Further empirical
studies confirm this pattern as consumers are known to consult others who are similar to
them in many ways (i.e., “homophilous”) and share strong social ties with them, both in
end-user (Brown and Reingen 1987; Reingen and Kernan 1986) and business-to-business
contexts (Czepiel 1974; Midgley, Morrison, and Roberts 1992), as well as those who are
perceived to have some expertise (Bansal and Voyer 2000; Gatignon and Robertson
1986). These same factors also moderate the extent to which word-of- mouth exerts its
influence on attitudinal and behavioral states of the consumer (Bansal and Voyer 2000;
Bone 1995; Brown and Reingen 1987; Gatignon and Robertson 1986; Gilly et al. 1998;
Lazarsfeld et al. 1944).
CONTEXT
Moderators . A few of the contextual variables have been the subject of word-ofmouth studies. These typically fall under the categories of culture, location, and
competitive environment. Money et al. (1998) found that, in international business
contexts, whether a buyer consults a strong-tie contact or a weak-tie contact is moderated
by the native culture of the buyer and the relative location of the business. They also
established that native and relative location both moderate the decision whether a wordof- mouth source with high network centrality will be consulted or not.
In another business buying context, Midgley et al.(1992) showed that whether a
general versus a specific word-of- mouth source is utilized depends on the level of
competition in the industry. In industries with high level of competition, word-of- mouth
30
sources tend to be enlisted from outside the competitive peer set because of the obvious
secrecy requirements.
I will now move to the macro level and briefly review studies that look at WOM
“traffic” at the population level. At this level, word-of- mouth phenomena can be
associated with factors stemming from economy, culture, society, and technology.
Macro-level Theory of Word-of-Mouth
A relevant consequence of WOM on individual firms is the prospect of
acceleration or deceleration of product acceptance depending on the parameters of the
WOM environment (Arndt 1967b; Bass 1969). A study argued that retailers cannot
directly control WOM but satisfaction and equity can mediate WOM production (Swan
and Oliver 1989). A comparison between direct WOM strategies (e.g., deploying paid
message spreaders and targeting opinion leaders) and indirect WOM strategies (e.g.,
stimulation of WOM via ads, simulation of WOM in ads, and monitoring and adjustment
to WOM) revealed the latter to be more effective (Bayus et al. 1986).
At a broader level word-of-mouth contributes to consumer welfare, as information
asymmetries are alleviated one consumer at a time with strategic contributions by opinion
leaders and market mavens (Price, Feick, and Higie 1987). Consumers, in the role of each
others’ salesmen, can negotiate markups down at the retailer level since the services of
informing consumers were shifting away from them (Whyte 1954).
Altruistic and collectivist cultural tendencies have also been found to increase the
overall level of market helping behavior and WOM referrals (Money et al. 1998; Price et
al. 1995).
31
Both empirically and conceptually, the existence of “consumer networks” (Brooks
1957), “referral networks” (Reingen and Kernan 1986), and “informal communication
networks” in the industry (Czepiel 1974) have been acknowledged. Literature suggests
that network structure is one of the most important mediators of WOM traffic (Festinger
et al. 1950), yet our knowledge about how that mediation effect works is scant. A major
treatise on communication networks suggests analyzing cliques, communication roles
(e.g., liaisons, bridges, isolates), and structural indexes (e.g., connectedness, integration,
diversity, openness) (Rogers and Kincaid 1981). Early work indicates that cohesive
networks experience product adoptions earlier (Coleman et al. 1966), and cliques
increase cohesiveness and effectiveness of group (Festinger et al. 1950). In a few studies
to develop theory about the effects of structure on WOM flows and product choices,
structures investigated were interconnected cliques of random nets (Frenzen and
Nakamoto 1993; Goldenberg et al. 2001), which is a rather uninformative setup since the
only variables to be manipulated are connection densities within and across cliques.
Studies run right after WWII found interpersonal relationships to be anchorage
points for individual opinions, attitudes, habits, and values (Katz et al. 1955). The culture
of the time was one of family, community, and civic participation. Therefore, word-ofmouth was seen as relay and reinforcement mechanism in the dissemination of ideas and
information. However, the 1950s were the highpoint of American civic life.
Subsequently, the rate of civic engagement declined and social capital eroded (Putnam
2000). As the channels and occasions of social interaction dwindled, so did word-ofmouth activity too. Nevertheless, contrary to the linear communication model, there is an
active consumer public in which ideas are discussed, opinions are exchanged, and
32
questions are asked and answered (Dichter 1966). And now, with the incredible rise and
spread of the Internet and the rapid global diffusion of cellular phones, we are witnessing
a reversal of that trend again.
Word-of-Mouth as a Central Construct: Limitations of Extant Research
Existing research on word-of- mouth exhibits several theoretical limitations. First,
as I have shown, a great deal of research has focused on describing and explaining the
processes on the supply side of the word-of- mouth phenomenon. This is likely to be due
to particular managerial and theoretical commitments. From a managerial standpoint, the
pragmatic objective of a business is to stimulate (suppress) word-of-mouth behavior by
satisfied (disappointed) consumers, thereby sparking (extinguishing) good (bad) publicity
right at the point where it first originates. From a theoretical standpoint, the highly
influential “two-step flow theory of communications” (Lazarsfeld et al. 1944) about how
news, messages, and information disseminate in society assumes that average members
of society, left on their own, do not seek out news and information. Rather, they are
exposed to news and information fed by various sources and media. People lack either
the ability (e.g., personal skills, technological resources and infrastructure) or the
motivation (e.g., no close interest in every single topic) to attend to all communicated
messages and information. Hence, the crucial importance of opinion leaders and their
mediational activities. However, the more recent rational choice and information
processing perspectives stress the active role played by the recipient in disseminating
information.
33
Second, researchers have shown a disproportionate interest in the antecedents of
word-of-mouth behavior. This can be evidenced in research that is not only supply--but
also demand-oriented. Most researchers’ attention is not quite focused on consequences
either, as the most coveted effect of word-of-mouth, namely opinion or behavior change,
seems to be empirically sound. Research emphasis on antecedents is also partly due to the
“two-step flow” logic which assumes a one-way communication process that carries
messages from one individual to another. The possibility that the changer can be changed
as well is not entertained. One final reason is the tendency of researchers to analyze
single epochs of communication flow, i.e., the history of one particular message or
innovation in a given social system, instead of viewing word-of- mouth as an ongoing
process that spans many issues and involves same participants multiple times. Most of the
studies that have investigated the consequences of word-of-mouth, on the other hand,
focus on purchase intention or actual purchase behavior. As a result, we know very little
about the indirect routes and mechanisms through which word-of- mouth might exert its
influence on the marketing system. Since word-of-mouth has not been treated in many
studies as a central construct in its own right, very few moderators of word-of- mouth
have been explicitly identified so far.
Third, a lot of research emphasis has been placed on factors related to the product.
This can be attributed to the disciplinary interests of marketing researchers. Product is
naturally the area where marketers can have immediate control. Every other construct is
of secondary importance, and will be of interest to the extent that it has any consequences
for the success of the product. The disproportionate emphasis on the product is also
symptomatic of the classic firm-centric view of marketing, wherein consumers are passive
34
demand targets for what the firm has on offer (Prahalad and Ramaswamy 2002, 2004).
Prahalad and Ramaswamy (2004) argue that we have to shift our concept of the market
towards a forum for co-creating experiences. The consumer-company interactions
become central to the value co-creation process, and as a result, consumer-to-consumer
interactions and WOM play a more central role than before.
Since there has been little interest in word-of-mouth as a central construct at the
micro- level, research into the macro-level determinants and effects of word-of- mouth has
been even more lackluster. Large scale macro- level studies rarely capture data about
word-of-mouth activity (see Anderson 1998 for an exception). It is not clear, for example,
what the appropriate metrics would be and how one would go about obtaining them. The
mechanisms and structures mediating between the micro- and macro- level word-ofmouth processes are not well known. Word-of-mouth at the aggregate level is certainly
not a simple aggregation of word-of- mouth processes at the micro- level. A lack of
insight about how individual WOM episodes aggregate into an expansive “traffic” of
communication flows, creates an appreciation-understanding gap. Hence, we have even
less direction as to how we could or should go about monitoring and controlling an
aggregate WOM process.
Finally, theoretical investigations have been directed at a few word-of- mouth
types without recognition or understanding of the full implications of the wider range of
word-of-mouth phenomena. We need a broader and more richer conceptualization of
WOM theory itself.
In summary, I submit that marketing researchers need to shift the priorities of
WOM research (1) from source-oriented to recipient-oriented and eventually to dyad-
35
oriented studies, (2) from studying the antecedents to studying the consequences and the
moderators as well, (3) from product-related investigations to self- and other-related
investigations, (4) from micro- level WOM studies to macro- level studies that allow us to
link micro to macro WOM effects, and (5) from narrowly construed word-of- mouth
theory to a broader typology of word-of- mouth.
As shown in Figure 2.2, we can construct a broader typology for WOM by
defining the construct as a communication relation (transmission, persuasion,
conversation, and exchange) between human entities (consumer, customer, organization,
and community) with social relation (personal, peer, familial, professional), about a
psychological relation (information, satisfaction, evaluation, experience) from the human
entities to a consumption entity (product, service, provider, practice).
36
Figure 2.2 Typology of Word-of-Mouth
Interaction\Modality
Cognitive
Affective
Creation\ Determination
Internal
External
Objective
Information
Evaluation
Unilateral
Product
Provider
Subjective
Satisfaction
Experience
Multilateral
Service
Practice
to
Consumption entity
Psychological relation
about
37
between
from
Communication relation
Intention\Structure
Asymmetric
Symmetric
Non-instrumental
Transmission
Conversation
Instrumental
Persuasion
Discourse
with
Human entities
Social relation
Agency\Structure
Independent
Interdependent
Domain\Attitude
Expressive
Normative
Passive
Consumer
Organization
Private
Personal
Familial
Active
Customer
Community
Public
Peer
Professional
As this typology demonstrates, the word-of- mouth construct possesses a rich
diversity of manifestations depending on the communication, social, and psychological
relations, as well as the human and consumption entities, involved. As reviewed in the
previous section, most of the research on word-of- mouth has looked at constructs located
in the upper left quadrant of each matrix in this typology, i.e. word-of- mouth as
transmission of information about a product between consumers with a personal relation.
Less is known, for example, about the very interesting case of word-of- mouth as
exchange of experience about a practice between communities with a professional
relation. The preponderance of the more limited view of WOM episodes as a
transmission process that is focused largely on the product is indeed consistent with a
firm-centric, product-centric view of innovation and value creation (Prahalad and
Ramaswamy 2004) that has dominated the industrial era, wherein products and services
are assumed to be the basis for value. This has also been the implicit dominant logic for
marketing over the past fifty years. But the emergence of the active role of consumers
and an individual-centered view of interactions in an increasingly networked society
forces us to re-examine this dominant logic. They suggest that the industrial system is
evolving to a new frame of value creation centered on the co-creation experiences of
consumers. We need a new and richer perspective for bringing WOM theory into the
broader realm of co-creation of value between firms and communities of consumers. In
this realm, interactions to co-create value are not just from the firm to the consumer, but
also from the consumer to the firm, as well as consumer-to-consumer. Consumer-toconsumer interactions thus become a central force, as evinced by the emergence of new
38
firms such as Amazon, Yahoo, and eBay, all capitalizing on facilitating such interactions
and building communities around consumer experiences.
A New Perspective on WOM: Dialogic Discourse
Following Prahalad and Ramaswamy (2004), the future of competition lies in
embracing the convergence of the firm and the consumer, wrought by discontinuities
such as ubiquitous connectivity, globalization, and technology convergence which forces
the firm to re-examine where and how value is created. They argue that value will
increasingly be co-created at points of interaction between consumer communities and
firms. The role of the firm therefore shifts from producing goods and services to
facilitating co-creation experiences for and around individuals (Prahalad and
Ramaswamy 2003). They discuss four elements of a co-creation experience as central to
an individual-centric view of co-creation: events, context, involvement of the individual,
and the derivation of personal meaning. Personal meaning becomes the overarching
element of the co-creation experience. That social individuals and groups are
interconnected through a vast, messy, and invisible web was coined “six-degrees-ofseperation” (Milgram 1967) but the enormity of the network coupled with hegemonic
impediments and lack of interest prevented immediate appropriation of the idea for use in
personal and social projects of individuals. All along, a culture of consumption,
entertainment, and media, which were capitalizing on the same constellation of
innovations, made significant inroads into human lives and consciousnesses, diverting
existential concerns further away from authenticity and sociality. Alienation,
fragmentation, and loss of meaning were both causes and effects of this societal
39
development, resulting in a vicious cycle of search for meaning in an increasingly
“hyperreal” environment (Baudrillard 1994). This search pulled individuals, who had
access to networking capabilities, at several historical junctures back into communities
where meanings were discovered, negotiated, and appropriated (e.g., alternative
movements in the 1960s, gay- lesbian movement in the 1970s). Another such moment is
transpiring now with a much larger reach, relevance, and impact for individuals and
society around the world. The consumer network is an invisible texture working beneath
the surface of relational processes, relaying product quality information over large webs
of word-of- mouth. A legitimate question would be: What is so profound about it? Why
now?
There are two points to consider. First, with the explosive growth in product
variety and promotional messages, consumers have to rely on word-of- mouth at a rate as
never before. Second, the interconnectivity of networks has exceeded a critical threshold
so as to create giant clusters of interlinked consumers at national and international scales.
These two developments clearly wreak havoc with the old assumptions of market-based
organization of consumption. Producers of commercial and social innovations have just
started to take heed of this fact and given the prevailing firm-centric are attempting to
strategically control and manipulate the network.
In the past, firms attempted to control consumers’ search for personal meaning. In
the future as it is evolving, individuals with their newfound access to information and
communication are upending traditional processes of communication from the firm to the
consumer, and shaping meaning for themselves in and through discourse with other
consumers. The impact of consumer advocacy through online groups may be even greater
40
than that of company marketing. When Novartis AG launched clinical trials of a
promising leukemia drug, word spread so fast on the Internet that the company was
overwhelmed with demand from patients seeking participation. Increasingly patient-topatient interactions in thematic communities facilitate such discourse.
Following the limitations of existing approaches to WOM research discussed in
the previous section, what is indeed common to all the shifts we have to make in WOM
theory--in light of the emergence of active, networked consumers--is the recognition that
word-of-mouth is a dialogical process involving both actors (source and recipient), with
antecedents and consequences reaching far beyond product-related concerns to shaping
personal experiences, whose effects occur over multiple episodes, within and through
multiple discursive structures.
As we will see below, the development of a theory of WOM as dialogical
discourse forces us to bridge the long-standing divide that exists between marketing
researchers who take a firm-centric view of consumer-to-consumer WOM episodes and
consumer behavior researchers who take a consumer-centric view of the same. The
movement towards consumer experiences with co-creation of experiences as its central
tenet -- away from products and services -- implies a shift to an individual-centric view
where the Self, Context, and Other aspects take on as much importance as the product,
and arguably become more central as well. At a minimum, it implies that WOM itself
must be a central, not peripheral construct in marketing, and that we need to bring
personal meaning, and not just a product and service centered utility-based view, to the
core of marketing.
41
Consequently, I pose the following “strategic research question”: Exactly what
happens during a word-of- mouth episode? Is there a central role for the individual and
not just the product? I believe that consumer word-of-mouth is a much richer process
than a simple transfer of numerical data from one consumer to another. Participants of a
word-of-mouth episode might come to it with many different motives and not just with
transmitting and acquiring information in mind.
Related to our strategic research question is the following question: Exactly how
do participants enter into and exit out of a word-of- mouth episode? Admittedly, some
word-of-mouth episodes do make up the entire verbal transaction that transpires between
two participants. However, I suspect that word-of- mouth episodes occur as embedded
parts in larger “discourses”.
These two questions can not only reorient the word-of- mouth research into
fruitful theoretical directions but also push the marketing concept, and its theories and
methodologies, into unexplored territories. I believe that these two objectives can be
gainfully pursued by adopting a new perspective of consumer-to-consumer interactions as
dialogue. The word “dialogue” has its etymological roots in “dia” signifying “through”
and logos signifying “meaning”. Dialogue is more than transmission of information. It is
about interaction, deep engagement, and the search for shared and personal meaning.
Meaning entails the “mental act of signification” and dialogue facilitates this act.
Next, I will briefly discuss and relate findings related to dialogue from the fields
of rhetoric, dialectic, pragmatics, conversation analysis, and hermeneutics, to offer a new
perspective on word-of- mouth as a dialogical process. I will then draw upon discourse
42
theory and discuss the implications of word-of- mouth as dialogic discourse on WOM
theory building and development.
Dialogue. Let us start with rhetoric. Plato’s Socratic Dialogues provides us an
example of how argumentation would be conducted as well as some insights and
criticisms on the practices of the leading rhetoricians of its day. Aristotle’s treatise, On
Rhetoric, has remained a popular reference work up to this day. In that work, he defined
rhetoric as an “ability, in each case, to see the available means of persuasion” (Aristotle
1991). Subsequent Greek and Roman rhetoricians refined the theory of rhetoric into five
divisions: ‘inventio’ (planning of the argument), ‘dispositio’ (arrangement of the speech
into parts), ‘elocutio’ (choice of words and sentences), ‘memoria’ (preparing to deliver
the speech), and ‘actio’ (delivery). Throughout the centuries, some parts of this
framework lost importance and some parts were integrated into other disciplines. Hence
what remained of rhetoric by 20th century was the poetic part (‘elocutio’). Literary
theorists sustained an interest in techniques like metaphors, metonyms, and synecdoches.
These phenomena are certainly not unimportant as, for example, metaphor is now
recognized as a fundamental cognitive operation (Lakoff and Johnson 1980). However,
the field of rhetoric has experienced a revival in the second half of the last century with
the ‘New Rhetoric’ movement (Perelman and Olbrechts-Tyteca 1969; Toulmin 1958).
In New Rhetoric, the motivation was to recover the original aspects of rhe toric in
light of modern phenomena such as the spread of mass media as well theoretical
developments in the fields of philosophy, psychology, and sociology. As such the
emphasis has largely been shifted to the argumentation aspect, i.e. how people reason
43
imperfectly in social contexts, using multiple media channels, in situations of cooperation
and contestation, etc. While classical rhetoric was about the rules and techniques of
delivering a speech from speaker’s perspective, New Rhetoric puts the reception of the
audience in the spotlight. More recently, consumer researchers have revived an interest in
traditional topics of rhetoric such as tropes and figures, both in traditional and new media
(McQuarrie and Mick 1996, 1999; Scott 1990; Scott 1994).
Rhetoric is mainly concerned with unidirectional communication processes. Its
traditional version took the public speech as its object and later included texts as well.
Modern rhetoric expanded its scope to newly introduced mass media as well. However,
the emphasis was still the monological transmission, not the dialogical interaction. These
two types of communication, monologue and dialogue, were in fact separated from
Aristotle on. His rhetoric laid down the principles of designing and delivering a
monologue whereas ‘dialectic’ was the discipline of argumentation in dialogue. The
objective of rhetoric was to persuade an audience, whereas dialectic was about attaining
truth by some sort of cooperative inquiry (Krabbe 2000). As a result, rhetoric dealt with
specific, circumstantial issues; dialectic, on the other hand, was useful in treating general,
abstract problems and topics
Walton (1998) proposes a dialogically-based theory of dialectic although he
defines several forms of dialogue: persuasion, inquiry, negotiation, information-seeking,
deliberation, and eristic. Not all of these forms are motivated by cooperation. Another
stream of research deemphasizes dialogue and concentrates on the defeasible and
oppositional aspects of argumentation. Blair (1998), for example, argues that complex
argumentation schemes which go beyond a simple question-answer format or
44
presentation of simple propositions, such as supporting a premise or adding an inference
link, are qualitatively different from the paradigmatic case of dialogues. To summarize
the current state of art in dialectic research, we refer the reader to Leff (2000) who sees
the virtue of dialectic in its role of negotiating between a strictly propositional view of
rationality, or logic, and a strictly instrumental view of persuasion, or rhetoric. Marketing
researchers have yet to explore and exploit the theoretical concepts and methodologies
made available by the field of dialectic for developing WOM theory.
While rhetoric looks at communicative tactics and strategies of persuasion, and
dialectic looks at rational foundations of dialogical processes, pragmatics provides
insights about the normative and contextual mechanisms everyday speakers of a language
rely on to signify and interpret, oftentimes underdetermined, linguistic artifacts. In other
words, it highlights those aspects of language us e which remain implicit, presumed, and
inferred but contribute to meaning in very essential ways (Levinson 1994). A very
important contribution of pragmatics is the theory of “speech acts”, the idea that, in
addition to conveying propositional content (‘locutionary force’ of speech), utterances
can also perform actions (‘illocutionary force’ of speech). There are surprisingly many
types of speech acts with particular ‘felicity conditions’, if and when met by the context,
yield specific effects on participants and the world, e.g. asserting, ordering, permitting,
apologizing, promising, asking, etc. (Austin 1962; Searle 1969).
Pragmatics also studies the normative and institutional aspects of conversation as
a social activity, in other words, what kind rules and conventions participants have to
follow for an orderly performance of linguistic interaction. Tacit knowledge of these
rules not only helps speakers perform effective communicative acts in a most efficient
45
manner but also allows them to monitor an ongoing communication for deviations from
the norm which act as signals for alternative interpretations. Last but not least, pragmatics
has received significant contributions from sociologists working in the areas of
conversation analysis. Researchers in this stream view conversation as a site where social
relations are manifested, produced, and contested as participants take sequential turns in
talk (Sacks, Schegloff, and Jefferson 1974). In a way, conversations are seen to carry a
second semi- independent layer of phenomena on top of language/communication proper.
Solidarity or competition within a group can also be enacted in the way conversational
opportunities are shared and distributed. Hence, this perspective can provide us with
ideas on how conversations at the most general level, independent of content, get
constructed as a joint achievement during social interaction.
Finally, hermeneutic s recognizes the derivation of meaning as an “interpretive”
process. In the context of consumer-to-consumer interactions, consumers share texts of
“stories” and their interpreted experiences with each other in WOM episodes, and not just
information (Arnold and Fischer 1994; Thompson 1997). As consumers engage in
dialogue with each other, they are engaging in generating a shared understanding and
through their own interpretations, deriving personal meaning. Through dialogue, a
community can create a collective identity and through individuals’ social actions and
involvement in the exchange of emergent interpretations, can generate new sources of
meaning and thereby value to other consumers.
Discourse. Dialogue itself is a type of discourse. In common usage, discourse
refers to a long, formal, and connected discussion or exchange of ideas, knowledge, and
46
experience about a subject in a certain context via spoken or written expressions in the
form of a treatise or sermon. However, in social sciences and philosophy, ‘discourse’
conveys a more specialized meaning in the sense of a normatively and ideologically
charged configuration of semiotic, epistemological/ontological, and social structures.
Hence, bits and pieces of any discourse will be multiply distributed and variably
instantiated across many texts, techniques, and individuals.
Three aspects can be distinguished in any discourse: form, content, and practice.
The form aspect corresponds to the “language above the sentence” quality of discourse
(Georgakopoulou and Goutsos 1997; Schiffrin 1994; Stubbs 1983). Any given discourse
consists of a certain arrangement of a particular selection of symbolic expressions that
convey an intended content. Each symbolic expression is made up of a combination of
more basic symbolic units. Every symbolic unit refers to a physical or mental entity or
event in a particular sense or senses, i.e. meaning. These meanings derive from that
symbolic unit’s particular relation to other symbolic units in one’s lexicon, which are
ultimately coupled to a conceptual and schematic network. As there are typically several
meanings any symbolic unit can signify, however, semantic ambiguities will be greatly
reduced via reference to meanings signified by other symbolic units in the expression and
an analysis of their syntactic relations vis-à-vis each other. Remaining ambiguities will be
resolved by going beyond the expression for further narrative meanings and contextual
information. All these semantic, syntactic, and narrative relations, rules, and conventions,
which are inherited and distilled from earlier discursive realizations, constitute the
objective structure, or form, within which new discourses are created, developed, and
transformed.
47
The content aspect refers to conventional use of language that mediates—in either
direction—between our thoughts about and actual realizations of certain types of social,
political, and cultural activities and structures (Dijk 1997b; Jaworski and Coupland 1999;
Johnstone 2001; McHoul 1994). A discourse is, ultimately, a more or less codified
framework that both enables and constrains an individual to experience, act on, think of,
and know about a material and/or mental domain of reality. This framework determines
which experiences are worth attending to, which interpretations are legitimate, and which
other experiences might be relevant and present in the immediate environment.
Furthermore, what goals are worth pursuing, what actions are legitimate and meaningful,
