Multiple Signals and Consumer Behavior in the Digital Economy: Implementing a Multidimensional Framework

Multiple Signals and Consumer Behavior in the Digital Economy: Implementing a Multidimensional Framework

Ciro Troise (Department of Management, University of Campania Luigi Vanvitelli, Capua, Italy)
Copyright: © 2020 |Pages: 26
DOI: 10.4018/978-1-7998-3042-9.ch001
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The digital economy shows a challenging environment, and three main players have entered the arena (digital platforms, online communities, new technologies). The aim of this chapter is to provide a new multidimensional framework for exploring multiple signals. The study leverages the signaling theory, since signals help companies and sellers to mitigate information asymmetries. In the virtual context of the digital economy, credible and observable information improve the decision-making process of consumers. The work opted for a multidimensional framework and proposes that four types of signals (social network, social capital, certification, social identity) influence consumer behavior. Furthermore, the study suggests that also the interactions/combinations between these signals could affect consumer behavior. This contribution offers a conceptual framework without testing empirically the propositions; thus, it offers the opportunity of further research. This work has interesting implications for several actors of the digital ecosystem (firms, entrepreneurs, platform managers, consumers, etc.).
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The current era is characterized by the advent of the digital and the spread of new technologies. At the same time, the rise of the so-called “Industry 4.0” (Lasi, Fettke, Kemper, Feld, & Hoffmann, 2014) and the development of ICT (Information and Communications Technology) (Sassi & Goaied, 2013) had a strong impact on the global economy. In this changing and evolving scenario, some new players have entered the arena. Among them, the most promising are digital platforms (Dou, He, & Xu, 2016; Parker, Alstyne, & Choudary, 2016), online communities (Kozinets, De Valck, Wojnicki, & Wilner, 2010; Sun, Rau, & Ma, 2014) and new technologies (also known as “Technologies 4.0”) – which include a multitude of categories such as mobile apps, Fintech, IoT, and so on. These new players have emerged in the last few years and have radically changed people’s lifestyles and companies’ activities.

The digital revolution offers many challenges and opportunities for several stakeholders, in particular for SNS developers and online companies. However, inevitably, the digital revolution raises a number of questions on the outlook for the traditional systems. In this vein, the main research questions that attract both scholars and practitioners are related to the impact of these new players and to the improvement of the understanding of consumer behavior.

Thus, there is a significant call for more research that contributes to shed some lights in this field. Understanding the consumer behavior – and the related buying process – plays a key role for the strategies of many companies. Consumer marketing strategies mainly follow new trends, for example the large use of social media (Hughes, Rowe, Batey, & Lee., 2012) represents an essential factor for both demand and supply sides. Changing consumer behavior is being joined by new digital technologies to drive a new era of innovation in marketing services.

In this digital revolution era, both the social networks and the so-called “digital natives” affect the success and the growth of digital businesses. Over the last years, some companies such as AirBnb, Alibaba, BlaBlaCar, MyTaxi and Uber, had a relevant impact on the market. In particular, sharing economy platforms (Basili & Rossi, 2019) are a successful business model in the digital economy (Denning, 2014). The digital economy and online markets present a challenging environment for consumers to evaluate the real value of products/services and company offers. In this context characterized by high uncertainty, the signals that companies send to consumers can affect their decision-making process. Observable and credible signals can mitigate the problem of information asymmetries (Connelly, Certo, Ireland, & Reutzel, 2011; Spence, 1973).

In the digital economy scenario, many companies operate through virtual platforms. These platforms are characterized by the absence of personal interactions and by a virtual space in the exchange process. One of the most important challenges facing companies and platform managers is to communicate information about the business or product/service in order to involve consumers. Thus, the signals must be credible and attractive to actually capture the attention of consumers. These signals could play a key role in limiting uncertainty associated with online purchases and overcoming typical problems related to information asymmetries, such as adverse selection and moral hazard (Akerlof, 1970).

The decision-making process of consumers is affected by several factors, for example social networks, motivation, emotions, passion, cognitive or relational aspects, and so on. More research that delve into aspect of consumer behavior and psychology in the digital economy is deemed necessary (Ling Chang, Ling Tam, & Suki, 2016; Nathan, Fook Chiun, & Suki, 2016; Suki, 2016). Accordingly, the present study tries to shed some light on the nascent research field related to consumer behavior in the digital economy by leveraging the signaling theory (Spence, 1973). Precisely, this work proposes a multidimensional framework in order to examine multiple signals and their influence on consumer behavior.

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