Measuring the Impact of a Single Negative Customer Review on Online Search and Purchase Decisions

Abstract

How much does a single negative customer review impact online search and purchase behavior? To answer this question, the authors compare choices made by consumers searching for a product that had a negative review posted on its product-page with those made when the same review had “moved” to a second page as additional reviews were posted. By focusing on where the review appears rather than whether it was submitted, our approach tackles concerns of spurious correlation between customer reviews and unobserved demand shocks. Using data from a large online retailer, we find that the discovery of a negative review – one that has 3-stars or less out of 5 – leads to an average drop in purchase probability of 51.4%, an increase in continuing search for a competing item of 11.4%, and a 15.8% increase in the price paid if a purchase occurs. Our findings are presented on a two-dimensional product map – an innovative way to evaluate the vulnerability of products to a single negative review.

Keywords: Customer reviews, Online shopping, Consumer search, Elasticity of demand, Electronic word-of-mouth

JEL Classification: M31, D12