WORD OF MOUTH AND MARKETING STRATEGY: A MODEL INTEGRATING THE EFFECTS OF MARKETING EFFORTS AND PERSONAL INFLUENCES FOR ONE TIME MAJOR PURCHASES (ADVERTISING, REPUTATION, MILITARY ENLISTMENT)

The purpose of this dissertation is to develop a model which integrates the effects of marketing efforts and word of mouth. In this research, we study first purchases of high commitment products. We also limit our attention to aggregate models rather than models of individual consumer behavior. in addition, we do not study the diffusion of information usually associated with new products, but concentrate instead on established products. The first concept in this model involves viewing the level of word of mouth activity as a state variable. Our model incorporates the following phenomena: (1) marketing efforts can impact the level of word of mouth activity, as well as the amount of sales; and (2) personal influences can occur between buyers, the target market, and other influential populations, as well as within each of these groups. In the second part, major components of our model are empirically investigated for the military enlistment decision. This purchase situation provides an ideal setting, since word of mouth and marketing efforts influence enlistment decisions. Using univariate (e.g., chi-square) and multivariate (e.g., discriminant analysis, logit and loglinear models) statistical techniques, the existence of all key model links are rigorously supported for a single purchase decision. In the third part, normative analyses of a dynamic mathematical formulation of the descriptive model are conducted. Using optimal control theory, analytical and numerical results are obtained for linear and non-linear formulations. Effects due to negative word of mouth and competition are also considered in simple formulations. The final part discusses the implications of our results for marketing strategy. Two general strategies are outlined: aggressive and defensive policies. In both cases, the level of word of mouth activity and the relative strength of personal influences in the marketing mix will determine the total level of marketing expenditures required to achieve a desired objective