and how certain actions are to be performed, are specified in a given discourse. Also, this
framework can provide methods, heuristics, and standards of cognitive processing, e.g.
how categories and schemas are to be formed and modified, how inferences are to be
drawn, how judgments and decis ions are to be made, and how processes across spheres
(i.e. experience, action, and knowledge) are to be coordinated. Finally, a discourse also
furnishes a knowledge base of known entities, their relationships, and yet-to-be-explained
phenomena along with very specific ontological, epistemological, and axiological
commitments, in a way sanctioning what is known, what can be known, and how it can
be known. Hence, a discourse provides a particular perspective, from which an individual
can experience, act upon, think of, and know about a given material or mental domain of
interest.
However, individuals typically cannot choose one discourse over another so
easily; cues and constituents of a discourse reside in many objects and situations. To the
extent that individuals encounter certain objects and situations more frequently than
48
others, they will develop a predisposition to use a certain discourse that offers a more
consistent and meaningful perspective for those objects and situations. Moreover,
individuals and groups who possess the motivation and power to create and manipulate
certain objects and situations in certain ways will also propagate the relevant discourse.
Hence, one can speak of a dominant discourse versus alternative discourses. Whereas a
dominant discourse reflects and reproduces a dominant power structure, alternative
discourses empower and liberate alternative forms of existence. In short, discourses help
define a subjective position for the individual, or content, with which he can reach out to
a domain and participate in further discourse.
Discourse needs to be understood in its intersubjective role as well. This practical
aspect of discourse can be summarized as “language use” or “language- in-use” (Brown
and Yule 1983; Dijk 1997b; McHoul 1994; Schiffrin 1994). Language is perhaps the
most important faculty human species has biologically and culturally evolved to cope
with and take control of its environments. Language makes it possible for groups of
individuals to share knowledge and coordinate actions. While there is an enormous
economy in learning from others and acting with others, it also causes the individual to
experience, act on, think of, and know about the world in largely pre-determined ways.
Hence, one’s experiences, actions, thoughts, and knowledge that might seem to be private
and subjective can be largely public and objective in their origins and structures. This is
especially true in the case of children. In a related vein, having a discourse in common
makes it possible for individuals to carry on further discourse with others. However, it
also places an implicit expectation on individuals to be able to couch and justify their
thoughts and statements in terms of valid discourses, i.e. accountability. In this fashion, a
49
discourse not only organizes and regulates the ways in which an individual experiences
and navigates a domain of reality but also makes them socially relevant and accountable
in a very fundamental way. Finally, every discourse specifies structures and norms of
who can participate when, how, and to what effect. Given the subtle and fundamental role
discourse plays in human existence, these structures and norms of participation are
perhaps the most critical components that make up and sustain the self and the society.
Hence, discourse not only constructs individuals from intersubjective materials but also
turns these individuals into intersubjectively oriented human beings by embedding them
into discursive practices.
Experiences, actions, thoughts, and knowledge are made meaningful through and
within discourse. On the one hand, each act of signification occurs through discourse, i.e.
the individual engages in discourse as an intersubjective practice. Even during a
seemingly private moment of signification when there is no one else present, an
individual will engage in a dialogue with his own self or an imaginary partner sustaining
or challenging the forms and contents of a discourse. In that particular sense, acts of
signification are also acts of situating the self vis-à-vis persons and communities one
wants to associate with or dissociate from, by virtue of alignments pro and contra their
respective discourses. Moreover, acts of signification are more often than not acts of
legitimation for that particular moment or future time. Hence, discourses can also be used
as strategic resources. Last but not least, acts of signification occur according to roles,
rules, and rights of participation specified by that particular discourse. This implies that
the work of signification might have different outcomes depending on who the other
participants are and what discursive positions and interests they represent. On the other
50
hand, each act of signification occurs within discourse, i.e. the individual is using the
form and the content of the discourse. Every experience, action, thought, or knowledge is
situated in a dynamic matrix of prior, concurrent, and anticipated experiences, actions,
thoughts, and knowledge. This matrix does not simply serve as a context for an act of
signification, though. Instead, it fulfils a deeper formative function by invoking a
particular discourse which will determine the relevant semantic, syntactic, and narrative
relations crucial for the current act of signification. Furthermore, this discourse will also
activate specific experience, action, thought, and knowledge schemas which supply a rich
reservoir of contents for the signification task.
Discourse theory is an interdisciplinary movement with contributions from
linguistics, philosophy, sociology, psychology, and anthropology (see Dijk 1997a for a
broad survey compendium). Its overarching objective is to understand and systematize
the way humans use language to interpret, categorize, appropriate, negotiate, challenge,
and realize various experiential, cognitive, conative, social, and cultural meanings,
situations, and tasks. It also recognizes that as much as—if not, more than—the way we
think influences the way we talk, the way we talk influences the way we think. These two
tenets of discourse analysis, then, imply that ‘our’ reality is socially constructed through
the use of language. In other words, language is a “structured structuring structure”
(Bourdieu 1977). As such, we cannot assume that communication between humans
occurs in an unproblematic way with the help of a transparent device called ‘language’.
Discourse analysts dissect actual instances of linguistic communication to reveal
the resources, rules, structures, and strategies people utilize, and are subject to, in their
interactions with language, linguistic artifacts, and other language users. Talk and text are
51
the two categories that divide discourse at the most general level. How individual
consumers share “texts of experiences” in their interactions with each other can form the
basis of understanding WOM processes, especially in communities. This is the subject of
the next chapter.
Thus, in this chapter, I provided an extensive and critical review of word-ofmouth theories along with a new perspective for conceptualizing and researching wordof- mouth in marketing science and consumer research. In one important respect, this
chapter forms the backbone of this dissertation. Namely, word-of- mouth as the process
by which consumer-to-consumer interactions occur. In the next two chapters, we will
deal with the content and structural components of consumer-to-consumer interactions.
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CHAPTER III
CONSUMER EXPERIENCES AND PERSONAL MEANING
Consumer Experiences
Consumer-to-consumer interaction, as treated in previous chapters, suggests, by
definition, a concept of mutual action. In Chapter 1, I showed how different types of
consumer-to-consumer interactions can be placed along a spectrum from perfect market
interactions to word-of-mouth interactions. Chapter 2 focused on the latter type, i.e.
word-of-mouth, as it signals major implications for businesses and the economy.
However, consumer-to-consumer interactions do not certainly occur in a vacuum. Rather,
they transpire in, and to a great extent are motivated by, a medium, what Prahalad and
Ramaswamy (2004) come to call an “experience environment.” Consumers interact with
products, retailers, devices, employees, channels, and cultural artifacts such as
advertising. Hence, the experiences a consumer enters into, undergoes, or lives through
play an important constitutive role in consumer-to-consumer interactions. This chapter
will first flesh out this concept of experience and expose its crucial relevance for a theory
of consumer-to-consumer interactions in a networked society, i.e. as the content of these
interactions. As the previous chapter was mainly about word-of- mouth as the process, it
is only natural to investigate the links between the two. This, then, becomes possible
through the concepts of intentionality and meaning since both have much to do with
discourse. I will close this chapter with a discussion about how meaning and discourse
figure in theories of consumption and a proposal to make consumption theory more
discursive.
53
In the previous chapter, I traced the outlines of the historical process by which the
existence and geometry of a networked social reality entered the consciousness of
producers, commercial and intelligence alike. In particular, I concentrated on word-ofmouth as the central social process to which producers have started paying more attention
as a vexing source of network effects. Since economy and society are not two isolated
worlds, the logic and the power of networks enter public discourses and individual
consciousnesses. Hence, consumers are awakened to the possibilities of connecting with
like-minded fellows to pursue meaning and value through a designated domain of
consumption, which is a sphere where they feel to have most autonomy and interest. As
consumers organize in consumer communities defined around a singular consumption
object or domain, they start to discover (i) the politics of power, (ii) the power of politics,
and (iii) the notion and significance of having experiences beyond the conventional
rhetoric of satisfying needs and wants.
For some producers (e.g., of controversial or high-public-interest goods and
services such as tobacco and airlines), these developments signal real trouble and
confrontation, as consumers become political activists about a particular consumption
issue. For some others (e.g., Harley-Davidson, Apple), they provide an opportunity for
differentiation and steady stream of revenues, as consumers are co-opted as ambassadors
and loyal supporters of the producer.
Through the communities (i.e., both of a political and of a cultural type) they
participate, consumers develop a new notion of consumption based on experiences. This
is a radically new species of consumption because:
54
(a) it is not the product or service that is being consumed but rather the experiences
afforded or mediated by the product or service;
(b) the consummated experiences are:
(i)
more contextualized than the solipsistic experiences of egoistic
consumption;
(ii)
more protentional (i.e., forward- looking) than the homeostatic experiences
of want-satisfying consumption;
(iii)
more intentional (in its phenomenological sense) tha n the nonperspectival
experiences of neoclassical consumption;
(iv)
more participatory than the staged experiences of experiential
consumption;
(v)
more authentic than the pre-programmed experiences of lifestyle
consumption;
(vi)
more existential than the incidental experiences of instrumental
consumption;
(vii)
more emergent than the automatic experiences of behavioralist
consumption;
(viii)
more meaningful than the sensory experiences of hedonistic consumption.
In this respect, it is worthwhile to pause and compare the existing consumption system
based on products with the emerging one based on experiences, as shown in Table 3.1. I
have organized the comparison using the same four dimensions that I introduced in
chapter 1 (when comparing the market-based and network-based forms of organizational
55
consumption) viz., emergent logic, structural categories, systemic features, and access
properties.
Table 3.1 From Products to Experiences
Central construct
Conventional Paradigm Emerging Paradigm
Products
Experiences
Organizing principle
Organizing theme
Needs
Homeostasis
Projects
Exploration
Structure
Action
Competition
Purchase
Life-world
Intentionality
Adaptation
Goal-orientation
Integration
Latent-pattern maintenance
Software
Marketer
Satisfaction
Habituation
Hermeneutic
Consumer
“Existenz”
Authenticity
Information content
Consumer’s attitude
Producer’s attitude
Benefits
Teleological
Strategic
Sincerity
Communicative
Communicative
Products are organized around the principle of needs. Needs are said to be
determined by human nature (Maslow 1954). Through the principle of homeostasis, a
need triggers a drive for its fulfillment whenever it exceeds a tolerable level. Human
nature is believed to determine these tolerance levels for different needs in each
individual. In general, a hierarchy of needs is postulated according to which more urgent
needs (i.e., essential for survival) call for more urgent fulfillments. Depending on the
expediencies of everyday life and the life-stage of the cons umer, different needs get
deprived and fulfilled in succession. Individuals are known to modify their perceived
needs and tolerance levels upon internal and external influence. Commonly, the media
and the advertising industries are in the business of influence and persuasion.
56
Advertisements typically appeal to “latent” needs and try to create a perception of
deprivation above their tolerance levels. Quite often they also modify the contour of
individuals’ deprivation tolerance levels. Likewise, conversations with social partners
oftentimes lead to a clarification of issues and situations, a modified perspective on life’s
priorities, and a changed perception of deprivation tolerance levels.
The elementary action in the system of products is the purchase. This action is
undertaken in an environment of competitive product offerings. The more a product is
purchased by consumers, the more competitive the producers become in order to capture
or reclaim the lost market share. Likewise, the more competitive the industry becomes,
the more significant the action of purchase becomes.
Products adapt to the changing requirements of a consumer segment to the extent
that they incorporate software features, which can be reconfigured by consumers. It is the
marketer who determines the goals of the product regarding the need- fulfillment
requirements of the consumer market. A product remains a part of the product system as
long as it provides satisfaction for the intended product segment’s wants as well as it
satisfies the product portfolio and development goals of the producer. Habituation and
entrenchment, both in producers’ and consumers’ ways of conducting activities, provide
the motivational background for sustaining a system of products.
The need- fulfilling potential of a product or service is determined by and
communicated as the benefits, which the product is able to offer through a combined
process of design and technology. The dominant attitude as consumers interact with the
product system is teleological, whereas producers take a strategic attitude in interacting
with the product system.
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Experiences, on the other hand, transpire as consumers pursue personal projects
in various spheres of life. A project is an organized activity structure, that pro-jects the
individual into different spatial and temporal directions and, through a concretion of
various projects, turns human life into an exploration of existential meaning and
fulfillment.
The elementary action that constructs an experience is intentionality. Human
mind experiences events, actions, thoughts, feelings, and sensations by virtue of the
mind’s capacity to direct itself on things. Individuals intend and in-tend different regions
of concern in their life-worlds, which ultimately structure the kinds and extents of the
experiences experienced. A life-world is the relevant experiential field surrounding an
individual along past, present, and future concerns and projects with their attendant
spatial, social, and symbolic environments.
The system of experiences migrates from the system of products as consumers
engage in hermeneutics of meaning constellations, first around the products, then around
autonomous meaningful experiences. As producers join in these hermeneutic activities,
the system of experiences establishes its autonomy and resiliency vis-à-vis contending
consumption forms. Producers equip individual life-worlds with utilitarian and symbolic
resources for the pursuit of meaningful existential projects, but the ultimate goalorientation of any experience rests by the consumer. A plurality of experiences find their
meaningful integration in an individual’s “Existenz” as defined by the “the projective
character of the experiencer as he uncovers the world not as a totality of entities but as a
plurality of regions of concerns, as an interpenetrating complex of places and times for
58
tasks to be assumed” (Schrag 1969). Motivation for this experiential orientation is
provided by every individual’s existential concern for authenticity in his life.
Access to an experience presumes the communication of sincerity to one’s lifeworld and one’s hermeneutic activity. This is valid for both the consumer and the
producer. Both agents (consumers and producers) take on a communicative attitude as
they interact with the experiential system.
Interactions, Experiences, and Personal Meaning
Experience, in common parla nce, refers to the process and effect of an
individual’s encounter with his internal and external environment. The interaction might
ensue as (i) a response to a stimulus or event in the environment, (ii) an encounter with an
environmental condition or fact, or (iii) an engagement with the environment during an
activity or practice. This interaction itself will have an active or passive modality (e.g.
participating vs. undergoing) as well as a positive or negative quality (e.g. observing vs.
suffering). Of all the effects impinging on the individual during an interaction, only those
that are registered through the senses or introspection can become an experience. As
such, all experiences have a subjective character. The effects can be accessed by
consciousness directly and instantly (as in hearing a sound) or indirectly and
subsequently (as constituent traces in one’s thoughts, emotions, and skills).
As soon as an individual receives an array of pure sensations (including via
introspection) from the environment, he will attempt to organize and interpret the data
using Gestalt principles as well as concepts and schemas stored in one’s knowledge base.
Clearly, all sense-data and knowledge entities are already symbolic expressions, and
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hence signification is intrinsic. The sense-data will undergo multiple iterations of
decoding, interpretation, and compression in a highly interactive, dynamic, and parallelprocessing manner until a stable meaning structure emerges. What this means is that the
individual is extracting meaning from his existing knowledge base (i.e. experience
structured by meanings) in order to tentatively invest meaning into the sense-data so as to
ultimately extract meaning out of the environment (i.e. experience structured for
meaning).
The meaning of any general (linguistic or otherwise) object, event, or state of
affairs is (i) partly subjective, rooted in the ideas, concepts, thoughts, beliefs, and
intentions of the subject; (ii) partly relational, deriving from the role that particular
object, event, or state of affairs plays within a relevant domain of activities, in particular
its sequential and substitutional value vis-à-vis other objects, events, and states of affairs;
and (iii) partly objective, anchored in the experiential and existential conditions and
consequences of the particular object, event, or state of affairs.
It is a common observation that all mental phenomena, e.g., perception,
remembering, belief, desire, hope, fear, etc., are of or about something. Intentionality is
the technical term used to refer to the directedness of the mind upon something or the
aboutness/of-ness of mental states (Brentano 1874). Talk of directedness suggests there
being an actual relation between the mind and something that the mind directs itself but
such is not the case, as mind can exhibit intentionality about things that do not exist at all
(e.g., ‘golden mountains’). To avoid this, Husserl (1950) suggested intentionality of the
mind to be its directedness as if of an object.
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To clarify things further, one can make a distinction between the intentional
object of a state and the intentional content, the latter being what the intentional state has
a relation to and through which the mental state is directed to an intentional object (Crane
1998). In fact, in the analytic tradition of philosophy starting with Frege and Russell,
intentionality is equated with having mental content, oftentimes representational or
informational (Siewert 2002). For Frege, this content is an abstract entity, a thought, that
is also the ‘publicly’ (not the ‘privately’) graspable ‘sense’ (not the ‘reference’) of a
linguistic expression that would be used to report one’s state of mind. For Russell, this
content is nothing but a proposition and intentional states are propositional attitudes.
However, Crane argues that intentional contents are not representations; rather
they are more like propositions or thoughts from which representations are constituted.
This is more in line with Husserl, for whom the structure of directedness of mind consists
of an overall object meaning or the ‘matter’ of the mental act that integrates the various
constituents of experience into experiences of the features of one object, and the type or
‘quality’ of the mental act which determines the reality-character ascribed to the object
(Føllesdal 1998). For Husserl, the ‘matter’ or the content of the mental act is prior to
judgment or predication, i.e. determined by our sense experience as it is given to us, and
hence different from the ‘content’ of a judgmental statement. Similarly, analytic
philosophers have started to entertain the possibility of non-conceptual contents (Siewert
2002).
Intentionality and meaning are based on brain states and oriented toward one’s
lived experience and practical engagement. First part of this premise is rather
uncontroversial unless one subscribes to a rather unpopular mind/body dualism but its
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real significance obtains by utilizing other facts about brain architecture. Searle (1983),
for example, has advanced the view that intentional states, which he defines as those
states that have conditions of satisfaction (e.g. truth for beliefs, veridicality for
perception, etc.), are related to a network of other intentional states. Hence, mind’s
intentionality at any moment is related to other intentionalities that the person has
entertained earlier and stored in the memory. Second part of this premise states the rather
intuitive notion that all intentionality and meaning is situated. Heidegger (1996), more
than anyone else, stressed the role of one’s lived experience and practical engagement in
shaping intentionality and meaning. We confer intentionality on those objects that have a
particular significance for us, given our concerns, interests, and possibilities. Likewise,
we assign meanings to objects, events, and relations from our particular perspective.
Intentionality and meaning are mediated through symbolic structures. It is not a
mere accident that meaning and language are so closely intertwined. Language is the
public symbolic system that humans have developed in order to render their subjective,
inter-subjective, and objective worlds meaningful. A symbol is basically an entity that is
used to represent something else (or its concept to be more precise), especially to achieve
cognitive economy. That something else gets to be symbolized if and only if it has
acquired a definite meaning as there is no point in assigning symbols to meaningless
objects, events, or states of affairs. Once symbolized, the meaning becomes relatively
stable and determinate. In this capacity, a symbol can contribute to the determination of
new meanings as the latter depends on the possibility of relating the novel object, event,
or state of affair to known objects, events, or states of affairs whose meanings have
already been determined and stabilized by symbols. As this process shows, symbolization
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results in a virtuous cycle whereby new meanings are symbolized and existing symbols
facilitate new meanings. The total effect of this dynamic is a proliferation of meanings. A
world that has been rendered more meaningful confers survival advantage to the
organism. As meanings are so intimately anchored in linguistic symbols, intentionalities
of being too are increasingly shaped by linguistic symbols.
Symbolic structures, arbitrarily, and less than perfectly, conjoin thoughts and
symbols in signs which differentially relate to one another in syntactical and associative
ways. Studies of symbolic structures, and particularly of languages, show that the basic
element of these structures is the sign which consists of a signifier (symbol) and a
signified (concept). The initial assignment of a particular signifier to a particular signified
occurs in an entirely arbitrary manner (provided that the linguistic community accepts
and adopts this assignment). However, the actual use of the sign is not arbitrary at all as
each sign bears syntactical (i.e. how and to what effect can the sign be used with other
signs) and associative (i.e. how and to what effect can the sign be used in place of other
signs) relationships of normative force to other signs once the sign has been integrated
into the system. The meaning of any novel or recurrent object, event, or state of affair is
encoded in this grammar of relationships. It is to be noted, though, that signification is a
less than perfect process: a particular signifier can be associated with multiple signifieds
or a particular signified can be associated with multiple signifiers, and quite often, both of
these are in effect. Hence, encoding and decoding of symbolic constructs is always a
nontrivial and creative process.
Symbolic structures are public, conventional, and domain-specific. As I alluded
earlier, it is the acceptance and adherence of its user(s) that explain the existence of a
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particular symbolic structure, i.e. it is an entirely conventional system. It is possible to
imagine a private symbolic system that each human individual would develop in his or
her lifetime. However, language, as a public symbolic system, allows the exchange and
transfer of meanings between contemporaries and across generations, which contributes
to the development of culture. Obviously, the long-run survival advantage of maintaining
a public symbolic system (calculated at a per capita level) is higher than the short-run
survival advantage each individual would obtain by developing a private symbolic
system in his or her own lifetime. Hence, even though there are minor individual
differences in the deployment of symbolic systems from one individual to another, by and
large, a public symbolic system is the norm among human populations, and as such it is
normative too, i.e. creativity with the system can be exercised only up to a certain point.
While symbolization is a largely public and shared enterprise, it is also a fact of social
organization to develop differentiated subsystems with respect to labor and interest. As a
result, specialized knowledge is generated and ut ilized by specialized sub-publics who
develop their own specialized symbolic structures as well. Therefore, most contemporary
symbolic structures tend to exhibit a certain degree of domain-specificity.
It is also essential to recognize the place of experience as a domain of human
existence vis-à-vis other activities. Here, I will adopt the cognitive science paradigm as
the most advanced and rigorous theoretical program in existence for explaining
intelligent human behavior (Wilson and Keil 1999). According to this paradigm, all
human cognition can be seen as information processing through computations. Cognition,
as implemented by the central nervous system and the brain, functions as a formal system
using symbols. The underlying premise, expressed via the physical symbol systems
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hypothesis, is that any physical-symbol system, such as an information processing
system, has the necessary and sufficient means to generate intelligent action (Newell and
Simon 1976). In such a system, certain fixed rules and the internal states of the system
manipulate and transform symbolic expressions formed by variables and operators. The
other domains rounding up human existence can be classified under the rubrics of
knowledge, action, and thought, as shown in Figure 3.1 below.
Figure 3.1 TAKE Framework of Personal Meaning
SELF
Interpretation
4
2
1
THOUGHT
Execution
EXPERIENCE
Activation
Association
Coding
KNOWLEDGE
Validation
ENVIRONMENT
3
Motivation
ACTION
Planning
Stimulus
Condition
Activity
Function
Effect
Change
1: Selection
2: Recognition
3: Goal-setting
4: Evaluation
Knowledge refers to an individual’s mental facility that organizes and retains
one’s experiences, actions, and tho ughts for future reference and reuse. Clarity and
distinction is the structural principle and memory is the structural site for organization
and retention of knowledge entities. An individual’s stock of knowledge becomes richer
and larger with more experience, action, and thought. Knowledge provides the individual
65
with familiarity and grasp of significant experiences, actions, and thought so that
consciousness can be directed to more immediate and novel tasks.
One’s knowledge expands as novel experiences, actions, and thoughts not only fit
into but also enhance the meaningfulness of the current knowledge base. In fact, that is
the sole criterion for adding to one’s knowledge base. At the same time, the individual
might also attempt restructuring the knowledge base so as to achieve a more meaningful
correspondence with current experiences, actions, and thoughts.
Action, most generally, refers to the process and effect of an individual’s exertion
