Social media marketing falls flat as a signal of quality, research finds

"Social media platforms have transformed the way consumers learn about products. Unlike traditional advertising, where firms broadcast one-way messages to increase awareness, SMM allows consumers themselves to generate and share information such as reviews, ratings, comments, and peer recommendations, all of which influence perceived product quality. As a result, firms increasingly rely on SMM both to expand their customer base and to influence the external information consumers receive."

""Firms often believe that spending more on social media marketing helps signal superior product quality," said Cui. "However, when we modeled this environment using a game-theoretic approach, we found that high-quality firms cannot reliably use SMM spending to separate themselves from mid- or low-quality competitors." Game-theoretic approach is a way of analyzing situations where multiple decision-makers (players) interact, and the outcome for each depends not only on their own choices but also on the choices of others."

Social media platforms enable consumer-generated reviews, ratings, comments, and peer recommendations that shape perceived product quality. Firms increasingly use social media marketing (SMM) to expand customer bases and influence external information available to consumers. Game-theoretic modeling shows that SMM spending cannot reliably allow high-quality firms to separate from mid- or low-quality competitors. Instead, SMM often pushes firms across quality levels toward similar spending and pricing strategies, producing pooling equilibria. Two modeled scenarios include a benchmark where SMM only raises awareness and a scenario where SMM also affects consumer-generated information, both reducing the informativeness of marketing and price signals.

Read at Phys