MODELING ELECTRONIC WORD OF MOUTH AND COMPLAINT BEHAVIOR FOR ELECTRONIC CRM SYSTEMS

Transcription

1 MODELING ELECTRONIC WORD OF MOUTH AND COMPLAINT BEHAVIOR FOR ELECTRONIC CRM SYSTEMS Charles V. Trappey, National Chiao Tung University, Taiwan Conna Yang, National Chiao Tung University, Taiwan ABSTRACT Word of mouth is one of the quickest and most efficient ways to increase a product s awareness among consumers. Nowadays, people access to the Internet as a ubiquitous channel for information and experience sharing. In addition to traditional word of mouth, electronic word of mouth is an extremely important issue due to the heavy use of the Internet in modern society. This research studies the use of electronic word of mouth due to willingness to communicate and individual trust. Furthermore, tie strength is used as a construct to measure the interaction with electronic word of mouth. The SPSS statistical analysis software was used to analyze the data retrieved. The research results supports the hypothesis of a significant relationship between trust and willingness to communicate ( F(1,169) = 3.984, p = 0.048). In addition, willingness to communicate, electronic word of mouth activity, and positive electronic word of mouth also have significant relationships. The results support the proposition that willingness to communicate serves as a mediator between trust and electronic word of mouth. The implications of these results for CRM systems are presented as a strategic summary. Keywords: Electronic Word of Mouth, Electronic CRM Systems, Trust, Willingness to Communicate RESEARCH BACKGROUND The Internet provides a means of communication that substitutes traditional ways of promoting products, brands, and services. Through Word of Mouth (WOM) communication, passing information and shared experience is well known as an efficient way of spreading commercial messages. Bone (1995) notes that there is a growing research interest in measuring and influencing WOM effects since, pre-usage attitudes about a product can be influenced by WOM communications, WOM effects have grown in importance with the emergence of the Internet [3]. This research evaluates Internet based sources of WOM communications and proposes a study to measure and influence WOM commercial communications. Varying among different industries, the strength of WOM is hypothesized

2 to influence the purchase intentions of consumers. The Internet provides a platform for electronic word of mouth. In comparison to traditional word of mouth where the information is passed on from person to person, electronic word of mouth is spread among a larger network of people where the geological distance and time barriers are eliminated. This study analyzes the interaction between interpersonal trust, willingness to communicate, and the tie strength among individuals. The research examines whether or not willingness to communicate is the mediator between trust and electronic word of mouth. If this is shown to be true, than the implications for the construction and altering of CRM systems are indicated. Word of mouth communications which exist across different cultures and countries enables information flow between people. Word of Mouth is still one of most familiar means by which people spread and gain information on certain issues and topics and is defined as informal communication directed at other consumers about the characteristics, ownership, or their sellers [24]. WOM is thought to be an outcome of customer experiences with a product or services [5]. Both positive and negative Word of Mouth can influence consumer decision making. A disappointed customer s reactions can be categorized into three different actions. The consumer might break the relationship, complain to others, or make their dissatisfaction known to the suppliers or company [15]. Out of these three, complaining to others, which is known in the literature as negative WOM, has the greatest impact on a company s reputation and sales. Consumer purchase intentions lead to the search of shared experience which influences the outcome of purchase and complaint behavior. According to earlier publications, individuals usually keep 10% of their emotional experiences, whether good or bad, to themselves; the majority of the experience will be shared through the sharing of conversation [9]. After acquiring word of mouth information, sometimes consumers may exclude their own opinions and private information and adopt attitudes and opinions given by others [10]. The word of mouth effect is stronger when consumers are faced with ambiguous information requiring immediate or delayed decisions [3]. The advice from friends, family, or other individuals with persuasive power serves as an important factor for consumer decision making. Word of mouth communications (WOM) is an interpersonal communication in which none of the participants are marketing sources [3]. Traditional word of mouth based on experience is passed on from opinion leaders on to others [13]. Word of mouth does not necessarily rely on opinion leaders to be transmitted since ordinary consumers can also generate word of mouth. For this research, word of mouth uses three dimensions to model Internet based positive and negative word of mouth. These three constructs are seen as different aspects to a single and more generalized measurement of WOM that can be independently studied [12]. Word of mouth activity is the level of enthusiasm and detail of conversational content exchanged between consumers about products. The content and frequency of electronic word of mouth sharing influences whether individuals will choose according to their own preference, character, and other antecedents. Richins (1983) argued that people are more likely to