on his internal and external environment. It is widely accepted that actions are different
from mere behaviors in that they are “directed and (at least partly) consciously aspired,
wanted, planned, and steered in order to achieve a specific goal” (Cranach and Tschan
2001). In that sense, actions are intentional: the agent’s mental state consists of a content,
i.e. a representation, of a particular goal/consequence, and a volitional attitude towards
this content. It becomes clear that in order for a content to be had and intended, one
should possess certain beliefs, values, and desires. Control over the action, or having
choices to exercise free-will, seems to be an integral component of a definition as well,
even though there could be consequences one did not originally intend but can be held
responsible for. It is not necessary that someone physically commit in a chain of events,
one’s intentional abstention can bring about desired results as well. In any case,
consciousness of one’s acts (at least some of them) as well as one’s agency follows. This
property issues in a special kind of thinking linked to actions, namely practical reasoning,
or deliberation.
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Actions can be individuated in various types. Goal-directed action issues from a
conscious intention towards an end state. Process- or experience-oriented (also called
‘autotelic’) action, instead of focusing on the end-state, concentrates on the performance
aspect of the action itself. A long-term perspective involving several consecutive actions
results in projects. In contrast, certain actions transpire in the heat of passion with intense
affective pressures and without much cognitive control. Habitual or intuitive actions are
performed with little supervision as well; however they develop over a long tenure of
practice. Finally, certain actions, called ‘communicative’, are oriented towards
understanding and coordinating with others’ intentions as unilateral efforts cannot bring
about intended results. According to this typology, the effects of an action created in the
environment can range from subtle (e.g. conduct or function) through regular (e.g. effect
or influence) to major (e.g. change or enterprise).
Cognitive processes involving action can be analyzed into motivational and
regulation approaches. Motivational approaches emphasize the energizing processes that
will take an individual from goals to volition. Regulation approaches focus on the
executive, or steering, problem as many actions cannot be completed in a single step with
a simple act. Expectancy theories of motivation are based on the simple idea that an
action should be taken, and hence an intention formed in the first place, if the outcomes
of the action are of high value and the action has a high likelihood of success. Once an
individual has formed the volition to pursue a goal, he will draft and execute an action
plan with intermediate subgoals and subactions. Within each segment of this sequence,
the individual will recruit experience, thought, and knowledge to monitor and regulate the
current progress, and hence signification and interpretation activities will necessarily
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arise. However, even in the absence of such feedback mechanisms involving other
domains (e.g. experience), higher- level goals will have to be translated into lower- level
physical and mental acts by way of negotiating and aligning meaning structures across all
these levels. Investing/extracting meaning to/from acts during rehearsals is especially
crucial for the effective learning of new actions.
Thought refers to an individual’s mental operations that interpret experiences,
intend actions, and process knowledge. All thoughts take as input one or more ideas
about experiences, actions, or known entities. These operations on ideas include (i)
accessing and encoding (e.g. remember, reflect, apprehend, understand), (ii) selecting and
activating (e.g. consider, attend, regard, care), (iii) associating and patterning (e.g.
connect, arrange, formulate, conceive, imagine), and (iv) evaluating and motivating (e.g.
judge, decide, plan, devise). The resulting products of these operations can be (revised or
new) ideas, attitudes, intentions, or inferences. Norms of rationality and logic often, but
not necessarily, structure thought processes.
Thought can be characterized as the symbolic engine par excellence since all of
its operations involve manipulations on symbolic expressions within and across the
domains of experience, action, and knowledge. Several different operations can be
executed on several symbolic expressions simultaneously across multiple domains as
long as a meaningful interpretation of experience, a meaningful accomplishment of
actions, or a meaningful organization of knowledge entities (and oftentimes a meaningful
coordination of all these three domains) has not emerged. Although individuals can and
do consciously direct the top- level flow of thought processes, most thinking occurs rather
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automatically and habitually. Typical experiences and typical actions coupled with a
calcified knowledge base result in routine and predictable ways of thinking.
Discourse and Derivation of Personal Meaning
In the previous chapter I discussed a new perspective on WOM as dialogic
discourse. As we move towards an experience-based view of interactions and
consumption, the role of discourse in engendering personal meaning gathers importance.
From the perspective of the firm, understanding the interplay between the process of
interactions and its content (shared texts of experiences) and its “value” to the individual
(personal meaning) becomes critical in terms of co-shaping individual experiences.
At any given time, an indiviual is situated in one of two general “discursive”
domains: the environment, and the self. The discourse of the self develops out of and
shapes an individual’s continuous interaction with the environment and its discourse. In
fact, the essence of meaning, as shown in Figure 3.2 below, consists of engaging one’s
experiences, actions, thoughts, and knowledge in the creation, maintenance, and
transformation of the discourses of the self and the environment, most possibly but not
necessarily, with attendant engagements with the real entities of the self and the
environment.
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Figure 3.2 The Discursive Consumer
ENVIRONMENT
Culture
Nature
MEANING
Knowledge
Experience
SELF
Identity
Subjectivity
Rationality
Thought
Autonomy
Action
Logic
Society
One can distinguish four sub-domains within the discourse of the environment:
Nature, Society, Cultur e, and Logic. The discourse of Nature consists of those structures
of signification that make one’s experiential, agentic, cognitive, and epistemic
interactions with natural substances and properties meaningful. More precisely, this
discourse takes as its subject all material and living entities (objects and events) from the
perspective of their essential, inherent, and non- intentional properties. The discourse of
Society structures one’s signification activities regarding human individuals and groups
in their direct intentional relations to each other and one’s self. Seemingly similar but
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essentially different discourse of Culture, on the other hand, organizes meanings about
objects and events that originate from and relate to, but are not identical to, these social
relationships. Finally, the discourse of Logic is a transcendental discourse about the
discourses of Nature, Society, and Culture and their interrelationships, i.e. how and why
objects and events within and across given discourses obtain the significations they do
individually and collectively. In Figure 3.2, I have roughly aligned those four discourses
with the TAKE framework for meaning. This is by no means an absolute relationship;
however I wanted to highlight the fact that each one of these domains of meaning is
predominantly engaged and correlated with its corresponding discourse about the
environment. As a result, one’s existential phenomenology of each domain is
significantly imprinted by its matching discourse and its objects.
The discourse of the Self emerges gradually as an individual recognizes the
relations of non- identity and causality between his being and the environment. This metadiscourse can be analyzed into four discourses: Subjectivity, Autonomy, Identity, and
Rationality. Once again, we note the close homology between these four discourses and
the four domains of meaning. The discourse of Subjectivity develops out of one’s
immediate and ongoing sense of being or not being the privileged subject of, and having
or not having in a uniquely subjective way, all the experiences, actions, thoughts, and
knowledge the being has engaged in. At the same time, this discourse also imprints the
senses of subjectivity on every experience, action, thought, and knowledge one
eventually has. The discourse of Autonomy springs from one’s cumulative sense of being
able to have particular experiences, actions, thoughts, and knowledge independent of
external determination. Conversely, under the influence of an autonomy discourse, the
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being is always faced with the questions and answers of whether and how to engage the
world because or independent of external factors. The discourse of Rationality is
constructed out of one’s ongoing judgments of correctness, appropriateness, and
normativity of the particular experiences, actions, thoughts, and knowledge the being is
engaged with. Almost certainly, this discourse also shapes one’s initiative and sense of
having particular experiences, actions, thoughts, and knowledge in the future. Last but
not least, the discourse of Identity is an outcome of one’s cumulative realization of
having been the same being which has had all these experiences, actions, thoughts, and
knowledge. Furthermore, this discourse plays an influential role in one’s determinations
regarding the kinds and senses of experiences, actions, thoughts, and knowledge the
being would, could, or should pursue.
Towards a Discursive Theory of Consumer Value
The assertion I would like to make here is that meaning and discourse figure in
theories of consumer value only obliquely, as the dominant paradigm is product-centric
(transactions) and not experience-centric (interactions) . Standard economic theory
focuses on “exchange” of value from the firm to the consumer. Thus, the role of the
individual is relegated to passive “consumption” of goods and services that the firm can
supply, rather than active co-creation of value by individuals (Prahalad and Ramaswamy
2004). In standard economics (e.g. Hausman 1992), consumption is rather narrowly
construed as a problem of rational choice (i.e. no other feasible option preferred over the
chosen option) from a set of bundles of goods and services that are rationally ordered in
terms of a preference relation (i.e. complete and transitive). Additional assumptio ns
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typically made are self- interest, independence of preferences across consumers, nonsatiation, and diminishing marginal rates of substitution. Finally, cases of risk and
uncertainty are dealt with by introducing a certain reduction postulate and an
independence condition along with the requirement of rational beliefs.
Clearly, at the core of this economic framework are individuals’ preferences for
bundles of goods and services, and yet economists do not question or investigate the
sources of preferences at all. More generally, the economic theory of consumer value is
silent about meaning and discourse. However, signification processes are presupposed in
many of the concepts and conditions outlined above (e.g. preference, belief, ordering,
self- interest). Similarly, a certain discourse structures the assumptions contained in the
theory (e.g. rationality, independence across consumers, non-satiation, diminishing
marginal rates of substitution). Hence, in a peculiar way, the economic theory of
consumer value is itself a particular discourse that describes and/or prescribes the practice
of organizing preferences and choices, leaving all underlying signification processes
unexplained (see Mäki 2001 for a set of critical papers).
Attempts to relax the assumptions and to clarify the presuppositions of the
economic theory in different directions result in the psychological, sociological,
anthropological, and critical theories of consumer value. Mainstream psychology largely
follows the cognitive science paradigm which entails adopting the computer metaphor to
model the structures and processes of psychological phenomena. This metaphor
postulates that every human individual is an information-processing system that consists
of a processor and a memory to negotiate his environment by coordinating incoming data
from receptors and outgoing actions through effectors via manipulation of symbolic
73
expressions (Eysenck and Keane 2000). In this particular sense, cognitive psychology
provides a major theoretical and empirical foundation for the view I introduced at the
beginning of this chapter about the role of meaning in experiences, actions, thoughts, and
knowledge. In another crucial sense, however, cognitive psychology does not sufficiently
address the issue of where and how these meanings come from save for the innate
physiological drives and reflexes. In other words, cognitive psychology can do a
remarkable job in explaining how an individual functions in his environment having all
these experiences, actions, thoughts, and knowledge with the central mediation of
symbolic expressions, given existing discourse structures to make the latter meaningful.
Cognitive psychology informs us about the hardware, the low- level machine code, and
the operating system of a huma n individual. It does not specify, though, how the
semantics, algorithms, and the high- level program goals, structures, and flows are
installed in this computer. What all of this means for the theory of consumer value is that
cognitive psychology firstly broadens the scope of consumption beyond the point of
choice to include pre-choice as well as post-choice processes, and secondly, it enriches
the economic theory by explaining how preferences and beliefs are formed and revised,
how rationality can be implemented, etc., i.e. supplying the procedural foundations of
economic theory. However, it cannot provide the meaningful content of particular
preferences and beliefs, rationality, self- interest, etc. For this, we have to turn to other
perspectives of consume r value.
Sociological theories locate the sources and sites of consumption-related
meanings and discourses in structures and processes of social relations.
Characteristically, individuals are seen to engage in consumption so as to situate and
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maintain their selves vis-à-vis other individuals and groups. Within this relatively wide
scope, one finds several distinct behavioral orientations determining one’s consumption,
such as building and growing a self (Belk 1988), establishing ties of solidarity with
others, marking and displaying one’s identity (Hebdige 1979), expressing one’s ideas and
ideals, communicating specific messages to specific audiences, achieving and
maintaining distinction over others (Veblen 1898), and producing and sustaining
structures of power and domination (Bourdieu 1984). These various orientations provide
a rich reservoir of meanings and logics to fill the economic and psychological theories
with content and structure.
Anthropology of consumption bears a similarity to sociology of consumption in
that consumption is seen as a social phenomenon. However, according to this
perspective, individuals do not consume goods and services instrumentally to achieve
specific social goals, instead the sphere of consumption provides props and signposts to
stabilize and read off the meanings of cultural categories (Douglas and Isherwood 1979).
Goods and services become components of more elaborate and extensive rituals in
traditional and contemporary societies alike (McCracken 1986). Consumption is said to
have its own, or more precisely, to project and partake cultural system’s, syntax, lexicon,
semantics, and pragmatics, in clear analogy to another socio-cultural phenomenon,
language (Mick 1986). As a result, consumption is incorporated into a larger system of
socio-cultural structures and practices. Hence, the meanings and discourses of
consumption cannot be considered in isolation of the larger socio-cultural context.
To a certain extent, sociological and anthropological theories of consumer value
correct the undue emphasis on individualistic and mechanistic aspects of choice found in
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economic and psychological perspectives. They do so by suggesting socio-cultural
sources and sites of meaning and discourse. What all these approaches have in common,
however, is that diverse meanings and discourses of consumption are taken to be implicit
and unstructured within or across individuals. In contrast, critical theories of consumer
value start with the premise that all consumption events bear structural and meaningful
relations to each other. Marxist theories of consumer value argue that individuals
consume goods and services not as what they should, i.e. entities bearing utility in
realizing the true self, but as fetishized commodities, i.e. entities which derive their
meanings and values from systems of ideology and exchange (Marx 1867 [1977]). The
latter systems, in turn, grow out of the particular relational distribution of power and
wealth in society. As such, consumer value is grounded in materialism and objectivism.
Hermeneutic theories of consumer value, on the other hand, shift the balance towards
idealism and subjectivism by privileging interpretation and self- understanding.
Consumption acts gain significance within one’s narrative of the self and cultural
interpretive frameworks in the background, and eventually feed back onto one’s narrative
to redefine the self (Thompson and Haytko 1997). Marxist and hermeneutic theories may
differ in where they locate the sources of meaning and discourse, i.e. material/objective
vs. ideal/subjective structures. They do, however, agree in recognizing the agency of the
individual(s), in the last instance. Less humanistic are the semiotic theories of consumer
value, which postulate that all objects and practices of consumption are subject to
signification, that if and when they acquire sign- status they stand in an essentially
structural relation to each other, and that this (semiotic) structure has autonomy and
causality vis-à-vis individuals’ experiences and actions (Baudrillard 1981). All these
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different emphases and tensions found in Marxist, hermeneutic, and semiotic perspectives
are dialectically resolved in poststruc turalist theories of consumer value (Holt 1997).
Accordingly, individuals do interpret and situate consumption objects and events in
relation to their self- narratives and cultural interpretive frameworks. However, the
narratives are never constructed with full creativity and the frameworks are rarely
adopted with high fidelity. Semiotic structures, which include the semantic, syntactic, and
pragmatic aspects of signification, mediate and define what can be intelligibly and
legitimately meant and understood, and hence the limits and potentials of narratives and
frameworks available to an individual. At the same time, these semiotic structures are
constantly manipulated, appropriated, and contested by actors representing different
power and wealth positions.
Evaluating this theoretical evolution about consumer value with respect to the
model of the Discursive Consumer introduced in the previous section, we notice that each
theory subsumes earlier insights and addresses a new aspect as follows (see Figure 3.3):
(a) Economic theory of consumer value stays at the level of being without
problematizing the self or the environment at all,
(b) Psychological theory of consumer value explains consumer behavior using a
discourse of Nature as well as allowing for a discourse of Nature to be used by
consumers in accounting for their own behaviors,
(c) Sociological theory of consumer value develops explanations based on a discourse of
Society as well as allowing for a discourse of Society to be used by consumers in
accounting for their own behaviors,
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(d) Anthropological theory of consumer value draws on a discourse of Culture to explain
consumption as well as allowing for a discourse of Culture to be used by consumers
in accounting for their own behaviors,
(e) Marxist theory of consumer value, as a discourse of Logic itself, criticizes economic
theory’s axiomatic abstraction of being, and challenges psychological theory’s
unreflective adoption of a discourse of Nature,
(f) Hermeneutic theory of consumer value, as a discourse of Logic itself, proposes to
problematize the previously neglected discourse of the self,
(g) Semiotic theory of consumer value, as a discourse of Logic itself, questions the
unreflective adoption of the discourse of Culture and suggests signification processes
as the transcendental ground for a critique,
(h) Poststructuralist theory of consumer value, as a discourse of Logic itself, criticizes
sociological theory’s indiscriminate use of the discourse of Society while integrating
aspects of Marxist, hermeneutic, and semiotic theories.
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Figure 3.3 Towards a Discursive Theory of Consumer Value
ENVIRONMENT
Anthropological
Psychological
Culture
Nature
MEANING
Knowledge
Experience
SELF
Identity
Subjectivity
Rationality
Autonomy
Thought
Logic
Action
Economic
Hermeneutic
Semiotic
Discursive
Marxist
Poststructuralist
Society
Sociological
A discursive theory of value is also a discourse of Logic itself. However, it differs
from earlier critical theories in that it reflexively turns back on to and problematizes the
discourse of Logic itself to explain consumer behavior. Whereas other critical theories
recognize the structural role of discourses in consumption phenomena but nevertheless
relegate them to the background, discursive theory of consumer value assigns a central
role to discourse. This follows from my earlier assertion and demonstration that all
activities of being are fundamentally oriented towards engaging, creating, and contesting
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discourses of the self and the environment. Clearly, individuals get involved with real
objects and events as well, but they are neither the starting nor the ending points of one’s
concerns. Moreover, those involvements are fully situated in discourses. Accordingly,
consumption is posited to be a discursive activity through and through: structured by
other discourses, consumption is itself structured as a discourse and structures other
discourses. More precisely, I will argue that consumption in an experience-based view of
value is the discursive practice of moving from a discourse of actual self grounded by a
discourse of actual environment to a discourse of actual environment grounded by a
discourse of actual self.
To illustrate this new approach, let us look at a typical consumer’s decision
making process as found in standard textbooks of marketing and consumer behavior
(Kotler 2003).
Stage in the process
Discursive dynamics
Problem Recognition
S/E/y/x à S/y/E/x à y/S/E/x
Resource Search
y/S/x/ E à y/x/S/E
Evaluation of Alternatives
x/y/S/E à x/y/E/S
Purchase Decision
x/E/y/S à x/E/S/y
Post-Purchase Behavior
E/x/S/y à E/S/x/y à E/S/y/x
S: discourse of the Self; E: discourse of the Environment; y: aspect of S; x: aspect of E
In this new scheme of things, an individual’s being is at all times engaged, via her
thoughts, actions, knowledge, and experiences, in discursive practices. Her consciousness
extracts and invests meanings by focusing on certain general patterns or specific aspects
of discourses as figures while grounding certain others as contexts or horizons. For
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example, the sequence [S/E/y/x à S/y/E/x] describes the mental dynamic in which an
individual’s consciousness shifts from a mental state focused on the general discourse of
the self as the figure set against the ground of the general discourse of the environment
with specific aspects of the self-discourse and environment-discourse in the contextual
horizon to a mental state focused on the general discourse of the self as the figure set
against the ground of the specific aspect of the self-discourse with the general discourse
of the environment and specific aspects of the environment-discourse in the contextual
horizon. All other discursive dynamics in the table are to be interpreted similarly. It is
important to recognize that each particular configuration in which general patterns and
specific aspects of discourses figure and ground each other corresponds to a particular
signification outcome. In this sense, one’s understanding of her own self and the
environment is always in progress.
In general terms, we see that what was termed ‘problem recognition’ in standard
accounts corresponds to a discursive dyna mic from a mental state focused on self
grounded by environment with specific aspects of self and environment in the horizon to
a mental state focuses on specific aspect of self grounded by self with environment and
specific aspects of environment in the horizon. One recognizes a problem as one’s
attention shifts to a specific aspect of self, first by reinterpreting the latter vis-à-vis the
environment, and then vis-à-vis the self.
As consciousness engages specific aspects of the self, specific aspects of the
environment are scanned for potential relevance. This process, known as ‘resource
search’ in standard theory, involves grounding of the self while figuring specific aspects
of the environment by reinterpretation.
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Analyzing the consumer decision making process in light of this new discursive
reformulation, we see that discourses and discursive practices play a crucial role in the
entire cycle. Standard decision process fails to highlight this essential link.
Viewed from the firms’ perspective, the “environment” in Figure 3 is where the
firm interacts with consumers. Prahalad and Ramaswamy (2004) argue that the next
frontier of value creation entails firms innovating “experience environments” in which
individuals can co-create their own view of value (experiences) with firms. Thus, in the
future, the experience environments of firms must intersect with the “environment” of
Figure 3, in a way that enables co-creation of experiences that is meaningful for the
individual (“self”). In other words, moving from a firm and product-centric view of
value to an individual and experience-based view of “co-creation of value” (Prahalad and
Ramaswamy 2004) calls for a concomitant shift from an exchange-based theory of value
towards a discursive theory of value. In the latter, the process and content of interactions
among individuals become central to co-creation of value, as does the “network
structure” of these interactions.
In the next chapter, I will attempt to build a foundation for this third component of
consumer-to-consumer interactions: its structure and how it influences the dynamics of
interactions.
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CHAPTER IV
DYNAMICS OF CONSUMER NETWORKS
In this chapter, I handle the third and final aspect of a theory of consumer-toconsumer interactions, namely their structure. First, I set up a theoretical model of wordof- mouth interaction utilizing information- and decision-theoretical conventions. Using
such a model, I show how to derive comparative static results as well as how that model
reveals critical requirements for an adequate and accurate information transmission
across consumers. I also demonstrate the role of network structure with as few as three
consumers. Then, I turn to the question of how to study larger consumer networks.
Through agent-based modeling, I investigate word-of- mouth flows in different types of
network configurations.
A Theoretical Model of Word-of-Mouth
In modeling the consumer behavior, we adopt an individual- level decision
analytic framework of product adoption, developed by earlier researchers in economics
and marketing science (Chatterjee and Eliashberg 1990; Feder and O'Mara 1982; Jensen
1982; Roberts and Urban 1988). Accordingly, we assume that consumer population is
heterogeneous in terms of risk aversion (c). Each consumer holds a perception of product
performance in the form of a normal distribution, i.e., x t ~ N(mt, st2). New information
about product performance, zt, is obtained either through WOM (from a consumer who
has adopted during the previous time period) or own use-experience. Consumer registers
this as if zt ~ N(µ, σ2 ), where, µ is the mean of the (unknown) true performance, σ2 is the
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perceived unreliability of information source. For use-experience, this is certainly how a
rational consumer should conjecture. Moreover, σ2 = ξ 2 corresponds to self-perceived
lack of expertise. For WOM, we reason that since consumers do not have any specific
information about other consumers’ priors, they will assume an uninformative (flat) prior
for any WOM source. Therefore, WOM source’s posterior, and by construction, a WOM
message will be assumed (by the WOM recipient) to come from N(µ, σ2 ).
Performance perception is updated via Bayes’ rule:
mt+1 =
mt / st2 + zt / σ 2
1
; st2+1 =
2
2
2
1 / st + 1 / σ
1 / st + 1 / σ 2
Consumer’s utility is specified using the standard Von Neumann-Morgenstern
form:
U ( xt ) = 1 − e −cx t
Adoption occurs if and when E[U(x t)] > 0, i.e.,
mt >
cst2
2
Comparative Statics
Here, we ask the question: How does the probability of adoption for a word-ofmouth (WOM) recipient (β) change with respect to WOM source (α) characteristics?
We start with the assumption that α has adopted at time 0. Hence,
mα , 0 >
cα sα2 , 0
2
84
(1)
Having adopted, α experiences delivered performance, y ~ N(µ, δ 2), where, δ 2 :
variance of (unknown) true performance. Subsequently α updates performance
perception, i.e.
mα , 0 / sα2, 0 + y / ξα2
1
mα ,1 =
; sα2,1 =
2
2
2
1 / sα , 0 + 1 / ξα
1 / sα , 0 + 1 / ξα2
β has not adopted at time 0 yet. Hence,
(2)
2
c s
mβ ,0 ≤ β β ,0
(3)
2
At time 1, β contacts and receives WOM from α, z ~ N(mα,1, sα,12). Upon
updating,
mβ , 0 / sβ2 , 0 + z / σ β2 ,α
1
mβ ,1 =
; sβ2 ,1 =
2
2
2
1 / sβ , 0 + 1 / σ β ,α
1 / s β , 0 + 1 / σ β2 ,α
(4 )
β will adopt iff
2
cβ s β ,1
(5)
2
Using (4) in (5) and rearranging, β’s condition for adoption becomes
m β ,1 >
 cβ m β , 0 
2
z > σ β ,α  − 2 
s β , 0 
 2
Hence, β’s probability of adoption, Pr(Aβ ), is

