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Int. J. Environ. Res. Public Health 2018, 15(1), 69; https://doi.org/10.3390/ijerph15010069

Dynamic Impact of Online Word-of-Mouth and Advertising on Supply Chain Performance

School of Economics and Management, Shanghai Maritime University, Shanghai 201306, China
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Received: 30 November 2017 / Revised: 28 December 2017 / Accepted: 30 December 2017 / Published: 4 January 2018
(This article belongs to the Special Issue Decision Models in Green Growth and Sustainable Development)
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Abstract

Cooperative (co-op) advertising investments benefit brand goodwill and further improve supply chain performance. Meanwhile, online word-of-mouth (OWOM) can also play an important role in supply chain performance. On the basis of co-op advertising, this paper considers a single supply chain structure led by a manufacturer and examines a fundamental issue concerning the impact of OWOM on supply chain performance. Firstly, by the method of differential game, this paper analyzes the dynamic impact of OWOM and advertising on supply chain performance (i.e., brand goodwill, sales, and profits) under three different supply chain decisions (i.e., only advertising, and manufacturers with and without sharing cost of OWOM with retailers). We compare and analyze the optimal strategies of advertising and OWOM under the above different supply chain decisions. Secondly, the system dynamics model is established to reflect the dynamic impact of OWOM and advertising on supply chain performance. Finally, three supply chain decisions under two scenarios, strong brand and weak brand, are analyzed through the system dynamics simulation. The results show that the input of OWOM can enhance brand goodwill and improve earnings. It further promotes the OWOM reputation and improves the supply chain performance if manufacturers share the cost of OWOM with retailers. Then, in order to eliminate the retailers from word-of-mouth fraud and establish a fair competition mechanism, the third parties (i.e., regulators or e-commerce platforms) should take appropriate punitive measures against retailers. Furthermore, the effect of OWOM on supply chain performance under a strong brand differed from those under a weak brand. Last but not least, if OWOM is improved, there would be more remarkable performance for the weak brand than that for the strong brand in the supply chain. View Full-Text
Keywords: online word-of-mouth; advertising; supply chain performance; differential game; system dynamics online word-of-mouth; advertising; supply chain performance; differential game; system dynamics
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Feng, J.; Liu, B. Dynamic Impact of Online Word-of-Mouth and Advertising on Supply Chain Performance. Int. J. Environ. Res. Public Health 2018, 15, 69.

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