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Third-Party Product Review and Firm Marketing Strategy

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Author Info

  • Yubo Chen

    ()
    (Eller College of Management, University of Arizona, McClelland Hall 320, P.O. Box 210108, Tucson, Arizona 85721-0108)

  • Jinhong Xie

    ()
    (Warrington College of Business Administration, University of Florida, 212 Bryan Hall, P.O. Box 117155, Gainesville, Florida 32611-7155)

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    Abstract

    Product reviews by third parties are growing in popularity. This paper examines when and how a manufacturing firm should adapt its marketing strategies to such reviews. For example, should a firm receiving an unfavorable review reduce its price or adjust its advertising? Should a winning product of a product review (e.g., “editor’s choice”) boost its advertising expenditure to spread the good news? How should firms’ strategic responses to product reviews differ across different types of product reviews (description vs. recommendation) and different advertising media (the reviewer’s publication vs. other media)? We develop a theory to address these issues and derive firms’ optimal responses to product reviews under different product/market/review/media conditions. We show that firms should choose rather than as a strategic variable in response to product reviews when enough consumers value horizontal product attributes. Surprisingly, we find that using a review-endorsed (i.e., advertisements containing third-party award logos) to broadcast its victory can hurt the winning product of a product review. Also, it is not necessarily wise for the winning products to boost to spread the good news. Data from two industries—printers and running shoes—are used to illustrate some of our findings.

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    File URL: http://dx.doi.org/10.1287/mksc.1040.0089
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    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 24 (2005)
    Issue (Month): 2 (February)
    Pages: 218-240

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    Handle: RePEc:inm:ormksc:v:24:y:2005:i:2:p:218-240

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    Related research

    Keywords: pricing; advertising; third-party infomediaries; product review information; information asymmetry; competitive strategy;

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    Cited by:
    1. Pastine, Ivan & Pastine, Tuvana, 2005. "Coordination in Markets with Consumption Externalities: The Role of Advertising and Product Quality," CEPR Discussion Papers 5152, C.E.P.R. Discussion Papers.
    2. Panos Markopoulos & Kartik Hosanagar, 2013. "A Model of Product Design and Information Disclosure Investments," Working Papers 13-25, NET Institute.
    3. David Godes & Dina Mayzlin & Yubo Chen & Sanjiv Das & Chrysanthos Dellarocas & Bruce Pfeiffer & Barak Libai & Subrata Sen & Mengze Shi & Peeter Verlegh, 2005. "The Firm's Management of Social Interactions," Marketing Letters, Springer, vol. 16(3), pages 415-428, December.
    4. Larceneux, Fabrice & Benoît-Moreau, Florence & Parguel, Béatrice, 2011. "How Sustainability Ratings Might Deter “Greenwashing”: A Closer Look at Ethical Corporate Communication," Economics Papers from University Paris Dauphine 123456789/4687, Paris Dauphine University.
    5. Béatrice Parguel & Florence Benoît-Moreau, 2011. "Much to tell to consumers about CSR, but who should talk or not talk about it?," Post-Print halshs-00636241, HAL.
    6. Chouk, Inès & Perrien, Jean, 2006. "Déterminants de la confiance du consommateur vis-à-vis d’un marchand Internet non familier : une approche par le rôle des tiers," Economics Papers from University Paris Dauphine 123456789/4215, Paris Dauphine University.
    7. Ting Liu & Monic Jiayin Sun, 2007. "Informal Payments in Developing Countries' Public Health Sectors¤," Boston University - Department of Economics - Working Papers Series WP2007-032, Boston University - Department of Economics.
    8. Béatrice Parguel & Florence Benoît-Moreau & Fabrice Larceneux, 2011. "How Sustainability Ratings Might Deter ‘Greenwashing’: A Closer Look at Ethical Corporate Communication," Journal of Business Ethics, Springer, vol. 102(1), pages 15-28, August.

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