Prescribing Response Strategies to Manage Customer Opinions: A Stochastic Differential Equation Approach
Authors: Yang, Mingwen; Zheng, Zhiqiang (Eric); Mookerjee, Vijay
Journal: Information Systems Research (2019)
<jats:p> Today, the reputation of a firm is profoundly influenced by user opinions expressed in online consumer reviews. Managing these opinions is, therefore, critical for the success of firms. We study the problem of devising an appropriate opinion management strategy (or response strategy) for a firm to respond to online customer reviews. To unravel the underlying mechanics of the problem, we develop a stochastic differential equation model that describes the evolution of review ratings over time for a given response strategy employed by the firm. This model is validated using data on online customer reviews and firm responses from two of the world’s largest online travel agents. When pitted against popular benchmark models, such as autoregressive moving average, generalized autoregressive conditional heteroscedasticity, moving average, exponential smoothing, and naive method, our approach not only achieves comparable (often better) predictive performance, it is also able to incorporate the response strategy into the data-generation process underlying the review ratings. Our approach, therefore, is not just predictive, but, more importantly, one that can be used in a prescripti…