Swayed by the Reviews: Disentangling the Effects of Average Ratings and Individual Reviews in Online Word-of-Mouth

Abstract

Online word-of-mouth studies generally assume that a product’s average rating is the primary force shaping consumers’ purchase decisions and driving sales. Similarly, practitioners place more emphasis on average ratings by displaying them at more salient places than individual reviews. In contrast, emerging evidence suggests that individual reviews also affect the decision-making of those consumers who consult both kinds of information. However, because average ratings and individual reviews are often correlated and confounded empirically, little research has attempted to disentangle their effects. To address this empirical challenge, we construct trade-off situations in which the average ratings and top-ranked reviews of different product options do not align with each other. We then investigate consumers’ preferences that can indirectly reveal the relative impact of average ratings vs. top reviews. Through an archival analysis of a panel dataset and two laboratory experiments, we find consistent evidence for a swaying effect of individual reviews and reveal their textual content as a likely reason. These findings challenge the commonly accepted assumption of average ratings being the primary driver of consumers’ purchase decisions and suggest that consumers may not be as rational as previous literature assumed. In addition, this paper is the first to disentangle the effects of average ratings and individual reviews on consumer decision-making and to explore a possible reason for the swaying effect of individual reviews. Our paper illustrates the importance of information accessibility in consumers’ purchase decisions, and our findings offer valuable insights for product manufacturers, online retailers, and review platforms.

Keywords: average ratings; individual reviews; information accessibility; consumer decision-making; online word-of-mouth

JEL Classification: M15, M31