We study the differential effects of a variety of WOM and mass communication activities on the means and on the variances of individual preference parameters. Analyzing the effects of communication on the means of individual preference parameters provides useful information regarding how much WOM and mass communication activities increase or decrease consumers’ preference parameters. Such a study helps us better understand how communication activities influence consumer heterogeneity. This raises a new question: “Do WOM and mass communication activities make consumers homogeneous or heterogeneous in terms of their product preferences?” This important question has not been previously addressed in the marketing literature. We propose a two-level choice model using a hierarchical Bayesian probit to incorporate the differential effects of mass and WOM communication activities, and the proper interaction between communication activities and product attributes. Using actual movie choice data, we analyze the effects of WOM communication activities compared to those of mass communication activities. Furthermore, we measure the differential effects of communication activities and the interaction effects between communication and product attributes. Based on the empirical analysis, we provide relevant managerial guidelines about communication activities.

• Jaihak Chung(Sogang University, Republic of Korea)
• Youngchan Kim(Yonsei University, Republic of Korea)