Reports

Online Reviews: Star Ratings, Position Effects and Purchase Likelihood

Prasad Vana and Anja Lambrecht, 2018, 18-107-04

In this report, Prasad Vana and Anja Lambrecht study how individual reviews displayed on the product webpage of an online retailer affect consumers’ purchase likelihood. Past research on the topic has focused on the effect of aggregate measures of reviews that are typically displayed on top of a product page such as the mean product rating and the number of reviews, but little is known about how individual reviews displayed on a product page affect sales.

The main challenge in identifying such an effect lies in the fact that retailers generally select which reviews to display on the product page and in what order, making the display of reviews in particular positions non-random, or endogenous. For example, a retailer may decide to always show positive reviews in the first position on the webpage and negative reviews in the fifth position. An analysis of such data would (erroneously) conclude that reviews in the first position always have a positive impact on sales and that the reviews in fifth position always have a negative impact on sales. It is not clear how a positive review in position five or a negative review in position one would affect sales since the retailer never places such reviews in those positions.

The authors address this challenge by utilizing an empirical context where the retailer displays reviews chronologically and exploit the variation in review positions generated as newer reviews are added on top of older ones. Results from the analysis of a large panel of reviews shows that even after controlling for the mean rating of a product and the number of reviews available, individual reviews have a strong effect on consumer purchase decisions. These effects are especially pronounced for products that have a high mean rating as well as a large number of reviews, suggesting that individual reviews matter most for products that appear attractive to consumers based on the aggregate review information displayed on the product webpage. Lastly, they provide evidence suggesting that the impact of individual reviews on consumers is related to the amount of time consumers spend on the product page.

These results are important for managers and policy makers. Retailers may benefit from strategically displaying certain reviews in top positions of the product page. This suggests that policymakers may wish to monitor how algorithms that retailers may employ to determine the order of information displayed on their website could affect consumer decision making online.

Prasad Vana is Assistant Professor of Marketing, Tuck School of Business, Dartmouth College. Anja Lambrecht is Associate Professor of Marketing, London Business School.

Acknowledgments
The authors thank Kusum Ailawadi, Puneet Manchanda, Nicos Savva and Scott Neslin for comments on earlier versions of the paper.

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