The Impact of User-Generated Content and Traditional Media on Customer Acquisition and Retention

Abstract

Customer acquisition and retention are central components of customer relationship management (CRM) and the key drivers of a firm’s long-term profit. However, our understanding of the relative impact of user-generated content (UGC) and traditional media and their synergies on customer acquisition and retention is still underdeveloped. Thus, the purpose of this research is to address two key questions: What is the effect of UGC relative to that of traditional media on customer acquisition and retention? Is there any interaction effect between UGC and traditional media on both customer acquisition and retention? To understand the differential impacts of these media, we develop a conceptual framework and propose several hypotheses. We test our hypotheses using data from the automobile and mobile game industries. Our findings indicate that UGC is much more effective in acquiring customers, while traditional media is more important for customer retention. Moreover, the volume of UGC and traditional media have a synergistic effect on customer retention. This research therefore contributes to the acquisition-retention literature while also providing important insights to managers.

ACKNOWLEDGMENTS

This work is based on the first author’s dissertation. We would like to thank the Marketing Science Institute for a supporting grant. The first author also thanks for the support provided by a 2019–2020 Faculty Support Grant from the California State University, East Bay Division of Academic Affairs.

Notes

1 UGC refers to any form of content, such as text, images, memes, and videos, that has been created by users of online platforms such as social media (e.g., Facebook, Epinions). Alternatively, research has used the term electronic word-of-mouth (eWOM) to represent the same idea.

2 Traditional media (sometimes referred to as old media) is any form of mass communication that existed before the Internet and mobile technology were developed. These types include television, radio, newspapers, magazines, mail, and outdoor messages.

3 Earned media refers to media activity related to a company or brand that is not directly generated by the company or its agents but rather by other entities such as customers or journalists.

4 A notable exception is Stephen and Galak (2012). However, they analyze earned media only for a well-established, online, nonprofit product.

5 We focus on UGC volume and valence metrics because they are the most commonly used metrics in social media research. Specifically, volume refers to the total amount of UGC and valence refers to whether the UGC is positive, negative, or neutral.

6 Clearly, with a longer data set, we are likely to see more retention. Consequently, any support for our hypothesis in a four-year window will probably be enhanced as the window gets longer.

7 Alternatively, we could have converted all traditional media from U.S. dollar spend to volume (number of advertisements) by assuming a common cost for all advertisements, but we decided to retain U.S. dollar spend to avoid advertising cost assumptions.

8 Detailed results available upon request.

9 For mobile games, no print media data are available. Only broadcast media were considered as traditional media. Thus, Appendix 3 includes principal components of UGC for mobile games only.

10 We would like to thank an anonymous reviewer for this suggestion.

Additional information

Notes on contributors

Ya You

Ya You (PhD, University of Central Florida) is an assistant professor of marketing, College of Business and Economics, California State University, East Bay.

Amit M. Joshi

Amit M. Joshi (PhD, University of California Los Angeles) is a professor, International Institute for Management Development.