c
m 
1 − Pr  z ≤ σ β2 ,α  β − 2β ,0  

sβ , 0  
 2

85
(6)
(7)
Plugging in z and from (2), we get for Pr(Aβ )

c
m  1
1 m
y 
1 − Φ  σ β2 ,α  β − 2β , 0   2 + 2  − α2 ,0 − 2  (8 )

s β ,0   sα , 0 ξα  sα , 0 ξα 
 2

Solving for the comparative statics, we find:
∂ Pr ( Aβ )
>0
∂mα , 0
∂ Pr ( Aβ )
∂s
2
α ,0
 cβ m β , 0 
2
> (< )0, if mα , 0 < (> )σ β ,α  − 2 
s β ,0 
 2
∂ Pr ( Aβ )
∂ξ
2
α
∂ Pr ( Aβ )
<0
∂σ β2 ,α
 c β mβ , 0 
2
> (<)0, if y < (> )σ β ,α  − 2 
sβ , 0 
 2
Hence, probability of adoption for recipient increases if:
•
the source holds a higher prior mean for perceived performance,
•
the source is of higher perceived informational reliability,
•
the source holds a higher prior variance for perceived performance
whenever his prior mean is lower than recipient’s adoption threshold,
•
the source has lower expertise whenever the delivered true performance is
lower than recipient’s adoption threshold.
The first two comparative static results are immediately intuitive. The last two,
however, might sound counterintuitive at first. How, at all, could the probability of
adoption for a recipient increase if the source has a less certain prior about perceived
performance or if the source is more of a novice? The answer is to be found in the
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qualifying conditions and the way learning happens. Whenever the source’s prior mean
of perceived performance is lower than a certain level (WOM equal to the mean would
just push the recipient into adoption), higher prior variance for perceived performance,
ceteris paribus, gives more weight to usage experience in the resulting posterior.
Likewise, whenever the source’s usage experience is lower than a certain level (WOM
equal to the usage experience would just push the recipient into adoption), lower
expertise, ceteris paribus, discounts the usage experience more heavily in the resulting
posterior. Therefore, given the qualifying conditions, it increases the chances of adoption
for a recipient if he contacts a source with higher uncertainty about his prior or the source
with lower expertise.
Information Aggregation
We first test the following expectation with respect to word-of-mouth: as
experience accumulates (via usage) and spreads across the population (via WOM), each
new adopter should obtain a more accurate performance perception.
To eliminate all other sources of idiosyncrasy, we set up a dyadic scenario where
•
source (α) and recipient (β) are identical except for risk aversion,
•
source adopts first, experiences product, updates perception, passes along
•
recipient updates perception, adopts and experiences product, updates
WOM,
perception.
The operational question we want to answer is this: Is the recipient’s final
perception more accurate than source’s final perception?
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Accordingly, let x α,0 ≈ xβ ,0 ~ N(m0, s02), σβ, α2 = σ2, ξα 2 = ξβ 2 = ξ 2, y : useexperience (constant), and
2m0
 m0
1 m0ξ 2 + ys02
cα < 2 < c β < 2 2 + 2
s0
s 20 + ξ 2
 s0 σ



