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The Impact of Online Customer Reviews on Consumer Decision Making

1. Introduction to Online Customer Reviews

To address this need, this study examines the posting of travel product reviews on TripAdvisor. Its purpose is to determine whether customer reviews lead travelers to rate a hotel higher or lower and also to indicate that it is definitely the best and/or worst hotel. In addition, the preconditions that enable customer reviews to have a greater or lesser impact on the scores must be studied. Since online customer reviews have been found to influence attitudes, behavioral intentions, and consumer decisions, and a company’s reputation, analyses of customer review impacts are consistent with our belief that it is important to shed some light on the nature of variations in the impacts of this customer-to-customer communications. The results should be revealing for company managers and online review-system designers alike.

Today, electronic word-of-mouth is perceived to be highly influential for consumers, and there is no shortage of sites on which reviews related to products and services are posted. Most people now use electronic word-of-mouth to aid their consumer decisions, companies are working to improve it, and social network sites are increasingly integrating it as a feature. It cannot be denied that the voice of the crowd on the Internet impacts consumer judgments and consumer decisions, pointing to the importance of this research topic. While there is quite a bit of research that investigates the influence of online customer reviews from sources like Amazon and guides consumers’ decisions, quite little of this research focuses on reviews of travel products on TripAdvisor.

2. Factors Influencing Consumer Trust in Online Reviews

Online reviews are partially useful when the product is not experienced by the reading consumer. If the consumer has not used the product, he or she depends on reviews and on the reliability of the reviewer. The experience rating and the trust in a single reviewer could have an effect on this matter. The intrinsic characteristics of the narrative and of the information provided in the message modify the attitude of the consumer towards the message, and this is not necessarily linked to the usefulness of the information given (Diakonian et al., 2007).

Hernandez and Mazzon (2007) concluded that normally, consumers don’t trust the reviews made by other consumers on the Internet. Trust is a sociological issue that has been given a personal definition by many authors (Möller and Vorbach, 2000) and it could be defined as the quality of a relationship that is based on the expectations of the involved parties. One of the most important factors defining e-commerce trust is honesty. In an electronic market, the customer does not have the real possibility to verify the real commitment of an electronic seller. Also, consumer distrust could be more frequent in places or portals containing millions of offers, since in such situations, a high probability of substitute products exists. Consequently, consumers’ fears of suffering displeasures and when this happens, the continued playing downs of both costs and opportunity costs should be less important. The good e-trader must select the surest channels and, in any case, must secure or preserve the line of confidence and its reliability.

3. The Role of Online Reviews in Consumer Decision Making

Second, the quantitative and qualitative information offered by online product reviews reduces the perceived risks associated with a product. Perceived risk is an important psychological variable that impacts consumer decision making. It is a function of the product category and various dimensions of the review process, in terms of what can occur to the consumer as a result of purchasing a product (e.g., financial risk) and the vendor when a performance does not measure up to expectations. Online reviews help reduce six types of risk: potential product benefits, potential financial loss, potential quality of benefits, potential encounter, potential physical safety, and potential psychological risks. In addition, country of origin, brand name, store, and price have been identified as potential perceptible risk reducers.

Online reviews are expected to be important marketing tools for generating e-commerce revenue. The CNET report noted that about 64.5 million technology products are purchased in a four-month period, and the potential sale increase from reading reviews is estimated to be US$2 billion to U.S. online retailers. Online reviews are meant to give decision support, influence support, and increase social presence, which encourage online shoppers to buy information products. Online reviews have the ability to help consumers gather decision-relevant information. The qualitative information provided by the reviews is expected to reduce some degree of uncertainty and control associated with a product, which allows consumers to perceive a more credible and credible consumption choice. Faxing and Berhardt also suggested that opinion superiority information will promote controlled consumption.

4. Challenges and Limitations of Online Customer Reviews

Online customer review websites enable users to share their opinions and experiences of various goods and services. This kind of mass knowledge is regarded as wisdom, differing from individual expert knowledge. It is essentially based on large numbers of lay people connecting with referred professionals for assistance. While scholars recognize the concept of online customer reviews, few researches have focused on the product sales and customer purchase behavior. The converted factor is knowledge shared by easily connecting consumer information and expert opinion. Certainly, it is the volume of customer reviews that encouraged stores and shoppers. Instead of a product that does not have any actual sales history, a product with a single rating would generate some reference for purchase. Even if a product is not rated by numerous customers, unhelpful reviews can also bring about shopping decisions. The trustworthiness of the information plays a more important role than volume.

4.1. Transform from Volume-Based Wisdom to Design-Based Wisdom

As online customer review is an emerging research field, numerous issues remain to be solved. Both theoretical and empirical questions exist. Limitations of online customer reviews, also regarded as challenges, are depicted in this section.

4. Challenges and Limitations of Online Customer Reviews

Online customer product ratings and reviews are recognized as potential resources for increasing sales performance. They not only directly affect the product sales and consumer perception, but also serve as sources of information for governmental regulation, which affects final consumer welfare. This study focuses on identifying the typological structure of online customer product ratings and reviews, and tests the impact of these different aspects of customer reviews on consumer purchase behavior. An aggregated framework incorporating measurement, structures, and impacts of customer reviews is proposed to understand how consumer purchase decision making is influenced by the various product features and service aspects of online customer reviews. The revealed hindrances of the development of customer reviews are analyzed. In addition to the various influencing factors, further research directions are identified.


Xiaojing Fan

5. Strategies for Businesses to Leverage Online Customer Reviews

Users say they trust reviews on commercial sites, such as TripAdvisor or Amazon, more than they trust those on review websites that simply aggregate reviews from many different sites. This is because, on average, the business with an incentive can adjust customer reviews more on third-party sites than on their own. Brand management or policy is the goal of a commercial site to promote more trust in the comments presented on their pages. Informational signals, such as the number of positive or neutral posts or the scores of the helpfulness of review, are linked to the absence of a recent service. E-commerce storefronts can indicate the control of information through helpfulness ratings. Social impact says that customer reviews on commercial websites in which the platform takes actions to erase fake testimonials are considered to be the most useful.

Encouraging feedback from customers helps businesses to discover customers’ preferences. Even bad reviews can provide valuable suggestions on how to improve business operations or what tactics to adopt. In some cases, a bad review may be seen as more credible by customers. Policymakers, industry stakeholders, and businesses all understand the value of online customer reviews and often make great efforts to encourage clients to say something nice about goods and services. Net-shoppers pay a price for the quality of reviews, and they are interested in reliable comments. If the business did not provide enough consumer reviews on the website itself, consumers may visit review aggregator sites to check reviews belonging to the same category before making a decision. Therefore, a worthy long-term business strategy is to provide both forums on your website and ratings.

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