Question 11.95

11.95 Impact of word of mouth.

Word of mouth (WOM) is informal advice passed among consumers that may have a quick and powerful influence on consumer behavior. Word of mouth may be positive (PWOM), encouraging choice of a certain brand, or negative (NWOM), discouraging that choice. A study investigated the impact of WOM on brand purchase probability.²² Multiple regression was used to assess the effect of six variables on brand choice. These were pre-WOM probability of purchase (PPP), strength of expression of WOM, WOM about main brand, closeness of the communicator, whether advice was sought, and amount of WOM given. The following table summarizes the results for 903 participants who received NWOM.

587

Variable
PPP	−0.37	0.022
Strength of expression of WOM	−0.22	0.065
WOM about main brand	0.21	0.164
Closeness of communicator	−0.06	0.121
Whether advice was sought	−0.04	0.140
Amount of WOM given	−0.08	0.022

In addition, it is reported that .

What percent of the variation in change in brand purchase probability is explained by these explanatory variables?
State which of these variables are statistically significant at the 5% level.
The PPP result implies that the more uncertain someone is about purchasing, the more negative the impact of NWOM. Explain what the "strength of expression of WOM’’ result implies.
The variable "WOM about main brand’’ is an indicator variable. It is equal to 1 when the NWOM is about the receiver’s main brand and 0 when it is about another brand. Explain the meaning of this result.

11.95

(a) 20%. (b) To be significant, , Strength of expression of , and Amount of WOM given are significant. (c) The stronger the expression of WOM, the more negative the impact of NWOM. (d) The regression coefficient for WOM about main brand is 0.21, meaning there is a 0.21 difference in NWOM between when the receiver is given NWOM about the receiver’s main brand versus when they are given NWOM about another brand, or the NWOM effect is much larger when it is the receiver’s main brand.