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.

Subjective knowledge (SK thereafter) is defined as what consumers think they know, or their perceived level of knowledge (Brucks, 1985). SK influences what consumers search for, the effort that they put into searching, and the purchasing decision and choice of brands they finally make (Hadar, Sood, & Fox, 2013; Moorman, Diehl, Brinberg, & Kidwell, 2004). The existing literature on consumer knowledge development mainly argues that SK development is associated with consumers’ product related experience, such as product ownership and experience from usage (Alba & Hutchinson, 2000; Park, Mothersbaugh, & Feick, 1994). This study contributes to the literature as follows. We consider a broad market segmentation where the market consists of product owners and non-owners, The literature suggests that these two groups of consumers should have different levels of perceived knowledge due to their different product-specific experience (Park et al., 1994). Our research specifically contends that it is important to distinguish, within the group of non-owners, between those who intend to buy and those who do not intend to buy the product. Thus, this study examines how previous ownership and intention to buy, which is the goal motivation, influence the SK levels of consumers, which in turn impacts on consumers’ heterogeneous preferences for different attributes within a product category. It is contended that the motivation to learn about a product category of non-car owners who have strong intentions to buy influences what this group learns compared to those non-owners who do not intend to buy. More specifically, the research proposes to uncover how learning influences how different groups of consumers perceive their subjective knowledge and how this relationship in turn shapes their preferences, especially when we compare owners and non-owners who have strong intentions of buying a product. Therefore, we develop following research hypotheses: H1: The SK level is positively associated with the product ownership experience. H2: The SK level is positively associated with purchase intention. H3: The relationship between purchase intention and SK level is moderated by the ownership of the product. H4: Preference heterogeneity for different types of brand attributes of the product between owners and non-owners is moderated by the SK level. The empirical context that illustrates the importance of this research is the Chinese car market where the majority of consumers are first time buyers. Our research shows that the SK level is positively associated with both car ownership and purchase intention. Furthermore, the segmentation analysis finds that purchase intention has a significant effect only on non-car owners’ SK level, while the effect on car owners’ SK level is insignificant. An interesting finding is that SK development, in turn, influences consumer’s preferences for different types of brand attributes of a product. We demonstrate the role of SK in forming consumer preference heterogeneity by comparing preferences for a tangible and a non-tangible brand attribute respectively across different consumer segments. We further show how this preference heterogeneity across two consumer segments (car owners versus non-car owners) depends on their SK level. The results of this study can be generalized beyond the specific context of the empirical study of the Chinese car market when marketers are considering new products launch or launching products where the majority of consumers may be unfamiliar with the product.