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Information Technology and Management

, Volume 9, Issue 3, pp 201–214 | Cite as

Do online reviews affect product sales? The role of reviewer characteristics and temporal effects

Article

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 

Notes

Acknowledgments

We would like to thank guest editors Paul Tallon, Indranil Bardhan, and Alok Gupta and the anonymous reviewers for their valuable feedback on earlier versions of this manuscript. All remaining errors and omissions are our responsibility.

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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.School of Information SystemsSingapore Management UniversitySingaporeSingapore
  2. 2.Department of Accounting & Information Management, School of ManagementUniversity of Texas at DallasRichardsonUSA
  3. 3.Department of Information Systems and Operation Management, College of Business AdministrationUniversity of Texas at ArlingtonArlingtonUSA

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