Credible Effects: The Impact of Disclosure of Material Connections Within Online Product Reviews

Abstract

Online product reviews are an influential source of information for consumers. With pressures to have readily available reviews, businesses must determine the best strategy for obtaining them. In 2009, for the first time in 29 years, the Federal Trade Commission (FTC) updated endorsement guidelines to address concerns over possible deception within online reviews. Since that time, the FTC has issued four additional statements underlining its concerns and providing additional examples of how to comply. In 2017, the first action of enforcement was made against individuals failing to adhere to these guidelines. In light of the FTC’s guidelines and pressures to have reviews, businesses must ask which type of affiliated reviewers, if any, are the most influential. As to reviewer credibility, the literature offers contradictory predictions. Through three experiments with a total of 1,077 consumers, the authors examine effects of reviewer affiliation. The findings affirm the spirit of the FTC’s updated guidelines. However, affiliation comes at a cost. Depending on the competitive context, the cost may be worth the benefits.

Innocent until proven guilty: suspicion of deception in online reviews

“…A study analyzing online consumer reviews using a sentiment mining approach found that their length and longevity positively influenced their readership and helpfulness (Salehan and Kim, 2016). Some reviewers have never purchased or tried the product and are providing fake reviews for self-gain, whereas others are incentivized to submit online posts (Steward et al , 2020). In the case of incentivized WOM, the incentivization process can induce biased self-interest on the side of the recommender (Pongjit and Beise-Zee, 2015).…”

“…This situation is even more problematic, considering that the influence of consumer review volume and valence is still debated in the literature (Kordrostami et al , 2021). Even the Federal Trade Commission (FTC) updated its guidelines for endorsements in 2009, in response to pressures from consumer groups, requiring the identification of any material connection between the seller and the reviewer, and took legal measures in multiple fake review cases (FTC, 2009; Plotkina et al , 2020; Steward et al , 2020). Studies have also discussed regulatory intervention to prohibit the use of deceptive consumer communications (Malbon, 2013; Mayzlin et al , 2014; Plotkina et al , 2020; Steward et al , 2020).…”

“…Studies found that 97% of consumers read online reviews for local businesses, and 93% of individuals are influenced by online reviews in their consumption decisions (Schoenmueller et al , 2020). Because consumers rely on online reviews when deciding which products and services to purchase, some marketers have injudiciously started using fake reviews to influence potential customer decisions (Hu et al , 2012; Malbon, 2013; Steward et al , 2020).…”

The Impact of Online Reviews on the Information Flows and Outcomes of Marketing Systems

“…Pressured to provide more product reviews, some companies incentivize reviews or have their own employees write them. The FTC guidelines require that any material connection between reviewer and seller should be stated "clearly and conspicuously" (in Steward et al 2020). Consumers are not as skeptical as sometimes thought-they assume a review does not have a material connection unless otherwise stated (Steward et al 2020).…”

“…The FTC guidelines require that any material connection between reviewer and seller should be stated "clearly and conspicuously" (in Steward et al 2020). Consumers are not as skeptical as sometimes thought-they assume a review does not have a material connection unless otherwise stated (Steward et al 2020). Mayzlin (2006) shows that firms sometimes pretend their promotion is a consumer recommendation and manipulate online consumer conversations.…”