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Impact of Online Customer Reviews on Sales Outcomes: An Empirical Study Based on Prospect Theory

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Abstract

This study examines the influence of the valence of online customer reviews on sales outcomes based on prospect theory. Numerous studies have revealed the importance of customer reviews in online marketing. However, only few studies have explored the impact of online customer reviews on sales outcomes in the dynamic process. Prior studies in behavioral economics literature have indicated that people differently value gains and losses and that losses have more emotional impact than an equivalent amount of gains. This study verifies whether prospect theory applies to the relation between online customer reviews and sales outcomes. Relevant data were collected from Amazon.co.jp, and three statistical models were employed to investigate the relation between the two factors. Major findings confirm that negative customer reviews considerably impact online sales than positive reviews. Furthermore, the findings indicate that the marginal effects of positive and negative reviews decrease with the increase in their volume. The results of this study will enable marketers to compare the relative sales effects of different types of customer reviews and improve the effectiveness of customer service management.

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Notes

  1. A stock keeping unit (SKU) is a 6–8 character long alphanumeric code used to identify a product and track its inventory. The SKU for each product and seller is a unique number.

  2. F-statistics for the category of portable batteries, earphones, and pump shoes are \(F_{\left( 1,326\right) }=5.78\,\left( p<0.05\right) \), \(F_{\left( 1,365\right) }=3.26\,\left( p<0.10\right) \), and \(F_{\left( 1,1207\right) }=4.73\,\left( p<0.05\right) \).

  3. The ratio of online reviews is \(\left[ 0,R\right) \), where R is an unknown positive number that satisfies \(R<\left| \frac{\beta _{k1}}{2\beta _{k2}}\right| ,\left( k=1,2\right) \) and \(R<100\) simultaneously.

  4. A large value of sales rank represents a small scale of sales volume.

  5. To avoid taking the logarithm of zero, one cent is added to the positive and negative ratios.

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Acknowledgements

The authors wish to thank the editor and two anonymous reviewers for their reviews and constructive suggestions throughout the review process. We also thank Prof. Miyako Mineo for helpful comments on this paper. This work was supported by JSPS KAKENHI Grant Numbers JP15H06747, JP17K18152.

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Authors and Affiliations

  1. Department of Marketing, Faculty of Business Administration, Toyo University, 5-28-20 Hakusan, Bunkyo-ku, Tokyo, 112-8606, Japan

    Zhen Li

  2. Faculty of Business Administration, Toyo University, Tokyo, Japan

    Aoi Shimizu

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  1. Zhen Li
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  2. Aoi Shimizu
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Correspondence to Zhen Li.

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Aoi Shimizu: Graduated in September 25, 2017

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Li, Z., Shimizu, A. Impact of Online Customer Reviews on Sales Outcomes: An Empirical Study Based on Prospect Theory. Rev Socionetwork Strat 12, 135–151 (2018). https://doi.org/10.1007/s12626-018-0022-9

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