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 versus 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 decisionmaking and 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.

On merchandise return policy, entrepreneurial internet retail, and customer reviews – Insights from an observational study

“…In this respect, Liu et al (2019) show that both the overall ratings as well as positive review content have a positive impact on the customers' purchase likelihood because most customers that genuinely consider buying a certain product will both consider the average rating as well as positive or negative individual reviews. Lei et al (2022) add to these findings by underscoring that the content of individual reviews may substantially impact the buying decision.…”

“…In some cases, for example, in the hotel industry, the customer ratings are further broken down into specific service dimensions (e.g., at Booki ng.com, where customers rate staff, comfort, cleanliness, and location, among others). Customer review ratings allow potential buyers to "easily gauge collective opinions" (Lei et al, 2022(Lei et al, , 2394 and access an indicator of overall quality that helps form an initial impression about the different purchase options they are considering (Yin et al, 2016). This helps narrow down the available options to a smaller subset on which to expend more effort to make the final buying decision (Lei et al, 2022).…”

“…Customer review ratings allow potential buyers to "easily gauge collective opinions" (Lei et al, 2022(Lei et al, , 2394 and access an indicator of overall quality that helps form an initial impression about the different purchase options they are considering (Yin et al, 2016). This helps narrow down the available options to a smaller subset on which to expend more effort to make the final buying decision (Lei et al, 2022). In this respect, Liu et al (2019) show that both the overall ratings as well as positive review content have a positive impact on the customers' purchase likelihood because most customers that genuinely consider buying a certain product will both consider the average rating as well as positive or negative individual reviews.…”

Multus Medium Opinion Mining (MMOM): A Novel Hybrid Deep Learning Approach for Comprehensive Product Review Analysis

“…2 something, being happy to feel sad, and being low to feeling happy [2]. It also helps companies raise their product quality because of these reviews.…”

Effects of online reviews and competition on quality and pricing strategies

“…As has been widely recognized, there is normally a significant gap between “seller's show” and “buyer's show” because a product may not fit the personalized need of a particular individual even if it has a high quality. As such, customers tend to use online reviews to acquire additional information and make informed purchasing decisions when they shop online (e.g., Chen & Xie, 2008; Kuksov & Xie, 2010; Kwark et al., 2014; Lei et al., 2022). Note that online reviews provide additional information of a product, also in the form of text, images, and even videos, but from the perspective of other customers who have bought the product.…”