EXPRESS: Impacts of Product-line Breadth on the Effectiveness of Advertising and Consumer Word-of-Mouth: Evidence from China’s Automobile Market

Abstract

Using data from the Chinese automobile market, we examine how firms’ product-line breadth choices moderate the effectiveness of firm advertising and consumer online word-of-mouth (WOM) in promoting product sales. We find that product-line breadth has opposing effects on the effectiveness of firm advertising and consumer online WOM. When a product line broadens, advertising’s effectiveness in driving vehicle sales declines, whereas online WOM’s effectiveness increases. Moreover, advertising and online WOM are substitutes in our context; however, such substitution effects weaken when product-line breadth widens. Furthermore, the mismatch cost between firms and consumers mediates the effects of product-line breadth on advertising and online WOM effectiveness. We quantitatively illustrate, using our parameter estimates, the trade-off between firm advertising and consumer online WOM in driving product sales when a firm’s product-line breadth changes. We contribute to the marketing communications literature by examining how firm strategy influences the effectiveness of marketer-generated (firm advertising) and user-generated (consumer online WOM) content. In addition, we contribute to the advertising – online WOM interaction literature and advance the understanding of mismatch cost.