Do online reviews affect product sales? The role of reviewer characteristics and temporal effects

Abstract

Online product reviews provided by consumers who previously purchased products have become a major information source for consumers and marketers regarding product quality. This study extends previous research by conducting a more compelling test of the effect of online reviews on sales. In particular, we consider both quantitative and qualitative aspects of online reviews, such as reviewer quality, reviewer exposure, product coverage, and temporal effects. Using transaction cost economics and uncertainty reduction theories, this study adopts a portfolio approach to assess the effectiveness of the online review market. We show that consumers understand the value difference between favorable news and unfavorable news and respond accordingly. Furthermore, when consumers read online reviews, they pay attention not only to review scores but to other contextual information such as a reviewer's reputation and reviewer exposure. The market responds more favorably to reviews written by reviewers with better reputation and higher exposure. Finally, we demonstrate that the impact of online reviews on sales diminishes over time. This suggests that firms need not provide incentives for customers to write reviews beyond a certain time period after products have been released.

A study on the effect of product quality on behavioral and attitudinal loyalty: A case study of SME companies

“…Based on the results of Table 2 we may confirm two hypotheses of the survey and conclude that product quality may influence positively on attitudinal as well as behavioral loyalty, positively. The results of this study are consistent with other findings reported by Romaniuk and Nenycz-Thiel (2013), Hu et al (2008) and Lee and Shin (2014). In other words, an increase on product quality has to increase attitudinal loyalty much more than behavioral loyalty does.…”

What makes a useful online review? Implication for travel product websites

“…Specifically, peripheral cues (i.e., star ratings and rankings of the reviews) are useful in the information search stage whereas central information processing (i.e., the number of total words in a review and the number of negative words) is influential in the stage of the evaluation of alternatives. Hu, Liu, and Zhang (2008) concluded that online consumer reviews infer product quality and reduce product uncertainty, in turn aiding the final purchase decision.…”

Harnessing the Experience Web to Support User-Generated Product Reviews

“…The rationale for such access is that review information of this kind has been shown to play a valuable role when it comes to helping users to make purchasing decisions, increasing the conversion rate of casual browsers into informed, satisfied buyers. For example, Hu et al [10] describe the results of one study on the value of online reviews, concluding that consumers do understand the value di↵erence between favourable and unfavourable opinions and respond accordingly. Furthermore, when consumers read online reviews, they pay attention not only to review scores, but to other contextual information such as a reviewer's reputation and reviewer exposure.…”