3 spread negative attitudes rather than positive attitudes. When dissatisfied or disappointed with a certain product, customers tend to reveal their experience to friends and advise them not to make the same purchase. The traditional CRM has been taken into the next level known as e-crm (electronic CRM) which integrates technologies of new channels such as the internet into the corporation s CRM strategy [21]. With the help of e-crm, consumer complaints can be collected and responded to using retention orientation approach. An important motivational concept is to focus on a consumer s lifelong value and an important key is avoiding negative word of mouth circulating on the Internet [25]. Instead, these negative word of mouth should be viewed as a remedy to repairs the consumer s satisfaction and the consumer will not be lost. The behavior of electronic word of mouth and complaints should therefore be further examined to have a better understanding of how e-crm systems should function. New media platforms such as the Internet offer different ways to spread word of mouth. The Internet in particular is the main portal for electronic word of mouth and has greatly changed marketing communications. Similar to traditional word of mouth, electronic word of mouth has higher reliability for changing attitudes than other forms of marketing information and strategies on the web [2]. The Internet enables different choices for consumers to communicate including blogs, forums, and websites. The traditional spread of word of mouth is limited by barriers such as distance, time, and cost of disseminating information. The Internet enables consumers to share their opinions and experiences with a multitude of other consumers [14]. In addition, consumers form social communities and exchange opinions and share advice when the flow of content is free. Consumers gather shared experiences posted on websites to learn more about a product before making a purchase [7]. Electronic word of mouth not only benefits consumers, but is also a new tool for the advertising industry. Media providers freely interact with consumers and advertise through the Internet. Electronic word of mouth shortens the distance between consumers and corporations and enables companies to reach out to a larger target audience [16]. For traditional word of mouth, the source of information is more tangible and people communicate in person whereas for electronic word of mouth, there are more channels and formats for information communication. Weblogs, often called blogs, are personal web pages that are frequently updated with new articles and include photos, music, and links to other Internet sites [20]. New forms of micro-blogging simplify functions and make it easier for users to share their status, post short messages, or upload pictures through mobile phones or the internet. The difference between traditional blogging and micro-blogging is that the later offers a faster way of sharing information by encouraging users to keep their posts short. In addition, instant messaging is a type of technology on the Web that allows users to send and receive short text based messages and check the status of their friends who are online and available [6].

4 Each person has different tendencies to speak, write, or communicate with other people. The willingness to communicate is a personality trait that underlies the communication process [17]. The tendency to avoid communication originated from Burgoon s 1976 research which was based on factors such as introversion, lack of communication competence, alienation, low self-esteem, and communication apprehension [4]. Mortenson, Arntson, and Lustig (1977) used this construct to further develop the construct willingness to communicate which measures predisposition towards verbal communication. McCroskey and Baer define this construct as the intention to initiate communication when given the opportunity. Trust defines whether one chooses to believe another person s words or advice. Therefore, trust can be used as a variable to model whether word of mouth is accepted by consumers or not. One of the classical definitions of trust is that it is a generalized expectancy held by an individual that the word of another can be relied on [23] When reliable information is consistently provided by others, our trust is strengthened. The willingness to share information and the expectancies underlying the communication are the foundation of trust. Schurr and Ozanne (1985) describe trust as the belief that one party s word is reliable and that it will fulfill its obligation in an exchange. A feeling of fear for negative outcomes or loss may occur if there is no trust. According to research done by Rempel, Holmes, and Zanna (1985), there are many definitions that define the features of trust. First, it is built upon past experience and a series of events that strengthen the feeling of trust. Second, dispositional characteristics are made towards the trustor, including attributes such as reliability, dependability, and predictability. The third conclusion is that one must be willing to be put at risk, whether it is the risk of being hurt, or loss of something either abstract or tangible. The last conclusion is that trust can be defined by the sense of security and confidence in the responses given and the intimacy and strength of the relationship. This research focuses on a feature of trust called interpersonal trust, which is the expectancy held by an individual or a party that the word, promise, verbal, promise, or written statement of another individual or party can be relied on [22]. Interpersonal trust is chosen as one of the research constructs because different from the more general definition of trust and focuses on the interaction between two individuals. The social relationship of individuals can be categorized according to the frequency of contact, and how well others are known and are defined as the potency of a bond between members of a network [11], or tie strength. Strong tie sources are friends and family, whereas weak ties are acquaintances and strangers [8]. The influence of tie strength can affect consumer decision making, word of mouth, and intergroup interactions [19]. Word of mouth communication is a social behavior that includes the exchange of information between individuals. Past research shows that tie strength influences the flow of

