Do Online Reviews Affect Product Sales? The Role of Reviewer Characteristics and Temporal Effects

Information Technology & Management Vol. 9 No. 3, pp. 201-214, September 2008.

33 Pages Posted: 8 Jan 2009 Last revised: 17 Oct 2012

See all articles by Nan Hu

Nan Hu

Stevens Institute of Technology - School of Business

Ling Liu

University of Texas at Dallas

Jie (Jennifer) Zhang

University of Texas at Arlington

Date Written: January 7, 2008

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.

Keywords: Word-of-Mouth, Online Product Reviews, Transaction Cost Economics, Uncertainty Reduction, Efficient Market, Portfolio Analysis

Suggested Citation

Hu, Nan and Liu, Ling and Zhang, Jie (Jennifer), Do Online Reviews Affect Product Sales? The Role of Reviewer Characteristics and Temporal Effects (January 7, 2008). Information Technology & Management Vol. 9 No. 3, pp. 201-214, September 2008. . Available at SSRN: https://ssrn.com/abstract=1324190 or http://dx.doi.org/10.2139/ssrn.1324190

Nan Hu (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Ling Liu

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Jie (Jennifer) Zhang

University of Texas at Arlington ( email )

701 S. West St.
Arlington, TX 76019
United States

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