Since
cα <
2m 0
< cβ
2
s0
only α adopts at time 0.
α experiences delivered performance, y, and updates his performance perception:
m0 / s02 + y / ξ 2
1
mα ,1 =
; sα2 ,1 =
2
2
2
1 / s0 + 1 / ξ
1 / s0 + 1 / ξ 2
At time 1, β contacts and receives WOM from α, z = mα,1. Note that we are using
a mean-approach. Upon updating,
m β ,1 =
m0 / s02 + mα ,1 / σ 2
1
; s 2β ,1 =
2
2
2
1 / s0 + 1 / σ
1 / s0 + 1 / σ 2
Since
β will adopt at time 1.
 m0
1 m0ξ 2 + ys 02 

c β < 2 2 + 2
s02 + ξ 2 
 s0 σ
β experiences delivered performance, y, and updates his performance perception:
mβ ,1'
mβ ,1 / sβ2 ,1 + y / ξ 2
1
=
; sβ2 ,1' =
2
2
2
1 / s β ,1 + 1 / ξ
1 / s β ,1 + 1 / ξ 2
Plugging in for mβ ,1 and
sβ2 ,1
88
we get
m β ,1'
m0 / s02 + mα ,1 / σ 2 + y / ξ 2
1
=
; sβ2 ,1' =
2
2
2
2
1 / s0 + 1 / σ + 1 / ξ
1 / s0 + 1 / σ 2 + 1 / ξ 2
Plugging in for mα,1 we get
(m0 / s + y / ξ ) + σ12 (m(10//ss20 ++1y/ ξ/ ξ2 ) ) m / s 2 + y / ξ 2
0
=
= 0 20
= mα ,1 !!!
(1 / s 02 + 1 / ξ 2 ) + 1 / σ 2
1 / s0 + 1 / ξ 2
2
2
0
m β ,1'
2
2
Hence, we find that the current WOM process, where the recipient blends
source’s final performance perception into his own perception, does not fully aggregate
the collective experience present in the social system! Instead, we see that collective
“prejudice”, which is contributed by the priors in each WOM, is aggregated as well. This
is a key insight.
In retrospect, it is easy to see why this happens. The WOM recipient makes the
vulnerable assumption that the WOM he gets from a source is coming from the true
distribution. However, this is not the case! The WOM piece includes the source’s prior
distribution as well. Therefore, in the case given above, the WOM certainly helps the
recipient adopt but once he experiences the product and updates his perception, his final
perception looks as if the WOM did not have any effect at all.
In order to postulate a WOM process that does aggregate collective experience
and filters out collective prejudice we propose two possible corrections:
– ideal WOM process, in which the source transmits actual experience only;
89
– rational WOM process, in which the recipient extracts actual experience and
filters out source’s priors.
Next we will briefly describe how these two corrections could work in actuality.
As we will see, a community facilitates ideal and rational WOM.
Ideal WOM process. Each consumer does use his prior to make the adoption
decision. When passing along WOM, however, he only submits his actual experience
plus experience obtained from his own WOM sources, accompanied by his uncertainty
about each information component.
Source (α) is the original adopter. He passes WOM to recipient (β) in the form of
“Product performance is yα with uncertainty ξ α 2,“ i.e, N(yα , ξ α 2). β integrates this WOM
into his prior while adding his own perception about α’s unreliability as an information
source, σβ ,α2 . Hence, for adoption purposes, β’s information is N(yα , ξ α 2 + σβ ,α2 ).
Upon adoption β experiences the product performance: yβ . His updated
experience information, which he passes as WOM too, becomes:
 yα / (ξα2 + σ β2,α ) + y β / ξ β2

1

N
,
 1 / (ξ 2 + σ 2 ) + 1 / ξ 2 1 / (ξ 2 + σ 2 ) + 1 / ξ 2 
α
β ,α
β
α
β ,α
β 

An ideal WOM process puts the burden and the responsibility on the WOM
source as
•
he has to incur the cognitive cost of filtering out the contribution of his priors when
conveying WOM information,
•
he needs to disclose his level of uncertainty honestly.
90
These two conditions can be met only in a social system, which comprises ethical
and altruistic individuals or in a community where a history of reciprocal interactions and
trust exist.
Rational WOM process. Each consumer uses his prior to make the adoption
decision. When integrating WOM from another consumer, he estimates the prior
structure of the WOM source, using available information about the person. Using this
information, he extracts the true experience information contained in the WOM.
Recipient (β) first estimates the prior structure of the source (α),
xˆα , 0 ~ N (mˆ α ,0 , sˆα2 , 0 )
e.g., via discussions with α, knowing his past history, imputing from similar
individuals, etc.
β estimates next the actual experience information and the uncertainty of it:
 z
mˆ α ,0 
2
yˆα = ξˆα  2 − 2 
σ

1/ σ
 β ,α sˆα , 0 
β can use this estimate as a vicarious experience in updating his prior. A rational
2
ξˆα =
2
β ,α
1
;
− 1 / sˆα2, 0
WOM process imposes two requirements on the recipient as
•
he should possess sufficient information about the source to infer his prior structure,
•
he should have the cognitive resources to carry out the signal extraction task.
Here, again, a community with ongoing interactions appears to be required.
91
Structural Mediation in a Triad
Here, our goal is to demonstrate the effect of social structure on adoption
dynamics. In particular, we will show how the particular connection pattern between
consumers determines the number of adoptions in the social group.
For this demonstration we will look at a triadic scenario with three consumers:
source (α), mediator (γ), and recipient (β). Using the results from a previous section we
assume an ideal WOM process. All three consumers are identical in terms of priors,
reliability perceptions, and expertise. Only risk aversion differs: α is least risk averse, γ is
more, and β is the most risk averse.
Accordingly, let xα,0 ≈ xβ,0 ≈ x γ,0 ~ N(m0 , s0 2 ), σβ,α2 = σβ,γ 2 = σ2 , ξα 2 = ξβ 2 = ξγ 2
= ξ2 , y = constant, and




2m 0

m0 
m0 
y
y



cα < 2 < cγ < 2 2
+ 2  < cβ < 2 2 2
+ 2
2
 ξ (ξ + σ 2 )
s0
s0 
s0 
2
ξ + σ
+
σ


2
2
 2ξ + σ

We will compare two structural scenarios:
α
Case 1
β
α
γ
Case 2
Since
cα <
2m 0
< cγ < cβ
2
s0
only α adopts at time 0.
92
β
γ
α experiences delivered performance, y, and updates his performance perception.
Case 1:
At time 1, β and γ contact and receive WOM from α , z = N(y, ξ 2 ). Upon
updating,
mβ ,1 = mγ ,1 =
m0 / s02 + y / (ξ 2 + σ 2 )
1
; s 2β ,1 = sγ2,1 =
2
2
2
2
1 / s 0 + 1 / (ξ + σ )
1 / s0 + 1 / (ξ 2 + σ 2 )
Since

y
m 
cγ < 2 2
+ 20  < cβ
2
s0 
ξ + σ
2
c s
m β ,1 < β β ,1
2
2
cs
& mγ ,1 > γ γ ,1
2
Thus, γ will adopt, β will not!
Case 2:
At time 1, γ contacts and receives WOM from α , z = N(y, ξ 2 ). Upon updating,
m0 / s02 + y / (ξ 2 + σ 2 )
1
mγ ,1 =
; sγ2,1 =
2
2
2
2
1 / s 0 + 1 / (ξ + σ )
1 / s0 + 1 / (ξ 2 + σ 2 )
Since

y
m 
cγ < 2  2
+ 20 
2
s0 
ξ +σ
2
cs
mγ ,1 > γ γ ,1
2
Thus, γ adopts.
93
γ experiences delivered performance, y, and updates his performance perception.
As a result, his updated experience information becomes

