Design of Consumer Review Systems and Product Pricing
Authors: Jiang, Yabing; Guo, Hong
Journal: Information Systems Research (2015)
<jats:p> Consumer review systems have become an important marketing communication tool through which consumers share and learn product information. Although there is abundant evidence that consumer reviews have a significant impact on product sales, the design of consumer review systems and its impact on review outcomes and product sales have not yet been well examined. This paper analyzes firms’ review system design and product pricing strategies. We formally model two review system design decisions—what rating scale cardinality to use and whether to offer granular review reports. We show that firms’ optimal design and pricing strategies critically depend on contextual characteristics such as product valuation, product mainstream level, and consumer misfit cost. Our results suggest that it is beneficial to host a review system only when the product valuation is higher than a threshold. Furthermore, firms should choose low rating scale cardinality for niche products and high rating scale cardinality for mainstream products. When consumers’ misfit cost is relatively high, including granular reports in the review system enables firms to attract the favorable consumer segment. Differ…