5 information. According to past research, individuals who are strongly tied relationship have more opportunities to interact and share information. If the Internet is used for communication between people, then these individuals logically have weaker ties. On the contrary, a weakly tied relationship offers few chances for individuals to spread information. Thus, strong ties should lead to the positive spread of word of mouth information and vice versa. METHODOLOGY This research explores the interaction between electronic word of mouth, willingness, trust, and tie strength. Past research supports a relationship between these constructs. In Ben-Ner and Putterman s 2009 study on trust and communication, the results show that if one desires to establish a relationship, then individuals must take the communication process seriously. Thus, the depth of communication promotes trustworthy behaviors. Other researchers have shown the interaction between trust and communication in different fields of study. Communication is critical to building a trusting relationship which will create stability [1]. However, few studies explore the relationship between the level of interpersonal trust, willingness to communicate, and the impact on CRM systems. Although the content of communication is not completely associated with personal privacy or other matters, it is reasonable to believe that the more one is willing to be exposed, the more willing they are to share information with others. Therefore this study proposes that interpersonal trust will have a positive effect on willingness to communicate. Word of mouth is an initiative action where an individual chooses to express his opinions or share past experiences with others. Word of mouth is an action that depends on the individual s intention to communicate so an individual s willingness to communicate with another person should be positively related with it. Therefore willingness to communicate is used as the third construct in the research framework. The strength of social relationships between individuals, or tie strength, relates to the way the Internet expands our social networks. Those that we communicate with on the Internet do not necessarily have strong ties with others. Granovetter s research in 1983 shows that individuals with strong ties would more often communicate with individuals that are similar to themselves. When exploring the interaction between tie strength and electronic word of mouth, Granovetter s research implies that there should be a negative relationship between tie strength and electronic word of mouth. We derive from this literature review ten hypotheses. Trust has a positive effect on willingness to communicate, electronic word of mouth has a positive effect on willingness to communicate and acts as the mediator between trust and ewom. Finally, tie strength has a negative and significant effect on ewom. Hypothesis 1: Trust has a significant and positive relationship with an individual s willingness to communicate.

6 Hypothesis 2: Trust has a significant and positive relationship with an individual s electronic word of mouth. Hypothesis 3: Willingness to communicate will mediate the relationship between trust and electronic word of mouth. Hypothesis 4: An individual s willingness to communicate has a significant and positive relationship with an individual s electronic word of mouth. Hypothesis 5: An individual s tie strength with another individual on the internet has a significant relationship with electronic word of mouth. In this study, questionnaires were handed out in campus classrooms with the help of friends. All data was collected using paper-based questionnaires. Most items utilized a five-point Likert scale ranging from 1 to 5, with 1 being strongly disagree and 5 being strongly agree. Willingness to communicate to others is a self-report scale which is scored by the participants themselves. All the original items were designed in English and then translated into Traditional Chinese by a native speaker who is fluent in both languages to ensure the content and meaning remained the same during the translation. The official questionnaire is divided into 5 sections, electronic word of mouth, trust, willingness to communicate, tie strength, and demographic variables. Electronic word of mouth activities were measured using Churchill s word of mouth scale which was modified by Harrison-Walker in Positive electronic word of mouth was measured by 3 items from the loyalty scale and electronic negative word of mouth used the scale from Liu and McClure s research on cross-cultural customer complaint behavior study. To improve the efficiency and increase the unity of the questionnaire, scales were modified from 7 points to 5 points. Rotter s Interpersonal Trust scale, which was developed in 1967, was used in the study to measure trust. In 1985, McCroskey proposed a scale to measure willingness to communicate which is a personality-based trait like scale that is consistent across different receivers and different communication contexts. This scale has 20 items, with 8 items being filler items. The willingness to communicate scale includes four communication contexts and three different receivers. The study measured each individual s general willingness to communicate. Hansen s 1999 two item scale measured the closeness of a working relationship and frequency of contact and is used to the measure of tie strength. RESEARCH RESULTS AND DATA ANALYSIS A reliability analysis for the 4 different variables showed that each constructs alpha was above Electronic word of mouth activity reached a Cronbach α of 0.78, positive electronic word of mouth 0.78 and negative electronic word of mouth The trust scale has a Cronbach α of 0.76, scoring much higher than the 2 pretests conducted. Furthermore,