1

N  y ,

2
2
2 
 1 / (ξ + σ ) + 1 / ξ 
At time 2, β contacts and receives WOM from γ,

1

z = N  y,

2
2
2 
 1 / (ξ + σ ) + 1 / ξ 
Upon updating,
mβ , 2

1

m 0 / s02 + y / 
+σ 2
2
2
2
1
 1 / (ξ + σ ) + 1 / ξ
 ; s2 =
=
β ,2

1


1

1 / s02 + 1 / 
+σ 2
1 / s02 + 1 / 
+σ2 
2
2
2
2
2
2
 1 / (ξ + σ ) + 1 / ξ

 1 / (ξ + σ ) + 1 / ξ

Since




m0 
y

cβ < 2 2 2
+ 2
 ξ (ξ + σ 2 )
s0 
2
+σ


2
2
 2ξ + σ

2
mβ ,2 >
c β sβ , 2
2
Thus β adopts!
These results clearly show that given two identical cases, save for the network
structure, we get two different pictures regarding adoptions. We note that the mediator
(γ) serves a crucial function both as a conduit and as a contributor in the aggregation of
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collective experience. Similarly, the recipient’s choice of contact (mediator vs. source)
might have a major impact on future adoptions, if we consider a community for which the
recipient is the gateway. Finally, this simple demonstration powerfully shows one way of
how Moore’s (1999) “chasm” argument might operate. In particular, a chasm lies
between source and recipient, and the mediator is the crucial bridge who closes this
chasm.
Modeling Consumer-to-Consumer Interactions in Large Networks
When exploring the structural effects on adoption, particularly with a large
number of consumers, stochastic analysis quickly becomes very cumbersome. Hence we
change our research strategy here and use computational analysis. To implement
computational analysis, we adopt agent-based modeling, where each agent’s
(consumer’s) behavior and agent-agent (consumer-to-consumer) interactions are first
modeled in logical language, then translated into mathematical language (whenever
applicable), and finally written in object-oriented programming language.
Agent-Based Modeling (ABM) is proposed here as a method to analyze complex
systems which comprise many interdependent behavioral systems. Mechanisms are
specified as agent/world and agent/agent interactions based on local variables, and agents
generate behaviors that cause the local variables to change. Thus, instead of enforcing
mechanisms on the aggregate, one observes the emergence of aggregate level dynamics
or structure endogenously from agent/agent and agent/world interactions. An agent-based
model consists of three components: a world, agents, and observer routines. A world is a
topology of local states and dynamics. Agents are defined by their sensors, effectors,
95
behavioral rules, individual states, and adaptive mechanisms. Observer routines are
windows that are opened into the model by the modeler to measure variables of interest.
One does not have to worry about solvability since agent-based modeling is implemented
via computer simulations. Most agent-based modeling implementations use objectoriented programming.
ABM is almost the same as stylized theoretical modeling, and even more. Agentbased modeling incorporates desirable aspects of game theoretical research and
experimental research. Having precise control over the setup and assumptions, we are at
par with game theoretical research. Having the possibility of comparing and contrasting
many diverse scenarios, we approximate experimental methodology. Agent-based
modeling also allows for both deterministic and stochastic analyses.
There has been an explosive growth in the implementation of agent-based models
in the recent years. One of the earliest examples of agent-based models is found in
Schelling (1978) where racial segregation in neighborhoods was shown to emerge
dynamically even if individual residents did not require majority of their neighbors to be
of the same race. Axelrod's agent-based simulations on the iterated Prisoner's Dilemma
game resulted in his seminal work on the evolution of cooperation (Axelrod 1984). Most
recently, Epstein and Axtell (1996) developed a large-scale agent-based model which
investigates several social phenomena such as group formation, cultural transmission,
combat, and trade as emergent properties of locally defined agents.
Holland and Miller (1991) claim that many economic systems are, in fact, CAS.
They argue that they are complex in the sense that (1) they consist of a network of
interacting agents, (2) they exhibit dynamic, aggregate behavior that emerges from the
96
individual activities of the agents, (3) their aggregate behavior can be described without a
detailed knowledge of individual agents. Furthermore, they are adaptive in the sense that
these systems are networks of adaptive agents who behave so as to increase their
individual performances. They also note that CAS operate far from a global optimum or
attractor. These systems possess many levels of aggregation, organization, and
interaction, and each level consist of local niches that can be exploited by particular
adaptations. These adaptations in turn create new niches and hence such a system
operates far from any global attractor. Holland and Miller maintain that everexpanding
range of technologies and products in the economy demonstrate exactly these
characteristics. They argue that constructing agent-based models in economics
complement ongoing theoretical and empirical work by providing an experimental
format, which is amenable to free exploration of system dynamics with complete control
on all conditions, and an opportunity to check the various unfolding behaviors for
plausibility. Advantages that accrue from using agent-based modeling over traditional
modeling approaches are several:
(i)
flexibility of linguistic models can be retained while precision and
consistency is ensured by the formal computer language,
(ii)
agents who are often assumed to be carrying out sophisticated
optimization calculations can be modeled more realistically as adapting to market
conditions as if they were optimizing,
(iii)
controlled experiments with artificial agents allow tests of literally endless
combinations of scenarios regarding utility, risk aversion, information, knowledge,
expectations, and learning,
97
(iv)
emergent behavior that is unanticipated or unpredictable at the outset
subject to particular initial structures can offer insights and suggestions for new theorems
concerning the effects of adaptive agents on phenomena,
(v)
analytically intractable problems can be solved numerically through
repeated simulations.
For this application, we use the SWARM platform, de facto standard in academic
research. Objective C, which is the programming language underneath SWARM,
provides useful features such as dynamic memory management, inheritance mechanisms,
and object creation/deletion.
Agent-Based Modeling is of great value for theoretical research in marketing due
to the great flexibility it can provide the researchers with.
Agent-based Modeling of Consumer Networks versus Social Network Analysis
There has been long-standing tradition in sociology called social network
analysis. In his review on network structure models, Burt (1980) proposed to classify
models according to their analytical approach (relational vs. positional) and unit of
analysis (actor vs. subgroup vs. network). One’s position in a web of relations, for
example, mediates his access to resources and opportunities, so much so that phenomena
such as finding a job through weak-tie contacts is more of the norm than an exception
(Granovetter 1973). In competitive contexts, entrepreneurial success in markets might
depend on securing a structural role or position that is highly non-equivalent and nonredundant, i.e. rich in “structural holes” (Burt 1992).
98
Social psychologists prefer the relational approach whereas sociologists and
anthropologists tend toward the positional approach. Models with a relationa l approach
highlight the intensity of relationship between pairs of actors and study one or few
relations in isolation of other relations that might exist. Models with a positional
approach focus on the pattern of relations defining an actor’s position in a network and
have to consider all relations that might have a systemic relevance. When the unit of
analysis is the actor, typical network models motivated by the relational approach capture
one’s personal network in terms of extensiveness, density, or multiplexity, whereas
positional approach concentrates on the centrality or prestige of the network position
occupied by the actor. Shifting to a subgroup as the unit of analysis, a relational approach
would analyze the cohesiveness of cliques, while a positional approach would discover
structurally equivalent actors based on status/role sets. Finally, when the entire network is
the unit of analysis, a relational approach would look into the density or transitivity
properties of the system, whereas a positiona l approach would describe the system
structure as a stratification of status/role sets.
As documented in Wasserman and Faust’s (1994) comprehensive review, social
network analysts have adopted and significantly extended concepts and methods from
graph theory. Measures of density, connectivity, cohesion, centrality, and transitivity are
widely used and further developed to characterize and compare empirical networks. The
density of a graph is a simple measure of connectivity and cohesion in a social system,
and can be easily calculated as the proportion of possible lines that are actually present in
the graph. However, this measure confounds connectivity and cohesion and underreports
them as group size increases. More specifically, a network is said to be connected if there
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is a path, no t necessarily direct, between every pair of nodes in the graph. In the extreme,
it might take the deletion of a single node to make a network disconnected; hence,
connectivity can be measured by the number of nodes or lines that must be removed to
make the graph disconnected. This property indicates the robustness of a network and can
be very sensitive to local conditions.
Cohesion, on the other hand, denotes the strength, intensity, closeness, mutuality,
and frequency of social relations within a given group of individuals. As such, it is not as
vulnerable as connectivity to individual effects. Measures of cohesion can be based on
complete mutuality, reachability and diameter, nodal degree, or within-outside ties.
Cliques are characterized by complete mutua lity of relations among all their members;
however, this is a rather stringent criterion of cohesion for most practical purposes.
Measures based on nodal degree relax this condition by grouping those individuals who
are connected to all but few others. Reachability- and diameter-based measures of
cohesion, on the other hand, do not require mutuality but track individuals reachable in
less than or at most a certain number of steps. Comparing within to outside subgroup ties,
without assigning individuals to groups a priori, yields cohesion measures that are closer
to the intuitive sense of the construct, albeit at greater computational costs.
Centrality and prestige are the most fundamental concepts to capture structural
heterogeneity in social networks. An actor who actively engages in many relations is
deemed to be central whereas an actor who is the recipient object of many extensive ties
is considered to be prestigious. Centrality of an actor can be based on the number of ties
she has with others (degree), on the number of steps she needs to traverse to reach other
actors (closeness), on the number of shortest paths she mediates between other actors
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(betweenness), or on the information mediation capacity she possesses en route from any
one actor to another (information). The population distribution of centrality or prestige
measures of all actors can provide significant theoretical insights about the structural
makeup and processes of the network.
Transitivity of social relations, i.e. the tendency of a direct relation to exist
between any two actors whenever the same relation holds indirectly via a third actor, is
another important construct that determines structural properties of social networks.
Transitivity has been used to operationalize Heider’s (1946) notion of balance in
interpersonal contexts. In the case of reciprocated relations, transitivity in a network
converges with clusterability, another structural property with significant theoretical
implications.
As mentioned earlier, positional approaches have been developed with explicit
interest in sociological and anthropological phenomena. The goal is to identify classes of
actors who have similar status/role profiles vis-à-vis other actors in the network. Two
actors are said to be structurally equivalent, and occupy the same position, if they have
identical relationships with all the other actors in the network. This property is hard to
observe in practical context, hence analysts have proposed less stringent properties such
as isomorphic, automorphic, and regular equivalence. In the case of regular equivalence,
for example, in a highly recursive fashion, two actors are said to be equivalent if they
have identical ties to and from equivalent actors. Per this scheme, a network might
contain several alternative partitions of actors into equivalence classes. At any rate, once
equivalence classes have been defined and actors have been partitioned into these classes,
one can then determine the presence or absence of relations across classes which leads to
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an ‘image matrix’. This procedure and its product together are called a ‘blockmodel’.
One can then investigate the relational nature of individual positions or the structural
properties of the entire configuration (White, Boorman, and Breiger 1976).
All the different measures and procedures mentioned above have their stochastic
analogues as well. However, as White et al. (1976) noted, models of structure are not
sufficient in and of themselves, and one has to dynamically link structure with concrete
social processes and individual manipulations. Subsequently, one has to study how
information flows and other transactions relate to structural patterns and their change.
Unfortunately, most network theoretic concepts and tools have been so far employed
within traditional research paradigms, as attributes of units that are statistically analyzed
in cross-sectional manner and not as constitutive mechanisms of social processes and
effects. As long as we do not address questions of origin, reproduction, and evolution of
networks in terms of the actors that come and go, we are bound to study networks as
moving targets (Emirbayer and Goodwin 1994).
In contrast, ABM offers a plausible alternative of conceptualizing networks as
entailing interactions between agents (consumers) who are themselves affected by it, i.e.,
the expectations and behavior of agents are “actively shaped by the network”. Individual
choice (of product and service offerings) becomes an endogenous process affected by
other individuals. Further, individuals can proactively also make choices of other
individuals through their associative preferences for consumer-to-consumer interactions.
We now examine how different configurations of a network shape individual
choices, and thereby the dynamics of market adoption (of a new offering). We will then
investigate how associative preferences affect these dynamics.
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Small World Networks
For our first large-scale investigation of WOM, we use the “small world”
formalism. The small-world phenomenon was first demonstrated by Stanley Milgram,
who traced the number of steps required for a message to travel from a person in one city
to another person, a stranger to the first, in another city in the U.S. and found the number
to be a little more than 6 (Milgram 1967). Hence, the popular expression, “six degrees of
separation.” Another popular example of this phenomenon is the “Kevin Bacon effect”,
which traces the distance of any movie artist to Kevin Bacon through other artists who
played in movies with Kevin Bacon or with artists who played with Kevin Bacon etc
(Reynolds 2001). In the academic community, people have been gauging their scholastic
centrality according to how close, in terms of co-publications, they are to Paul Erdos, a
famous mathematician with contributions in the field of combinatorics and graph theory,
using the “Erdos number” (Grossman 2001). The gist of the small- world argument is that
a very small number of random, global links can shrink the world drastically (Watts
1999).
Small-world formalism serves as a convenient setup since it can be constructed
easily and in a controlled fashion. Using it, we can eliminate extraneous idiosyncrasies
that would confound observations of structural effects. Using the framework proposed by
Watts and Strogatz (1998), we can generate networks that are connected (it is possible to
reach any other agent from any agent without leaving the network), have minimal
structure (no agent has a particular structural dominance in the network, i.e., no agent is
overwhelmingly central), made up of unidirectional and non-valued links, and range
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between a topological ring and a complete graph. Some illustrative structure of consumer
networks are shown in Figure 4.1 below.
Figure 4.1 Some Illustrative Structures of Consumer Networks
Disconnected world
Random world
Very large world
Large world
Small world
Very small world
Computational Experiments: Adoption Dynamics
In the experiments described below, all consumers have identical risk aversion
parameters, priors, expertise levels, and source reliability perceptions. We used the WOM
process given at the outset of this chapter. In addition, we allow WOM transmission from
non-adopters as well. This assumption allows us to have the very first adoptions to
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emerge from WOM activity instead of some other mechanism (e.g., variation in risk
aversion or external communication) which would raise issues of how and why we pick
the “seeding” consumers and whether that selection confounds the results. There is also
evidence that WOM can occur between two non-adopters (Arndt 1967a). In the
experiments conducted below, each time period, only one WOM source is consulted.
Upon adoption, WOM intake stops but updating from product experience continues in
future time periods.
Details of the experimental setup are given in Appendix A. Our observables of
interest are the time of first adoption, penetration speed, final penetration rate, and path
dependence. Appendix B provides plots of the dynamics obtained through our
computational experiments. Appendix E provides a pseudo-code of the program used in
all experiments. Table 4.1 summarizes our findings.
Table 4.1 Qualitative Summary of Simulation Results
Observable\World
"Very" large
Time to first adoption Shortest
Penetration speed
Monotonically
decreasing
Final penetration rate Lowest
Path dependence
Highest
"Very" small
Longest
First increasing then
decreasing
Highest
Lowest
In any given network, the very first adoption(s) occurs as some individual (or a
group thereof) drifts toward adoption due to an accidental sequence of high WOM values.
Once that individual adopts, he further updates his performance perception with actual
experience and disseminates this as WOM.
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Large world networks:
•
provide protective niches for group polarization to take place via positive
feedback, leading to earlier adoptions in some groups and “pockets of resistance” in
some others. Hence we see more adoptions early on but lower final penetration rates.
•
disseminate WOM more locally. As a result, penetration speed decreases
monotonically as opportunities for hitting a non-adopter dwindle.
•
imply more structure and localization. Thus, higher path dependence.
Small world networks:
•
expose consumers to many conflicting WOM sources. Therefore, we
observe “frustration” and non-adoption for a longer duration.
•
disseminate WOM more globally and more instantly. As a consequence,
we see S-curved penetration speed and higher final penetration rates,
•
imply less structure and globalization. Hence, lower path dependence.
•
might also lead to zero adoptions if “frustration” persists long enough and
affects a great majority!
In summary, we find that in the transmission of WOM and subsequent adoption
dynamics, the structure of a network matters! This is the case even in the least
idiosyncratic scenario of connected and minimally centralized topologies. On a related
note, the well known Bass model of new product diffusion in marketing (Bass 1969)
implies that exponential curves are due to innovation (p: individual effect) and logistic
curves are due to imitation (q: social effect). According to our analysis, exponential
curves can be obtained via social processes as well. As far as new product strategy is
concerned there are two key insights:
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•
During initial periods of a new product introduction, firms should
encourage and facilitate WOM circuits in local and relatively closed communities.
Global and random WOM transmissions should be discouraged or blocked at this
stage.
•
As positive WOM builds up in small communities, firms should gradually
open up WOM channels from these communities to the larger market and facilitate
random WOM flows.
Constructionist Network Models of Communities
It is a general observation that most social groups and affiliations are formed on
the basis of common gender, residence, occupation, educational history, etc. (Festinger et
al. 1950). Lazarsfeld and Merton (1954) coined the term ‘homophily’ to refer to this
tendency of an individual to associate with similar others. In a series of surveys involving
large samples from urban communities in the US and Germany, Laumann found
empirical support for this relationship between social position and association patterns
(Laumann 1966, 1973).
Laumann’s working hypothesis throughout these studies was that characteristics
of the individuals would determine the structure of the association network, which in turn
would result in the anchoring and crystallization of attitudes and behaviors. He showed
that although individuals prefer to associate with others who are higher in socioeconomic
status, actual associations occur between individuals with approximately equal status
(Laumann 1966). These aspired and actual associations were found to be closely related
to occupation prestige and status, respectively. This discrepancy can be explained by the
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fact that individuals in upper strata are cautious toward associates from lower strata
whereas individuals from middle strata seek associates from upper strata. Laumann
argued that individuals were assigned to positions based on ascription (e.g. ethnicity,
religion) or achievement (e.g. occupation) (Laumann 1973). He also found that the
friendship networks of individuals from lower status or immigrant groups were more
homogenous in terms of ascriptive attributes whereas individuals from higher status and
multi- generationally American groups had friendship networks more homogeneous in
terms of occupation. It was also discovered that occupationally heterogeneous and
ethnoreligious homogeneous networks tend to be more intimate and durable.
Along similar lines, Blau proposed an axiomatic theory (Blau 1977) which he
later empirically tested as well (Blau and Schwartz 1984). In his framework, distribution
of individuals across social positions has causal priority over role relations and
associations. Social positions are defined by all relevant attributes or affiliations, i.e.
structural parameters, which distinguish individuals and are taken into account by the
same individuals in making distinctions in social intercourse. Structural parameters can
be nominal (e.g. sex, race, religion, ethnicity, occupation, residence, marital status,
political affiliation), in which case individuals are said to be members of ‘groups’ and the
distribution is called ‘heterogeneity’, or graduated (e.g. education, income, wealth,
power, age, intelligence), in which case individuals are said to possess ‘status’ and their
distribution is called ‘inequality’. He assumed that individuals possess inherent
homophily but some heterophily (tendency to associate with dissimilar others) as well.
Through very simple algebraic derivations, Blau obtained some quite surprising results,
e.g.:
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•
“The rate of intergroup associations of the smaller group must exceed that of
the larger… Changes in a parameter's salience [i.e. homophily due to that
parameter] change the extent of intergroup relations of a minority with a
majority more than the majority's.”
•
“Except for the lowest strata, the probability of social associations with statusdistant persons increases with increasing status, ceteris paribus… Except for
the lowest strata, the probability of people's associating with others below
them in status is greater than the probability of their associating with others
equidistant above them.“
•
“Increasing heterogeneity increases the probability of intergroup relations…
Increasing status diversity increases the probabilities of associations among
persons whose status differs.”
•
“Intersecting nominal (graduated) parameters [i.e. with low correlations]
improve the integration of various groups (strata) by raising the rates of
association between their members.”
Hence, motivated by the preceding theoretical perspectives and empirical
findings, I propose that networks should be constructed bottom-up using distributions of
individual parameters and associative preference functions. As much as heterogeneity is
the prime variable of traditional segmentation approaches in marketing science,
heterophily (i.e., the tendency of individuals to associate with others who are dissimilar in
attitudes, interests, opinions, appearance, etc.) should be elevated to a similar role for
studying consumer networks and communities. A heterophily distribution is the
multidimensional aggregation of associative preference structures of individuals.
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Similar constructive approaches have been used in recent literature as well. Of
particular interest are Zeggelink’s papers (Zeggelink 1994, 1995) and Hummon
(Hummon 2000), which follow similar constructive strategies to network modeling. Note
that by linking network structure constructively to heterogeneity distribution on the one
hand, and to heterophily distribution on the other, we can reconcile both a positional and
a relational perspective to network modeling as observed by Burt (1980).
Using heterogeneity distribution in combination with heterophily distribution
allows the researcher to endogenize network structures and grow social structure bottom
up. The research strategy followed below is thus as follows: By postulating very simple
heterophily and heterogeneity distributions, I construct network structures, and then run
WOM processes to determine choice distributions (see Figure 4.2). The output is then
statistically analyzed to develop theoretical insights.
Figure 4.2 General Approach of Constructionist Network Experiments
Consumer population structure in
terms of risk aversion, expertise
etc.
Adoption
dynamics
(Emergent)
Network Structure
Associative preferences
for homophily and heterophily
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To represent heterophily distributions, I consider two parameters. Let τ be the
strength of the associative preference for an individual with trait θ: τ > 0 for heterophily,
τ < 0 for homophily, τ = 0 for no preference (random matching).
Different societies or communities can be distinguished by particular τ values.
Given the θ distribution, and the τ paramater, different social structures will emerge. A
logit probability function can be used to determine particular associate assignments.
In particular, let probability of j to be assigned as an associate of i be:
P (iRj) =
τ θ i −θ j
e
∑e
τ θ i −θ l
∀l , l ≠ i
Here, θi is the specific value of consumer i along the trait that determines her
associative preference. θj is that value for consumer j, a potential consumer i might
choose to associate with. The denominator is a sum taken over all potential associates.
This specification will result in networks with predominantly heterophilous
associations if τ > 0, predominantly homophilous associatio ns if τ < 0, and random
associations if τ = 0. Note that this is a probabilistic assignment, in other words, it does
not automatically link consumers to those who would be their top choice.
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Details of the experimental setup are given in Appendix C. Our observables of
interest are the time of first adoption, penetration speed, final penetration rate, and path
dependence. Appendix D provides plots of the dynamics obtained through our
computatio nal experiments. Appendix E provides a pseudo-code of the program used in
all experiments.
Let us first look at the emergent properties of networks generated with these
specifications. Networks that are constructed according to associative preferences for
heterophilous others, i.e. pure heterophily, tend to result in configurations having the
highest centrality, lowest connectivity, and low clustering. As individuals try to pick
associates who are most dissimilar to themselves along the risk aversion continuum,
which I have used as the basis for associative preferences, associative preferences
gravitate increasingly to others on the two opposite ends of that continuum. Hence, these
