The Effects of Firm Generated Content in Social Media on Customer Behavior: An Empirical Examination

Ashish Kumar, Ram Bezawada, Rishika Rishika, Ramkumar Janakiraman, and P.K. Kannan, 2016, 16-111

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Social media spending is expected to grow faster than any other form of online marketing, and marketers are concerned about measuring the returns on those investments.

In this study, Ashish Kumar, Ram Bezawada, Rishika Rishika, Ramkumar Janakiraman, and P.K. Kannan examine the effect of social media engagement on individual-level customer purchase behavior. Specifically, they examine the effect of firm generated content (FGC) in social media on three key customer metrics: spending, cross-buying, and customer profitability. They also examine the synergistic effects of FGC with television advertising and email communication.

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Why firms should invest in social media

Based on a large New York state retailer, their dataset comprises customers’ social media participation data, customer transaction data, and attitudinal data obtained through surveys.

Their results indicate that after accounting for the effects of television advertising and email marketing, FGC has a positive and significant effect on customer spending and cross buying. Further, FGC works synergistically with both television advertising and email marketing.

They also find that the effect of FGC on spending and cross buying is greater for more experienced, tech-savvy and social-media-prone customers.

For three characteristics of FGC—valence, receptivity, and customer susceptibility—they find that all the three components have a positive impact, and the effect of FGC receptivity is the largest.

These findings suggest that managers should embrace social media and exploit the synergistic relationship between social media and TV and emails. Further, they should encourage participation by customers who have a longer tenure with the firm, and should monitor the popularity of firm generated content.

Ashish Kumar is Assistant Professor of Marketing, School of Business, Aalto University. Ram Bezawada is Associate Professor of Marketing, School of Management, State University of New York, Buffalo. Rishika Rishika is Clinical Assistant Professor of Marketing, Darla Moore School of Business, University of South Carolina. Ramkumar Janakiraman is Associate Professor of Marketing and Business Partnership Foundation Research Fellow, Darla Moore School of Business, University of South Carolina. P.K. Kannan is Ralph J. Tyser Professor of Marketing Science, Robert H. Smith School of Business, University of Maryland.

We thank Professor Arun Jain and the Research Group in Integrated Marketing at the School of Management, SUNY Buffalo for access to the data and research assistance; and the participants at the INFORMS Marketing Science and AMA Summer Educators Conferences for their suggestions. We also thank Marketing Science Institute for financial support made available through a competitive research grant (#4-1871).

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