Online Consumer Review: Word-of-Mouth as a New Element of Marketing Communication Mix
Management Science, Vol. 54, No. 3, pp. 477-491, 2008
45 Pages Posted: 15 Nov 2004 Last revised: 9 Nov 2009
Date Written: July 1, 2004
Abstract
Online consumer product review is an emerging market phenomenon that is playing an increasingly important role in consumers' purchase decisions. This paper examines a fundamental issue concerning online consumer review, i.e., the functions such reviews have for an online marketer. We argue that online consumer reviews, a type of product information created by users based on personal usage experience, can serve as a new element of marketing communications mix and work as free sales assistants to help consumers identify the products that best match their idiosyncratic usage conditions. For many products, this marketing function is impossible or very costly for traditional marketing communications to achieve. However, this new communication mode does not come without cost because it eliminates a seller's control over the content of product information accessible to consumers, and because consumer reviews may not be fully informative.
We examine four specific strategic issues: (1) when an online seller should provide consumer reviews to its customers, (2) how a seller's decision to supply consumer reviews interacts with its product assortment strategy, (3) how the seller's strategy regarding the supply of consumer reviews interacts with its traditional marketing communication strategy, and (4) what timing is best for the seller to offer consumer review information for a product.
Our results show that supplying online consumer reviews can benefit or hurt an online seller depending on product characteristics, the informativeness of the review, the seller's product assortment strategy, the seller's product value for the partially matched consumers, and consumer heterogeneity in product consumption expertise. We also show that the seller's decision to provide consumer reviews will increase its incentive to offer more complete product information to consumers through its traditional marketing communications. Finally, we discover that offering consumer review information too early leads to a lower profit.
An empirical study based on data from online sellers in different product categories provides some preliminary support for our theory.
Keywords: Online Consumer Review, Independent Product Information, Word-of-Mouth
JEL Classification: D83, L15, L86, M37
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Promotional Chat on the Internet
By Dina Mayzlin
-
The Effect of Word of Mouth on Sales: Online Book Reviews
By Judith A. Chevalier and Dina Mayzlin
-
The Effect of Word of Mouth on Sales: Online Book Reviews
By Judith A. Chevalier and Dina Mayzlin
-
Word-of-Mouth for Movies: Its Dynamics and Impact on Box Office Revenue
By Yong Liu
-
Do Online Reviews Matter? - an Empirical Investigation of Panel Data
By Wenjing Duan, Bin Gu, ...
-
Strategic Manipulation of Internet Opinion Forums: Implications for Consumers and Firms
-
Self Selection and Information Role of Online Product Reviews
By Xinxin Li and Lorin M. Hitt
-
By Chris Forman, Anindya Ghose, ...
-
By Michael Trusov, Randolph E. Bucklin, ...