networks are highly centralized in comparison to the two other regimes. Noting that each
individual is allowed only two social links and these do not have to be reciprocal, as there
is polarization, these networks have the lowest connectivity. Similarly, as there is little
transitivity across multiple actors due to high centralization, there is also little clustering.
On the other hand, networks constructed per associative preferences for
homophilous others, i.e. pure homophily, yield configurations with the lowest centrality,
moderate connectivity, and moderate clustering. Associative preferences expressed
towards others similar to oneself tends to distribute social affiliations in a decentralized
fashion. It is also in this regime that one finds networks with moderate levels of
clustering as transitive relations ensue. Connectivity of these networks was found to be at
moderate levels.
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While one gets moderate levels of centrality and low clustering, highest level of
connectivity obtains in networks with uniformly distributed homophily/heterophily
preferences. This is a significant finding since it suggests that networks likely to occur
naturally in most social settings exhibit high levels of connectivity.
Moving on to the results concerning adoption dynamics, it is interesting to note
that, contrary to the finding of the previous section, there is not a crossover-like effect for
the mean time to cumulative adoptions, i.e., each level of cumulative adoptions is arrived
earlier in pure heterophily networks than in pure homophily networks. Similarly,
standard deviation of times to cumulative adoptions are consistently lower in pure
homophily networks than in pure heterophily networks. Also, in stark contrast to small
world networks formalism of the previous section, adoptions might not occur at all in all
types of constructionist networks.
One could also argue that pure heterophily and pure homophily networks behave
similar to very small world and very large world networks, respectively, in the sense that
full penetration may be reached in the former and may not in the latter, or penetration
process might get significantly stalled in the former and not as much in the latter.
As far as new product strategy is concerned, two recommendations can be made:
•
During initial periods of a new product introduction, firms should encourage
and facilitate WOM circuits in communities of similar individuals.
•
As positive WOM is generated in these pure homophily networks, firms
should ensure that more and more dissimilar individuals come into contact.
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A general conclusion is that in the absence of complete data on network
structures, and hence, of models of network- mediated communication processes,
segmentation based only on heterogeneity distributions confounds the true effects of
heterogeneity with the true effects of heterophily on consumption choices. Heterophily
and heterogeneity interact in complex ways to yield potentially unexpected choice
distributions when WOM channels become important sources for decision-making.
In the next chapter, I summarize the conclusions from this dissertation, its
implications for marketing science and consumer research and then discuss potential
directions for future research.
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CHAPTER V
CONCLUSIONS AND DIRECTIONS FOR FUTURE RESEARCH
Word-of-Mouth as Dialogic Discourse: Implications for Research and Practice
In marketing, the term “word-of- mouth” has often been used in conjunction with
words like communication, referral, recommendation, and advertising. This way it carries
a meaning close to its dictionary sense, i.e. oral or spoken (Gove 1993; Pickett 2000;
Simpson and Weiner 1989). However, this usage runs the risk of trivializing the
phenomenon by an attribution of mere modality (i.e. oral) to whatever term it applies to
(e.g. advertising). Moreover, this narrow “orality” or “spokenness” interpretation
oftentimes gravitates towards negative or extreme connotations such as rumor, gossip,
and buzz. Hence, I presented a more comprehensive typology of word-of-mouth to
generate a more substantive and informative definition. As my working definition
demonstrates, there is little agreement on what constitutes word-of- mouth. As a result, it
has been operationalized in several ways without analyzing its validity. Comparing,
contrasting, and reconciling findings across studies become progressively harder as the
fuzziness of the construct remains.
Existing studies also exhibit methodological limitations, not entirely independent
of their theoretical orientations. How a word-of-mouth episode transpires and to what
effects it does so is still largely unknown. My review suggests that a great majority of
studies on word-of- mouth used retrospective self-report measures to capture consumers’
actual word-of- mouth behavior and its relation to other constructs. To the extent that they
reliably tap into previously experienced states and behaviors, self-reported measures can
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claim to have some ecological validity. Same cannot be said for quite a number of studies
which administered questionnaires with hypothetical scenarios. However, these studies
can also claim to have achieved better manipulation controls. Further, very few studies
have set up simulated word-of- mouth experiments where the simulation was realized by
having one (two) consumer(s) deliver a verbal statement (exchange) to the subjects.
Unfortunately, this contraption makes the dubious assumption that the essence of wordof- mouth lies in one party passively listening to or eavesdropping on other people’s
utterances.
As is evident from these methodological choices, no study conducted thus far has
achieved any degree of external validity with respect to the true phenomenon at hand
even though the internal validity obtained across samples and contexts looks impressive.
Word-of- mouth research tries to advance theory by relying on data retrieved from
memory or conjectured upon a scenario. Significant breakthroughs in our knowledge of
word-of-mouth behavior should be expected to come from studying the phenomenon in
its natural settings, unobtrusively. Another methodological problem shared by almost all
the studies I reviewed is the fact that no two participants of the same word-of- mouth
episode are cross-examined to reconstruct the phenomenon which is an essentially
cooperative event. The benefits of studying both sides of a particular word-of- mouth
episode should be obvious, even if we stayed in the same paradigm of recall measures or
scenario-plays.
It is still a notoriously difficult job to track what type of and how much word-ofmouth is being generated in the marketplace. One obvious reason is the forbiddingly
large number of word-of- mouth episodes that could possibly transpire between
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consumers in a marketplace. Another reason, I submit, is that, for all practical purposes,
we do not yet know how an actual word-of- mouth episode works and how it interacts
with other psychological, social, and contextual variables. Word-of- mouth is still a blackbox: a set of inputs, outputs, and environmental parameters measured retrospectively or
projectively by probing only one side of a dyadic process are used to make inferences
about the actual event.
More critically, then, a discursive view of WOM can provide us with a much
needed broader and richer perspective on what happens in WOM interactions among
consumers. Word-of-mouth, as dialogical discourse, can highlight the functional,
structural, and ideological aspects of a linguistic consumer-to-consumer interaction. A
discursively-oriented theory of word-of- mouth can stimulate research into actual
performances of such dialogue to understand how it does what it does. I believe that the
next frontier in word-of-mouth research lies in developing theoretical and methodological
approaches informed by discourse theory. I present below a list of research tasks and
questions that would guide such a research agenda.
•
Developing a research methodology that will capture actual word-of- mouth
dialogues (either in audio or video format) complete with psychological, social,
and contextual measures.
•
Applying discourse-analytical approaches suc h as speech act theory, interactional
sociolinguistics, ethnography of communication, pragmatics, conversation
analysis, and variation ana lysis (e.g. Schiffrin 1994) to the data captured.
•
Investigating the syntax, semantics, pragmatics, rhetoric, and semiotics of wordof- mouth discourse; comparing and contrasting findings with other oral
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discourses such as everyday conversations, customer-salesperson encounters
(Ventola 1987), or advertising.
•
Examining the relationships between antecedents, moderators, and consequences
of word-of- mouth reviewed earlier in this paper with discursive properties and
processes of word-of- mouth dialogue.
•
Exploring the effects of everyday conversation, advertising, and other cultural
discourses on word-of- mouth discourse, and determining the macro impact of
individual word-of- mouth discourses on cultural discourses and product/firm
performance.
I believe that a theoretical and methodological reorientation for word-of- mouth
research that builds on the emerging interdisciplinary perspective of discourse theory and
analysis can motivate researchers to observe word-of-mouth in its natural settings and to
analyze it using linguistic approaches. Moreover, a direct application of discourse theory
to word-of- mouth research has the potential of empirically grounding and managerially
orienting the postmodernist/poststructuralist consumer research (Firat and Venkatesh
1995; Thompson and Haytko 1997; Thompson and Hirschman 1995).
Last but not least, a discursive reorientation of word-of-mouth research should
also stimulate more debate and research on discursive psychology as an alternative
perspective to the ruling cognitivist paradigm (Bagozzi and Dabholkar 2000; Edwards
1997; Edwards and Potter 1992; Gergen 1999; Harré and Gillett 1994).
In closing, in an increasingly networked society, consumer-to-consumer
interactions are being turbocharged with advances in communications, multimedia, and
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information technologies. The net result is that we can no longer treat consumers as
passive human entities engaged in WOM processes centered on the firm’s products and
services. The role of WOM flows as contributing to structuring personal meaning in and
through discourse becomes important to recognize.. The discursive consumer is an active
consumer. And active consumers expect to be co-creators of value and in the process
force us to recognize the importance of the “self” – individually and in communities – in
co-creating personalized experiences (Prahalad and Ramaswamy 2004). Once we
consider value creation as a joint process, we realize that market itself is a forum in
which both consumers and firms constantly engage in discursive practices to interpret and
invest meanings into objects, events, and processes regarding the selves and the world.
Hence, a discursive theory of value implies the “market as a forum” where the market is
an integral aspect of the value creation process (Prahalad and Ramaswamy 2004).
Consequences of a Discursive Theory of Consumer Value
At this point in time, the social and historical processes described as the
emergence of consumer communities and consumer experiences are still in progress, at
different rates, at different stages, and at different places. It is of utmost interest for
consumer researchers and social theorists to investigate whether causal effects, which
have been flowing downwards from the macro-level of consumer networks to the microlevel of consumer experiences, have started to flow upwards from the micro- level
consumer experiences to the macro- level networks, and if they have, then in what ways.
Three speculative scenarios, at least, might give the researcher ideas of what kind
of hypotheses to test for. Rifkin (2000) paints a black picture in that with an increased
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emphasis on experiences by producers, all of a consumer’s life will become a paid- for
experience. Eve n the traditional communal relationships will become commodified and
subjected to market transactions. As it stands, this argument indicates a regression from
the network-based organization of consumption towards a radicalization of the marketbased organization of consumption.
Castells (1996; 1997; 1998) also suggests a gloomy scenario in which the logic of
network will become one with the logic of capital and a cleavage will appear between the
global network of capital and communities of resistance organized around primary
identities. This global network of capital overwhelms the human experience of workers
and there is little chance for resistance communities to be successful. What this argument
boils down to is again a regression towards a market-based organization of consumption.
Firat and Dholakia (1998) postulate that postmodernist tendencies of late present
a unique opportunity for consumers to liberate themselves from repressive systems of
traditions, institutions, and ideologies by a strategic use of consumption as experience,
realized through free movements in and out of diverse life mode communities.
Consumption is understood as an act of identity construction (bricolage) from diverse
experiences sampled in multiple life mode communities. It is far from clear whether any
life mode community would persist at all as consumers move in and out in search of new
experiences, and whether the total effect would not be the dissolution of a network-based
organization of consumption into a market-based one.
All three hypotheses above assume that consumers would pursue narrow
individualistic goals and projects without ever thematizing consumption itself and
without engaging in discourse with fellow consumers about consumption. Hence, the
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formation of communities of discourse based on consumption-at- large and politicization
of consumption by consumers is not considered. However, as experiences become a
source of value and consumers become co-creators in the production of experiences, they
start to command over an inalienable production input, the self. Since attendant meanings
and values of experiences proposed by producers are subject to interpretation, evaluation,
and appropriation by consumers, and only through these steps do they become more than
just propositions, selves have an incentive to join with other selves in interpretive and
discursive communities of consumption:
(i)
to resist, anchor, and stabilize the “hyperreal” media;
(ii)
to borrow interpretive traditions and frameworks from others to interpret and
evaluate novel experiences when one’s interpretive resources are not
sufficiently structured;
(iii)
to increase opportunities for self- growth through exposure to novel
interpretations and experiential configurations; and
(iv)
to pool interpretive power so as to influence more and more of the back-end of
experience production processes.
Hence, there seems to be an alternative way by which the sweeping societal
changes precipitated by the diffusion of information and communication technologies can
lead to novel and enduring ways of organizing consumption (i.e., networks and
communities) contra the three hypotheses outlined in the previous paragraph.
What discursive communities of consumption can achieve is more than just
revealing consumer sovereignty through free choice. It is also more than just voicing
discontent about a particular product or service with a group of fellow consumer, or even
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boycotting a producer collectively. What they can achieve is rather profound: they can
negotiate value through challenging and reassigning meanings of experiences (originally
assigned to them by producers and the culture industries) instead of ne gotiating prices.
Since meanings are more direct determinants of value than price, this is (from a
consumer’s point of view) a much more efficient way of creating and exchanging value
than through the mediation of prices in markets.
Modern industrial system has removed consumers as far away from production as
possible through:
(i)
establishing a long chain of specialized technologies of production and
distribution, practical access to which is almost impossible except at the point
of exchange;
(ii)
an intricate and individually inaccessible web of culture industries which
assigns and reinforces meanings to the products and experiences.
A similar historical development can be discerned in processes of democratic will
formation and realization. Public sphere, which was once the place for civic participation
in current matters and policy issues, was rendered impractical and impoverished through
the formation of a national press and giant bureaucratic machineries. How to bring
citizens back into political decision processes has been a topic of continuing debate.
Habermas (1989; 1996) has been at the center of this lively debate with his discourse
theory of deliberative politics based on his earlier studies on communicative action
(Habermas 1984). More recently, efforts have been started to the implement practical
online deliberation and discourse technologies. Similar theoretical debates and practical
developments should be expected in the domain of consumption as well. The existence of
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various online newsgroups, product evaluation websites, and virtual communities already
signal such a trend.
At the theoretical level, the following general picture, which explains the decisive
shift from a market-based organizational form of consumption to a network-based one,
emerges. According to a popular definition, “Economics is the science which studies
human behavior as a relationship between ends and scarce means which have alternative
uses” (Robbins 1932). And economy, following from this definition, is the particular
domain of human affairs that facilitates the coordination of ends and scarce means, which
have alternative uses. The emphasis here falls on the word “scarce.” Without scarcity, so
it seems, there would not be an economic problem to start with.
Since the material, human, and energy resources of the planet are limited and the
needs of populations are continuously rising, production has evolved into specialized
industries, and vast distribution systems have been devised to bring the produced goods
and services to the consumers. Historically, markets have arisen as an informationally
efficient solution to this problem of coordinating the ends and scarce means of a great
number of economic agents.
A closer look at the battery of needs reveals the fact that human needs can be
broadly divided into two kinds: (i) material needs, and (ii) symbolic needs. Material
needs are those needs, whose fulfillment essentially requires physical materials as input.
Symbolic needs are those needs, whose fulfillment essentially requires significations (i.e.,
meanings) as input. Most human needs are hybrid in that their fulfillments require the
cooperation of both material and symbolic inputs. As one moves up Maslow’s hierarchy,
needs become increasingly more symbolic (Maslow 1954). In fact, starting with the
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middle layer of social needs, material inputs become strictly incidental and parasitic on
symbolic inputs.
What is peculiar here is that symbolic inputs are not scarce resources. Meanings
do not grow on trees, nor are they buried under the oceans. Meanings cannot be owned as
if owning a property, either. Individuals attach meanings to objects, relations, events, and
activities by an appropriation and recombination of other publicly available meanings.
Every individual is free to accept or reject previously proposed meaning constellations.
Moreover, they can construct their own personal meaning constellations as they relate to
objects, relations, events, and activities. No meaning or a constellation thereof, by itself,
can be bought or sold. Patent bureaus do not register meanings. No one has ever been
asked to pay a fee to gain permission for using a certain meaning for a certain entity.
Clearly, public expression of some meanings is strictly sanctioned but in the minds of the
people, meanings can and do get attached to any entity without any external intervention.
While symbolic resources are clearly limitless in abundance, and, therefore,
should be free of charge, this is not what happens in practice. Today, most of the products
and services offered in markets are loaded with significances. Consumers, oftentimes
willingly, pay hefty premiums for meanings, which are not inherent in the products. What
producers have done throughout the years is to redefine the resource space by adding new
dimensions, which are symbolic and, therefore, not scarce at all.
Commodification and mystification of symbolic resources, which are not scarce,
through economic production is quite odd, as it goes against the definition of economics
itself. It is not that strange, however, that this was to occur in a market-based
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organizational form of consumption. The reason is basic: in a market-based organization
of consumption,
(i)
consumption is seen as a private-sacred act,
(ii)
consumers are independent of each other,
(iii)
consumers are decoupled from the production process,
(iv)
consumers are passive recipients of symbolic messages produced by
advertising and culture industries. Hence,
(v)
consumption is non-discursive.
As a result, meanings that accompany products have to be privately evaluated.
They can be modified but the social-semiotic impact of this modification remains very
limited and local. Hence, meanings can be bought and sold like commodities since there
is no venue for consumers,
(i)
to publicly challenge the mystifications proposed by the producers and the
culture industries,
(ii)
to engage in rational discourse with fellow consumers about the
appropriateness, legitimacy, or validity of such signification proposals.
A very strong reason for why network -based organizational form of consumption
is taking off now is that, thanks to the facilitating impact of revolutionary
communications and information technologies, consumers can now connect with other
consumers to reclaim what really belongs to them: their symbolic labor. Meanings that
get ultimately attached to products and services, even after multi- million dollar
advertising campaigns, are in reality the output of the symbolic work carried out by
millions of consumers. Not only do those consumers who buy the symbolically- loaded
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product pay a premium for it, but also millions of non-buyers expend mental labors when
they appropriate and accommodate that meaning assignment in their cognitive schemas.
And it is because of the mental appropriation and performative validation of this second
group of non-buying consumers, that it becomes attractive for the first group of buying
consumers to pay the premium that the producer asks for the offering. In effect, the nonbuying publics, who nevertheless participate in the signification efforts, are expropriated
of their own contributions. Even graver, in most social milieus, those significations that
become commodified and validated thanks to the non-compensated cognitive efforts of
non-buying publics, get used against these very publics as strategic classification devices
(Bourdieu 1984).
Extending the Structural Models and Analyses
Following up on the analytical studies of Chapter 4, the next logical step would be
to develop further models and analyses for the information extraction problem in a dyadic
setup by allowing for consumer heterogeneity. Note that the previous models assume
consumer heterogeneity but do not consider its structural effects on the communication
process. However, communication literature suggests that he terogeneity across
communicators (i.e. heterophily) is an important factor impinging on the contents and
consequences of information transferred. Hence, it would be of interest to investigate
models where consumer heterogeneity modifies the communication process directly.
Some of the possible scenarios one can have due to consumer heterogeneity are:
•
“Language” effect: What a WOM source means to communicate and what a
WOM recipient understands from that communication will be different the
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more dissimilar the individuals are. We can view that as the communication
channel being noisy. An extra noise term, with a variance increasing in
dissimilarity, could be added to the signal transmitted.
•
“Subjectivity” effect: The same innovation will perform differently in
different personal situations, i.e. there could be a difference between the
objectively delivered performance and its subjective perception. An
evaluation information inherently reflects such an innovation-environment
interaction effect. In other words, experienced performance is the sum of
average true performance plus an individual-specific bias component (with
some variance). To the extent that two persons are more similar, the closer
will be perceived performance. Hence, evaluation information from a
dissimilar person will systematically under- or over-state the expected
performance for the focal person.
Given these effects for similarity/dissimilarity of communicators, two possible
consequences follow:
•
Individual knows whether the other person is similar or dissimilar and
behaves accordingly (adjust for bias and variance).
•
Regardless of his knowledge about the similarity or dissimilarity of the other
person, the individual does not adjust for anything but the consequences are
reflected in variables and subsequent communication dynamics.
In consumer groups with three or more members, information transmission
process and social structure create further complications. An example for the former is
the potential problem of double/multiple counting of the same information. An example
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for the latter is the association patterns with respect to similarity of personal
characteristics.
Chapter 4 introduced a setup with three consumers. Note that there I did not allow
for the possibility of a consumer receiving WOM from two other consumers, as my
theoretical objective was different. However, once we lift that restriction, we also see the
possibility of having the same information transmitted twice, once directly from a
consumer and then indirectly from another media ting consumer. Can the final recipient
detect and account for this problem? Evidently, as the size of a consumer group increases,
the risk of counting the same information multiple times increases. One might want to
model and analyze situations of this nature as well as possible mechanisms that could
curb these vicious dynamics.
Previous chapter also demonstrated the importance of the social structure. By
social structure, I mean the particular pattern of social relationships between particular
types of individuals. In the previous section, we saw how a consumer is more likely to
adopt if he is associated with a consumer more similar, but not too similar, in terms of
risk aversion. We also saw how this co-occurs with a linear transmission pattern instead
of centralized transmission. Extending from this simple setup to larger groups requires
further formalization of the concepts of association and topology. Developing these
aspects of the WOM process seem to be promising research avenues.
Also note that so fa r I only looked at a scenario where the choice decision, i.e.
expected utility, depends on one’s information about a single attribute. Multi-attribute
evaluations present another interesting direction to understand WOM processes. Some of
the possible scenarios one can have due to multi-attribute evaluations are:
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•
“Incompleteness” effect: As WOM is more or less a sequential process;
information about some attributes might not get communicated due to
increasing costs of doing so. This introduces the inferential problem of
imputing for missing information.
•
“Specialization” effect: Individuals differ in terms of the attributes they care
more about and have a specialized ability for precise evaluation.
These effects can be present simultaneously for a dyad as well. Hence, one might
also want to mathematically model and analyze these situations.
Consumer Communities as an Emerging Force
One important development associated with the shift towards a network society is
the emergence of millions of consumer communities, small and large, local and global,
temporary and permanent. The main engine driving this dynamic has been the rapid
development, increasing affordability, and widespread diffusion of communication
technologies leading to networking of consumers on a scale as never before. As a result,
consumers can now exchange all kinds of product and service information, tips and
advice, and good and bad experiences, with fellow consumers across town as well as
across continents without any time delay. They can put collective pressure on companies
in many areas ranging from a minor troubleshooting idea to a major technology platform
decision.