7 the 12 items of willingness to communicate had an internal consistency of 0.81, while tie strength had the highest internal consistency with an alpha of Performing a Regression Analysis on the retrieved data, we conclude that the R-square for several models was quite low. Yet, the most crucial part of this study is established with the predictive power of trust on willingness to communicate passing the P-value standard of 0.05, (F (1,169) = 3.984, p = 0.048). The regression results for willingness to communicate on both electronic word of mouth activity and positive electronic word of mouth is highly significant with P-values of (F (1,169)=10.643, p = 0.001) and (F (1,169) = 9.113, p = 0.003). The predictive powers and relationships of tie strength on all three dimensions of Electronic Word of Mouth Activity are significant. The results imply that the stronger the relationship between two individuals, the more likely they are to share their experiences of good product purchases. Also, the higher the degree of communication willingness, the more an individual will use positive word of mouth. Negative electronic word of mouth is the only dimension that does not have a significant relationship with willingness to communicate. Therefore, even if one is willing to communicate and trusts other individuals, this does not mean that they will share their negative experiences with others. Tie strength has a positive and significant relationship with both positive and negative electronic word of mouth, yet the relationship is not supported by electronic word of mouth activity. Hypotheses 2 is rejected since there is no significant positive relationship between Trust and Electronic Word of Mouth. However, trust does have a significant relationship with willingness to communicate. This supports the argument that the higher the degree of interpersonal trust, then the more willing consumers are to communicate and talk with others. STRATEGIC IMPLICATIONS FOR CRM SYSTEMS This research provides several new insights on how corporations can use electronic word of mouth as part of their strategic CRM design to attract and hold consumers. One of the most important management steps in e-crm is to be able to take the consumer s point of view instead of a marketer s [21]. If the corporation can take use of the consumer behavior and encourage consumers to give feedback on the products, the chances of stopping an unsatisfied consumer from switching brands will help increase the consumer s lifelong value to the company. The results point out that individuals in this study are more reluctant to share negative word of mouth online even when they have a high degree of interpersonal trust with the communicator. Corporations can learn how to increase the consumers trust towards the company so that consumers will be willing to interact. Analyzing the common goals of CRM in Table 1, several conclusions related to this research

8 can be derived. Electronic word of mouth should not be generalized to a single target audience. Corporations should divide the consumers into groups by the consumer s level of tie strengths when managing CRM systems. Since some customers feel a lack of desire to share negative purchasing experiences, they should be encouraged by the corporation that any form of feedback on the product is welcome. Also, traditional word of mouth is important for marketing events and may be combined with these findings. Marketers can manipulate the level of trust between initial consumers so that they are more willing to discuss the company s products with other people. Table 1: Common CRM Goals and Strategic Implications. Common Goals Strategic Implications 1. Adapt processes to satisfy specific customer preferences 2. Preserve the value of customers, target profitable segments, and cultivate high-quality relationships to ensure customer loyalty 3. Customer segmentation is a core function of CRM and frequently uses geographical data, demographic data, and behavioral variables to group customers 4. To analyze customer segments, customer preferences, and provide best case service models 5. To gain customer knowledge Enforce the level of consumer trust towards the company Corporations should aim to encourage customer feedback through the boosting of willingness to communicate Not all unsatisfied customers choose to voice their complaints. These types of customers should be approached and encouraged to voice their opinions Consumers can be offered incentives for posting or blogging word of mouth via Internet. Potential consumers who have strong ties with these individuals will then be stimulated to learn more about the product Through the building of trust and willingness to communicate, corporations can activate its consumers to share their purchase experiences and advice.

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