Word Of Mouth

Based on research Constance Elise Porter, Sarv Devaraj and Daewon Sun

• As virtual communities have boomed in recent years, businesses are pondering the best way to work with them.
• Two important models have emerged: virtual communities sponsored by firms, and those where consumers are the driving force behind community creation.
• Which works better for firms? And should a company invest resources in sponsoring a community? Analysis across a range of communities reveals that both models have value — but there is good reason for companies taking an active role, especially when it comes to building trust.

Businesses have always known that word of mouth matters. If customers, or people in general, say nice things about you, other people listen, and may be inspired to buy your products.

In the past, though, word of mouth was fairly limited because it depended on person-to-person contact. Now, with the rise of the Internet and social media, what was once chatter around the neighborhood has become national and even international. Virtual communities can bridge not just distance, but social class and other barriers, creating a near-dizzying power to share information.

For both consumers and companies, this means opportunity. The former can learn from peers about a firm and its products; the latter can build brands, nurture client loyalty and glean marketplace insights. But how to best make use of this virtual new world? Do customer comments rule, or can firms make a difference by investing resources to sponsor their own communities?

Virtual communities come in three basic forms: groups created by a third party (think Epinions.com, which tags itself as “unbiased reviews by real people”); those created by consumers with a shared interest (say coffee, or a type of car); and those created by a firm, which tend to be found on a firm’s website. While the first type of community has sparked a lot of interest among information system researchers, the latter two have garnered far less attention, with no researchers exploring consumer-initiated and firm-sponsored communities comparatively.

To help fill this gap, Constance Elise Porter, an assistant professor of marketing at Rice Business, and two co-authors surveyed a selection of two types of consumers – those who were members of a virtual community that was sponsored by a firm and others who had only visited a virtual community run by consumers. The researchers asked the former about experiences in a firm-sponsored community and the latter about their experiences in a consumer-driven community. Both sets of subjects were queried about how information from community members, also known as Member Generated Information (MGI), shaped their decision-making process. However, those on the firm-sponsored side were also asked how effective those firms were at offering quality content as well as fostering interaction and member embeddedness.

The researchers measured "value" by a subject's willingness to share personal information and spread positive word of mouth.

Not surprisingly, MGI had major sway with both groups, particularly when it was consistent, showed consensus and was distinctive. But there was good news for those managers who wonder if spending time and money on a firm-sponsored virtual community is a waste of resources. Where trust is concerned, those in the second group said, a firm's effort toward customers can have an even greater influence than MGI.

In the end, then, both firm-sponsored and customer-initiated virtual communities matter. Managing customer relationships online makes a real difference; virtual communities of both types can be crucial, their benefits hinging on external marketplace conditions and a firm's internal resources. By exploring two types of virtual communities, Porter and her co-authors found empirical evidence about how trust and value is created and opened new avenues of research into the ways these worlds affect business. That's worth a little word of mouth.

Constance Elise Porter is an assistant clinical professor of marketing at Jones Graduate School of Business at Rice University.

To learn more, please see: Porter, C. E., Devaraj, S., & Sun, D. (2013). A test of two models of value creation in virtual communities. Journal of Management Information Systems, 30(1), 261-292.