Communities of consumers can monitor and scrutinize the marketing activities of
firms on behalf of special groups or the general public, and then launch vocal and
influential campaigns in support or in opposition of selected companies. Word-of-mouth
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has been a potent dynamic in all ages but with the mushrooming of consumer
communities it is amplified and spread at impressive rates and speeds. Furthermore,
revolutionary advances in information and web technologies have only complicated and
propelled these effects to new levels. In short, consumers are not isolated and
independent entities that can be aggregated through classificatio n and summation
anymore; rather they are social creatures in communities that live and breathe according
to their own logics and operations.
Popular Literature on the Power of Consumer Communities. Small town
marketplaces have been sites of local, spontaneous, and implicit consumer communities
for thousands of years. With increasing possibilities of communication, consumers of
certain products, technologies, hobbies, events, and lifestyles from dispersed locations
too have congregated into more regular and explicit communities for many decades if not
centuries. Certain producers took note of these consumer communities and developed
direct relationships with these customers. However, modern management literature,
which was typically oriented toward big corporations, by and large ignored consumer
communities. This situation has started to change in the last decade with the opening up
of the Internet to the public. The following remarks are just a small indicative sample of a
more general outlook about the possible impact of consumer communities on business
and economy.
•
“Virtual communities have the power to reorder greatly the relationship
between companies and their customers.” (Hagel and Armstrong 1997)
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•
“The concept of community is one of the main themes that recurs [in the new
economy].” (Schwartz 1997)
•
“Experience communities…will shape the way everyone processes
information in the Net Future” (Martin 1998)
•
“Network architecture can find, cultivate, persuade, manage, and nourish
intermediate-sized audiences and communities focused on common interests.”
(Kelly 1998)
•
“By allowing more people to interact in more ways and in more settings,
cyberspace facilitates greater communicatio n, more participation, deeper
human connections, and, by extension, community.” (Benjamin 1998)
•
“Exploring the power of communities in cyberspace can be liberating for the
company as well as the customer.” (Downes and Mui 1998)
•
“There is a radical shift in who is in control of information, experiences, and
resources.” (Shapiro 1999)
•
“The Internet is bringing us out of a world of parochial self- interest into a
unified and spiritually connected global community.” (Bressler and Grantham
2000)
Only a few years after the commercialization of the internet, Hagel and
Armstrong (1997) proposed a framework and roadmap that they thought would develop
“virtual communities” into full- fledged market institutions. They noted that as consumers
become increasingly sophisticated in capturing and managing their own information and
seek out fellow consumers to develop common interests, form relationships, contemplate
fantasies, and consummate transactions, virtual communities will emerge as central
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players that impartially aggregate, organize, and orchestrate consumers’ information,
transaction, and experience possibilities so as to extract more value from the business
system for all constituencies.
Similarly, Martin (1998) pointed out that “the aggregated knowledge of
populations who, collectively, have experienced almost everything… can be collected
and used in real time to supplement or in some cases replace the more traditional forms of
expertise.” According to Shuman et.al.’s (2001) vision, consumers can be members of
many communities at any particular moment and they will opt in and out of communities
as their needs and wants evolve.
Approaching from a more humanistic standpoint, Benjamin (1998) observed that
communities are tools through which consumers experience their actual and possible
selves. Hence, the community has to be relevant to one’s identity and goals and actively
engage the member. Likewise, Bressler and Grantham (2000) argued that the sense of
loss with respect to our own identities and the identities of our family, workgroup, or
locality due to ever-expanding governmental, economic, and educational units motivates
us to search for alternative communities to anchor ourselves and regain our sense of
identity. Accordingly, communities help us find answers for the perennial questions of
identification, unity, involvement, and relatedness.
Recent contributions to this literature provide more technical and practical
information on how to build and manage online communities by paying attention to
community aspects such as purpose, place, profiles, roles, events, rituals, policies, etc.
(e.g. Bressler and Grantham 2000; Kim 2000; Preece 2000). Nevertheless, one sho uld not
hastily conclude that this new found interest in communities should be exclusively
132
limited to online environments. As Benjamin (1998) noted, “Cybercommunities will
supplement, not supplant, existing communities.” Moreover, it is important to recognize
that “Online associations promote weak bonds with others faraway at the expense of
strong bonds with others local. However, local associations foster true sense of belonging
and shared experiences, hence commitment, where democracy and social justice is to be
achieved” (Shapiro 1999). In fact, researchers in marketing have been studying consumer
communities for a while too but the majority of these explorations have been related to
offline environments as the next section will show.
Research on Consumer Communities in Marketing. Only within the last
decade have marketing and consumer researchers started studying consumer
communities. Initially, community was seen as an aspect of experiential consumption and
marketing. In their study of river rafting trips as extraordinary experience and extended
service encounter, Arnould and Price (1993) observed communitas, i.e. “an evolving
feeling of communion with friends, family, and strangers”, as a prevalent theme. As
customers devote themselves to a common transcendent goal, cast off their personal
goods suggestive of status differentials in favor of shared goods, and cope with
challenges in close proximity with and dependence on each other, they take an active role
in the production of a community, even if it is temporary.
Similar insights emerged from Celsi et. al.’s (1993) study of skydiving as highrisk consumption activity. They noted that frequent participants of high-risk leisure
activities are motivated by “individual heightened experience” (i.e. flow), “transcendent
group camaraderie” (i.e. communitas), and “special communication” (i.e. phatic
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communion). Communitas, a sense of community, emerges as people from different parts
of the society cross the normative and conventional borders that keep them apart in
everyday life and come together to participate in an intensely engaging, ritualistic,
experience or flow. This community is further forged into a cult- like organization as they
develop and use a special code to signify and communicate the very particular but shared
experiences.
Schouten and McAlexander (1995) carried out a three- year long ethnographic
study of the Harley-Davidson motorcycle owners’ subculture. They defined a “subculture
of consumption as a distinctive subgroup of society that self-selects on the basis of a
shared commitment to a particular product class, brand, or consumption activity.” Further
characteristics associated with this construct are an identifiable, hierarchical social
structure; a unique set of shared beliefs and values; and distinct linguistic, symbolic, and
ritualistic patterns. The social structure of a subculture of consumption reflects the levels
of commitment and authenticity of members. One’s standing is determined by his or her
commitment, experience, expertise, and seniority in the group. A subculture can be
composed of multiple subgroups defined by non-central characteristics such as locality,
age group etc. When such subgroups exist, judgments of hierarchy across subgroups are
made according to the representativeness and authenticity of each subgroup vis-à-vis the
core ideology of the subculture. The ethos, i.e. the set of shared beliefs and values, is a
much richer system of meanings and relationships than the standard meanings associated
with the functional- technical attributes of the object. It is because of the ethos and not the
object per se that individuals are attracted to the subculture. Participation in the
subculture occurs in successive stages: one first contemplates and elaborates the
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subculture identity as a possible self, then becomes an owner by investing and acquiring
the central object, followed by a period of identification, conformity, and selfimprovement with regard to existing standards of performance, culminating with the
graduation into the hard-core if sufficient effort has been expended to master and
internalize the subcultural values and forms.
Belk and Costa (1998) reported an ethnographic study about a community that
reenacts the 1825-40 fur-trade rendezvous held in the Rocky Mountains. They note that
the participants of this community “socially construct and jointly fabricate a consumption
enclave, where fantasy time and place are created and experienced.” The key constituents
of this “fantastic consumption enclave” are objects and actions to build feelings of
community, a concern for building and maintaining authenticity, and the creation of an
alternative space-time amenable for adult play and rituals.
For Muniz and O'Guinn (2001), “a brand community is a specialized, nongeographically bound community, based on a structured set of social relationships among
admirers of a brand.” Through their studies in a small neighborhood with users of Saab,
Ford Bronco, and Macintosh, they argue that a brand community is characterized by
consciousness of kind, rituals and traditions, and moral responsibility, all three situated
within a commercial and mass-mediated ethos. Members of a brand community not only
feel an attachment to the brand, but also a “we-ness”—face to face or imagined—with
respect to other community members. Opposition to competing brands plays an important
role in defining this shared consciousness. However, members are also sensitive about
distinguishing between the real believers and fad followers. Meanings central to the
community are constructed and reproduced, oftentimes in direct criticism of and
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contradiction with official marketing texts and actions, through a range of rituals and
traditions, including celebration of the brand history and sharing of brand stories.
Community members also exhibit a sense of moral responsibility to each other as they are
committed to missions such as integrating and retaining members, and helping other
members in the proper use of the brand. Different from a consumption subculture, a
brand community does not have to adopt and express an anti- mainstream, antiestablishment ideology and lifestyle. Therefore, there are relatively more possibilities for
interpretation and negotiation of brand meanings.
McAlexander and Schouten challenged Muniz and O'Guinn in arguing that a
brand community is not built and made meaningful around the brand per se but around
the customer experience emerging from customers’ interactions with the brand, the
product, and the marketer (McAlexander, Schouten, and Koening 2002). In other words,
the community includes not only the customer-brand dyad or the customer-customerbrand triad but also the customer-product and customer- marketer dyads.
Kozinets (2002) finds a new species of consumer communities, what he
tentatively calls a hypercommunity, in the week- long event of Burning Man: “a wellorganized, short- lived but caring and sharing community whose explicit attraction is its
promise of an intense but temporary community experience.” This particular community
distances consumers from markets by instituting discourses of communality and market
criticism, alternative exchange practices, and consumption repositioned as self-expressive
art. Hence, consumer communities can be conceptualized as more than just “hybridized
communal forms” as in Muniz and O’Guinn or “symbiotic unions” as in Schouten and
McAlexander: “a corrective, or at least ameliorative, response to two effects of market
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logics, namely, its tendency to weaken social ties and to reduce or homogenize selfexpression.”
Finally, through an ethnographic fieldwork in an urban ga y community, Kates
(2002) demonstrates aspects of subcultural consumption tha t allow for considerable
within-community heterogeneity and temporal permanence, in contrast with concepts
found in Schouten and McAlexander or Kozinets. Specifically, it is shown that the
cultural meanings shared and constitutive of the subculture are malleable, shifting, and
open to contestation, not only due to marketers but also due to consumers themselves.
Relatedly, the social structure underlying the subculture is not one of a fixed status
hierarchy but one open to change and challenge in response to attempts to shift or
redefine the bases of distinction. In fact, this “protean quality of subcultural
consumption” is encouraged by the inherent ethos of the gay subculture that is
fundamentally anti-conformist.
It is interesting to note that whereas the consumer research studies reviewed here
by and large investigate in great detail and richness consumption situations either at the
margins or outside of the mainstream consumption system, the managerial proposals
reviewed in the previous section predict a rapid growth in mainstream consumer
communities without providing much theoretical guidance. Consequently, it becomes
quite clear that consumer community research needs to select and develop essential
aspects of the phenomena that can be helpful in illuminating the theoretical and practical
problems of both online and offline environments as well as mainstream and radical
consumption situations.
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From Consumer Segments to Consumer Communities. Whereas firms have
always tried to communicate with consumers and inform them of their offerings, the
networking of consumers now allows consumers to form communities of their own
accord—characterized by consumer-to-consumer interactions. Through communities,
consumers can not only determine their own valuation or define their own view of value
but also create value on their own. This challenges the firm’s view of consumer
heterogeneity which has evolved in different stages.
First, heterogeneity of consumers was largely ignored to achieve economies of
scale, a classic example being Ford’s dictum regarding the Model- T car: “you can have it
in any color, as long as it is black”. Then, companies began to recognize the
heterogeneity in consumer characteristics, leading to “classification of consumers” and
developing/marketing “different products for different classes of customers.” A
pioneering example was Alfred Sloan and General Motors’ strategy of tailoring a
different marketing mix for each class (e.g., Chevrolet, Pontiac, Buick, and Cadillac).
Next, firms directed the ir attention to the heterogeneity in preferences of consumers,
either through preferences revealed from the behavioral responses of consumers to the
firm’s marketing mix efforts, or a priori through “needs-based segmentation”. Finally,
companies started to recognize the unique preferences of each individual for a firm’s
offerings, as they built capabilities for customizing their offerings for “Segments of one”
(e.g., Dell), engaging in “one-to-one marketing”. It is worth noting that all along, the
view of consumer heterogeneity has been largely firm/product-centric, and focused on the
firm’s view of customers as potential demand for what the firm puts on offer. The
consumer’s role is that of a passive recipient of the firm’s marketing mix.
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However, the emerging centrality of consumer communities has profound
consequences for one of the core concepts of marketing, namely, segmentation. It is a
consensus view among academics and practitioners that segmentation, targeting and
positioning constitute the essential activities of marketing strategy (Kotler 2003).
Accordingly, a firm will first “segment” the market into groups of customers, then
“target” one or more segments that can be served effectively and profitably, and finally
“position” its product or service in the minds of the customers of these targeted segments.
Standard theory and practice equate segmentation with classification, i.e. sorting
customers with similar needs and preferences into separate classes.
However, the new communications revolution is turning one-way/one- mode
communications into multi-way/multi- mode communications, and self- interested
individuals into we-interested communities. Hence, segmentation comes to be seen as
‘contexture’, i.e. mapping the connective structure of a community of individuals (with
possibly dissimilar needs and preferences) and their shared texts of experiences. In order
to compare and contrast these two approaches, I provide an analysis, as summarized
below in Table 5.1, using the framework that should be familiar by now.
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Table 5.1 From Segments to Communities
Central construct
Segments
Classification
Communities
Contexture
Organizing principle
Organizing theme
Similarity
Indifference
Interest
Identity
Structure
Action
Segmentation bases
Membership
Heterogeneity
Collective
Adaptation
Goal-orientation
Integration
Latent-pattern maintenance
Inclusion-Exclusion
Marketer
Profitability
Rationality
Voice
Moderator
Performance
Communitas
Information content
Consumer’s attitude
Producer’s attitude
Marketing mix
Teleological
Strategic
Significance
Communicative
Communicative
In segmentation by classification, classes are constructed by marketers. Therefore,
most of the decisions and actions regarding the segment pertain to the marketer whereas
the consumers themselves have no consciousness of what segment they belong to as such.
The organizing principle of a class is the similarity of its constituents, consumers. The
organizing theme of a segment is the indifference between the responses of segment
members. The more similar are the members, the more indifferent are their responses to
marketing stimuli.
Within the given structural space of segmentation bases, consumers are classified
as members or non- members. The integrity of a segment is preserved by including or
excluding consumers as the organizing theme is reinforced or compromised. It is the
marketer who sets up the goals of the segmentation exercise. Most fundamentally,
memberships in the segment are integrated into a who le by virtue of their marginal
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contribution to profitability. It is the culture of rationality that underlies all of
segmentation practice.
Marketers communicate to the segment the marketing mix. Consumer’s attitude
against the producer and against other fellow consumers is teleological since a segment is
nothing but a microcosm of the larger market for the consumer. Similarly, the attitude of
the producer is strategic.
Allenby and Ginter (1997) investigated the practical reasonableness of the
"homogeneous group" definition of a market segment. Their empirical findings suggest
that the homogeneous group assumption is very questionable and the extent of withincomponent heterogeneity is larger than the extent of across-component heterogeneity. An
implication that immediately follows is that since homogeneous groups do not exist,
methodologies relying on statistical metrics to uncover them will not work.
In contrast, as shown in Table 1 above, in segmentation by contexture,
communities are constructed by the consumers themselves around certain common
interests. The central construct is “contexture” rather than classification.
Typically a community identity emerges out of the many relationships, which
belong to the same community. The peculiar structure of a community is given by the
heterogeneity of its members even though a common interest connects them. Within this
structure, community attempts to generate collective action. In the absence of
heterogeneity, there is not a problematique of collective action as such. Homogeneous
consumers can act in concert without the mediation of a community (i.e., imagined
communities).
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Any threat to the integrity of the community is countered by vocal voices from
community members. One of the members, chosen as a moderator by community
consensus, guards for and coordinates the set of goals of the community. Members of the
community maintain their attachment to the community as long as the community as a
collectivity delivers the expected performance. Beneath the visible relationships and
discourses of the community, communitas, a sense of community, is responsible for
members’ attachment and loyalty.
What is communicated within the community and what can be communicated
from outside to the community is significance, i.e., what certain consumption practices or
objects mean with respect to the shared interest of the community, what the shared
interest and identity mean vis-à-vis other interests and identities, etc. Both consumer’s
and producer’s attitude towards the community are communicative in that they “seek to
reach an understanding about their action situation and their plans of action in order to
coordinate their actions by way of agreement” (Habermas 1984).
The emergence of consumer communities as a central force can thus challenge the
fundamental premise that the firm creates value unilaterally (Prahalad and Ramaswamy
2004). Instead, consumer communities (and the “market”) becomes an integral part of the
value creation process by firms. The ability of individuals to make their own choices and
the collective action of a community challenges the traditional control that firms have had
on the value creation process. As value is co-created by consumer communities and
multiple firms, heterogeneity in consumer-to-consumer interactions, shared texts of
experiences, and collective action become critical constituents of the shift from a
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firm/product centric view of value creation to a consumer/experience-centric view of cocreation of value.
I hope this dissertation stimulates much needed theoretical and methodological
research on consumer-to-consumer interactions, consumer communities, and the
convergence of the role of the consumer and the firm in co-creating experiences.
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APPENDICES
144
APPENDIX A
Experimental Setup for Small World Network Models
Common Across Treatments
Parameter
Number of Consumers
Risk Aversion
Prior Perceived Performance
Perceived Source Unreliability
Perceived Experience Unreliability
Initial Adopters
Specification
100
0.5
Normal with mean = 0 and variance = 100
Variance = 100
Variance = 100
0
WOM Request / Consumer / Period
1 (Pre-adoption)
0 (Post-adoption)
Adopters and Non-Adopters in Consumer’s
Personal Network
Random with Equal Probability
WOM Source Selection Criterion
WOM Source Selection Method
Experience Episode / Consumer / Period
True Product Performance
0 (Pre-adoption)
1 (Post-adoption)
Normal with mean = 30 and variance = 1
Simulation Duration
500 Periods
Treatment Levels
Property
Topology
Local Links /
Consumer
Total Shortcuts
Very Large World
Simple Ring
2
(left: 1, right: 1)
0
Small World
Locally Dense Ring
10
(left: 5, right: 5)
1
Very Small World
Complete Graph
99
(left: 50, right: 49)
0
Replications
1,000
1,000
1,000
145
APPENDIX B
Small-World Network Results with SWARM Experiments
.
Mean Time to Cumulative Adoptions
100
Cumulative Adoptions
90
80
70
60
50
40
30
Very Large World
20
Small World
10
Very Small World
0
0
100
200
300
Time
146
400
500
Standard Deviation of Time to Cumulative
Adoptions
100
90
70
60
50
40
30
Very Large World
20
Small World
10
Very Small World
0
0
25
50
75
100
125
Time
Final Penetration Distribution
400
Very Large World
350
Small World
Very Small World
300
Frequency (N=1000)
Cumulative Adoptions
80
250
200
150
100
50
0
0
20
40
60
Final penetration (T=500)
147
80
100
150
APPENDIX C
Experimental Setup for Constructionist Network Models
Common Across Treatments
Parameter
Number of Consumers
Risk Aversion
Specification
100
Uniformly distributed with min = 0 and
max = 1
Normally distributed with mean = 0 and
variance = 100
Variance = 100
Variance = 100
0
Prior Perceived Performance
Perceived Source Unreliability
Perceived Experience Unreliability
Initial Adopters
WOM Request / Consumer / Period
1 (Pre-adoption)
0 (Post-adoption)
Adopters and Non-Adopters in Consumer’s
Personal Network
Random with Equal Probability
WOM Source Selection Criterion
WOM Source Selection Method
Experience Episode / Consumer / Period
True Product Performance
0 (Pre-adoption)
1 (Post-adoption)
Normal with mean = 30 and variance = 1
Simulation Duration
500 Periods
Treatment Levels
Property
Associative
Preferences
Pure Homophily
All consumers
identical at -100
Topology
(Emergent)
Lowest centrality
Moderate
connectivity
Moderate clustering
Links/Consumer 2
Replications
1,000
Uniformly Dist. HH
Uniformly
distributed with min
= -100 and max =
+100
Moderate centrality
Highest connectivity
Low clustering
Pure Heterophily
All consumers
identical at +100
2
2
1,000
1,000
148
Highest centrality
Lowest connectivity
Low clustering
APPENDIX D
Constructionist Network Results with SWARM Experiments
Mean Time To Cumulative Adoptions
100
Pure Homophily
Uniform HH Dist.
90
Pure Heterophily
Cumulative Adoptions
80
70
60
50
40
30
20
10
0
0
100
200
300
Time
149
400
500
Standard Deviation of Time To Cumulative
Adoptions
100
Pure Homophily
90
Uniform HH Dist.
Pure Heterophily
70
60
50
40
30
20
10
0
0
20
40
60
80
100
Time
Final Penetration Distribution
450
Pure Homophily
Uniformly Distributed HH
Pure Heterophily
400
350
Frequency (N=1000)
Cumulative Adoptions
80
300
250
200
150
100
50
0
0
20
40
60
Final Penetration (T=500)
150
80
100
APPENDIX E
Pseudo-Code of the SWARM Experiments
Network Generation Routine
Small World Network Models
for consumer_i=1 to number_of_consumers
create (local_links/2) reciprocal links with
(consumer_i+1) .. (consumer_i+local_links/2)
for shortcut=1 to number_of_shortcuts
create reciprocal links between randomly picked two consumers
Constructionist Network Models
for consumer_i=1 to number_of_consumers
for consumer_j=1 to number_of_consumers
calculate trait_distance(consumer_i,consumer_j)
for consumer_i=1 to number_of_consumers
create unilateral link to (local_links) consumers with
prob ~ logit[trait_distance(consumer_i,consumer_j)]
151
Network Adoption Simulation Routine
Both small world and constructionist network models
for time=1 to simulation_periods
for consumer_i=1 to number_of_consumers
if not adopted yet
randomly pick consumer_i’s social link consumer_j
obtain WOM from consumer_j
update performance perception with WOM information
if utility > 0
adopt product
update performance perception with experience
else
update performance perception with experience
152
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ABSTRACT
CONSUMER-TO-CONSUMER INTERACTIONS IN A NETWORKED SOCIETY:
WORD-OF-MOUTH THEORY, CONSUMER EXPERIENCES,
AND NETWORK DYNAMICS
by
Kerimcan Ozcan
Chair: Venkatram Ramaswamy
This dissertation engages in a detailed investigation of consumer-to-consumer
interactions in a networked society. I begin with the process of interactions entailing
Word-of-Mouth phenomena. I first critically review the theory of word-of- mouth and
propose a new typology and perspective on word-of- mouth along dialogical discourse
principles. Next, I examine the content of consumer-to-consumer interactions entailing
shared texts of consumer experiences. I build a framework for studying consumer
experiences that proposes theoretical perspectives to explain the processes of derivation
and investment of meaning through and within discourse. As a result, it is shown that
standard accounts of the market as a site for exchange have to be supplanted by a new
understanding of the market as a forum for discourse.
I then examine the structure of consumer-to-consumer interactions and develop
analytical models and insights of word-of- mouth processes based on decision theoretic
considerations. I study the role of consumer networks in the flow of consumer
experiences and the evolution of adoption dynamics, using computational experiments. In
particular, I compare and contrast “small worlds” of consumer connectivity with large
worlds of largely isolated consumers, as well as constructionist models of community
structures obtained by crossing heterogeneity and heterophily distributions, to derive
insights into how network dynamics affect market evolution. Finally, I discuss the
theoretical and managerial implications of consumer-to-consumer interactions, especially
for the segmentation-targeting-positioning framework in marketing and the role of
consumer communities in co-shaping choice.