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Promotional Marketing or Word-of-Mouth? Evidence from Online Restaurant Reviews

Author

Listed:
  • Xianghua Lu

    (School of Management, Fudan University, Shanghai, China, 200433)

  • Sulin Ba

    (School of Business, University of Connecticut, Storrs, Connecticut 06269)

  • Lihua Huang

    (School of Management, Fudan University, Shanghai, China, 200433)

  • Yue Feng

    (School of Business and Management, Hong Kong University of Science and Technology, Hong Kong)

Abstract

The value of promotional marketing and word-of-mouth (WOM) is well recognized, but few studies have compared the effects of these two types of information in online settings. This research examines the effect of marketing efforts and online WOM on product sales by measuring the effects of online coupons, sponsored keyword search, and online reviews. It aims to understand the relationship between firms' promotional marketing and WOM in the context of a third party review platform. Using a three-year panel data set from one of the biggest restaurant review websites in China, the study finds that both online promotional marketing and reviews have a significant impact on product sales, which suggests promotional marketing on third party review platforms is still an effective marketing tool. This research further explores the interaction effects between WOM and promotional marketing when these two types of information coexist. The results demonstrate a substitute relationship between the WOM volume and coupon offerings, but a complementary relationship between WOM volume and keyword advertising.

Suggested Citation

  • Xianghua Lu & Sulin Ba & Lihua Huang & Yue Feng, 2013. "Promotional Marketing or Word-of-Mouth? Evidence from Online Restaurant Reviews," Information Systems Research, INFORMS, vol. 24(3), pages 596-612, September.
    • Handle: RePEc:inm:orisre:v:24:y:2013:i:3:p:596-612
    DOI: 10.1287/isre.1120.0454
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    References listed on IDEAS

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