Read the summary and the most important questions on Online Social Interactions: A Natural Experiment on Word of Mouth Versus Observational Learning A4MCM

• 1 Introduction

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• What does Word-of-Mouth mean in the setting where social interactions influence the purchase decision of consumers?

  This is when they learn from, and are affect by other people's opinions. Also listening to the experiences of his/her friends.

• Why have WOM (product reviews) and OL (buyer's purchase action reports) become an important part of consumer purchase decisions?

  Because online consumer social interactions, often initiated and facilitated by an organisation, have become important in purchase decisions.

• WOM, which refers to the spreading of information (in the form of opinions and recommendations) has 2 important attributes. Which are these and what do they mean?

  1. Valence = whether opinions from WOM are positive or negative (can influence product sales; 
     
  2. Volume = amount of WOM information (plays informative role - increasing consumer awareness of product and number of informed consumers.

• What does the Observational Learning, as the second form of social interaction, entail?

  OL holds discrete signals communicated through the actions of other consumers but the reasons for these actions are not given. Limited information will shape the viewer's beliefs.

• Briefly explain the concept of Observational Learning Valence.

  The valence of Observational Learning is decided by the percentages of adoptions. 
  Positive OL motivates adoption; 
  Negative OL in essence discourages adoption. 

• Why is positive Observational Learning considered most favourable?

  Because consumers are more certain about the quality of these products and the generalisability  to matching a customer's taste.

• Why is Negative Observational Learning more difficult to determine than Positive Observational Learning?

  Because Negative Observational Learning does not necessarily lead to unfavourable consequences as it might be the result of a high quality niche product.

• Name the two largest differences between OL and WOM?

  1. The first difference is in amount, because OL contains less information than WOM (there are no reasons, opinions or recommendations);
     
  2. Credibility of the information, as the article literally states: 'actions speak louder than words', thus OL information is seen as more credible.

• 2 Accessibility-Diagnosticity Model

• The Accessibility-Diagnosticity Model states that whether information will be used by consumers for making a decision, depends on the extent to which information can be diagnosed. Product information is diagnostic if it aids consumers to put a product in a certain category and non diagnostic if it has several interpretations. Why is negative Observational Learning considered to be less diagnostic than positive Observational Learning information?

  Because there can be 2 reasons for the lower diagnosticity: 
  

  1. Indeed small market share and purchase percentage; 
  2. High-quality niche product.

• Which, the positive or negative OL information, is credibility more likely to strengthen?

  The impact of positive OL information because negative OL information has low diagnosticity.