Measuring the Value of Social Dynamics in Online Product Ratings Forums

Abstract:     
Extant research has shown that consumer online product ratings can significantly influence product sales. However, these ratings have also been shown to be subject to a number of social influences. In other words, posted product ratings not only reflect the customers’ experience with the product, but they also reflect the influence of others’ ratings. The objective of this paper is to model the arrival of posted product ratings in an effort to measure the impact of any social dynamics that may occur in the ratings environment on both subsequent rating behavior as well as product sales.

Our modeling efforts are two fold. First, we model the arrival of product ratings and separate the effect of social influences from the underlying (or baseline) ratings behavior. Second, we model product sales as a function of posted product ratings. However, rather than simply modeling the effects of observed ratings, we decompose ratings into a baseline rating, the contribution of social influence and idiosyncratic error. From this model, we can measure the overall sales impact resulting from observed social dynamics. We consider both direct effects on sales as well as indirect effects that result from the influence of dynamics on future ratings (and thus future sales).

We show that ratings behavior is significantly affected by previously posted ratings. We further show that the effect on sales resulting from this social dynamic is significant. With the increased popularity of online discussion and ratings forums, many marketers have been investing in efforts to moderate these conversations or to contribute comments of their own in order to create a more positive ratings environment. However, our results show that while these efforts can directly improve sales, the overall effect is relatively short-lived once indirect effects are considered.

Number of Pages in PDF File: 44

Keywords: User-Generated Content, Online Consumer Product Ratings, Social Dynamics

working papers series