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

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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.

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Notes

  1. Although the phrase “word-of-mouth” generally refers to oral communication, in this paper we are using this term to refer to person-to-person virtual communication.

  2. We also evaluate hypothesis 1 using all of the panel data as well as the sub-sample. These analyses yield consistent results, as we discuss later.

  3. Recall that we use sales rank to approximate sales. Sales rank is a function of actual sales so that an increase in sales rank is associated with decreasing sales.

  4. The skewness of the change in sales is approximately −0.60; the kurtosis is approximately 7.38, which might also indicate that the data are slightly skewed.

  5. The median Z-test results are very similar to the mean difference results.

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Acknowledgments

We would like to thank guest editors Paul Tallon, Indranil Bardhan, and Alok Gupta and the anonymous reviewers for their valuable feedback on earlier versions of this manuscript. All remaining errors and omissions are our responsibility.

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Authors and Affiliations

  1. School of Information Systems, Singapore Management University, Singapore, Singapore

    Nan Hu

  2. Department of Accounting & Information Management, School of Management, University of Texas at Dallas, Richardson, TX, USA

    Ling Liu

  3. Department of Information Systems and Operation Management, College of Business Administration, University of Texas at Arlington, Arlington, TX, USA

    Jie Jennifer Zhang

Authors
  1. Nan Hu
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  2. Ling Liu
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  3. Jie Jennifer Zhang
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Correspondence to Nan Hu.

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Hu, N., Liu, L. & Zhang, J.J. Do online reviews affect product sales? The role of reviewer characteristics and temporal effects. Inf Technol Manage 9, 201–214 (2008). https://doi.org/10.1007/s10799-008-0041-2

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  • DOI: https://doi.org/10.1007/s10799-008-0041-2

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