IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v24y2005i2p218-240.html
   My bibliography  Save this article

Third-Party Product Review and Firm Marketing Strategy

Author

Listed:
  • 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)

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.

Suggested Citation

  • Yubo Chen & Jinhong Xie, 2005. "Third-Party Product Review and Firm Marketing Strategy," Marketing Science, INFORMS, vol. 24(2), pages 218-240, February.
    • Handle: RePEc:inm:ormksc:v:24:y:2005:i:2:p:218-240
    DOI: 10.1287/mksc.1040.0089
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.1040.0089
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.1040.0089?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hao Zhao, 2000. "Raising Awareness and Signaling Quality to Uninformed Consumers: A Price-Advertising Model," Marketing Science, INFORMS, vol. 19(4), pages 390-396, January.
    2. Michael Ellman & Colin Lawson & Neil Fodor & Sylvia Woodby & R. J. Crampton & Daniel Nelson & Eugene Huskey & Peter Potichnyj & Hugh Phillips & Ragnar Björk & John Basil & Peter Kenez & Maureen Perrie, 1989. "Reviews," Europe-Asia Studies, Taylor & Francis Journals, vol. 41(3), pages 487-502.
    3. J. Miguel Villas-Boas, 2004. "Communication Strategies and Product Line Design," Marketing Science, INFORMS, vol. 23(3), pages 304-316, January.
    4. Yong Liu & Daniel S. Putler & Charles B. Weinberg, 2004. "Is Having More Channels Really Better? A Model of Competition Among Commercial Television Broadcasters," Marketing Science, INFORMS, vol. 23(1), pages 120-133, July.
    5. Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
    6. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    7. Birger Wernerfelt, 1994. "On the Function of Sales Assistance," Marketing Science, INFORMS, vol. 13(1), pages 68-82.
    8. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    9. David Godes & Dina Mayzlin, 2004. "Using Online Conversations to Study Word-of-Mouth Communication," Marketing Science, INFORMS, vol. 23(4), pages 545-560, June.
    10. Anderson, Simon P & De Palma, Andre, 1992. "The Logit as a Model of Product Differentiation," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 51-67, January.
    11. Archibald, Robert B & Haulman, Clyde A & Moody, Carlisle E, Jr, 1983. "Quality, Price, Advertising, and Published Quality Ratings," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 9(4), pages 347-356, March.
    12. Ganesh Iyer & David Soberman, 2000. "Markets for Product Modification Information," Marketing Science, INFORMS, vol. 19(3), pages 203-225, February.
    13. Alex Reid & Paul Gregory & Michael Bleaney & David Scrivener & Vladimir Wozniuk & Daniel Park & John Dewdney & Mason Soule & J. N. Westwood & Marie Mendras & Paul Dukes & Hiroaki Kuromiya & Peter Kene, 1989. "Reviews," Europe-Asia Studies, Taylor & Francis Journals, vol. 41(4), pages 654-676.
    14. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
    15. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
    16. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    17. Chaudhri, Vivek, 1998. "Pricing and efficiency of a circulation industry: The case of newspapers," Information Economics and Policy, Elsevier, vol. 10(1), pages 59-76, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liang Guo & Ying Zhao, 2009. "Voluntary Quality Disclosure and Market Interaction," Marketing Science, INFORMS, vol. 28(3), pages 488-501, 05-06.
    2. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    3. Dina Mayzlin & Jiwoong Shin, 2011. "Uninformative Advertising as an Invitation to Search," Marketing Science, INFORMS, vol. 30(4), pages 666-685, July.
    4. Moraga-Gonzalez, Jose Luis, 2000. "Quality uncertainty and informative advertising," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 615-640, May.
    5. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    6. Dmitri Kuksov & Yuanfang Lin, 2010. "Information Provision in a Vertically Differentiated Competitive Marketplace," Marketing Science, INFORMS, vol. 29(1), pages 122-138, 01-02.
    7. Simon P. Anderson & Régis Renault, 2013. "The Advertising Mix for a Search Good," Management Science, INFORMS, vol. 59(1), pages 69-83, April.
    8. Laura J. Kornish & Qiuping Li, 2010. "Optimal Referral Bonuses with Asymmetric Information: Firm-Offered and Interpersonal Incentives," Marketing Science, INFORMS, vol. 29(1), pages 108-121, 01-02.
    9. Tingting Nian & Arun Sundararajan, 2022. "Social Media Marketing, Quality Signaling, and the Goldilocks Principle," Information Systems Research, INFORMS, vol. 33(2), pages 540-556, June.
    10. Régis Chenavaz & Sajjad M. Jasimuddin, 2017. "An analytical model of the relationship between product quality and advertising," Post-Print hal-01685892, HAL.
    11. repec:dau:papers:123456789/12407 is not listed on IDEAS
    12. Dmitri Kuksov & Chenxi Liao, 2019. "Opinion Leaders and Product Variety," Marketing Science, INFORMS, vol. 38(5), pages 812-834, September.
    13. Thomas A. Weber & Zhiqiang (Eric) Zheng, 2007. "A Model of Search Intermediaries and Paid Referrals," Information Systems Research, INFORMS, vol. 18(4), pages 414-436, December.
    14. David Soberman, 2002. "Informative Advertising: An Alternate Viewpoint and Implications," Review of Marketing Science Working Papers 1-3-1009, Berkeley Electronic Press.
    15. Xujin Pu & Huanzhen Zhang, 2016. "Voluntary Certification of Agricultural Products in Competitive Markets: The Consideration of Boundedly Rational Consumers," Sustainability, MDPI, vol. 8(9), pages 1-13, September.
    16. Marco Costanigro & Yuko Onozaka, 2020. "A Belief‐Preference Model of Choice for Experience and Credence Goods," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(1), pages 70-95, February.
    17. Charity, Nabwire Ephamia Juma, 2016. "Economic Analysis Of Consumers’ Awareness And Willingness To Pay For Geographical Indicators And Other Quality Attributes Of Honey In Kenya," Research Theses 265574, Collaborative Masters Program in Agricultural and Applied Economics.
    18. Laurent Cavenaile & Pau Roldan-Blanco, 2021. "Advertising, Innovation, and Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 251-303, July.
    19. Yi Qian & Qiang Gong & Yuxin Chen, 2015. "Untangling Searchable and Experiential Quality Responses to Counterfeits," Marketing Science, INFORMS, vol. 34(4), pages 522-538, July.
    20. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    21. Belleflamme, Paul & Peitz, Martin, 2014. "Asymmetric information and overinvestment in quality," European Economic Review, Elsevier, vol. 66(C), pages 127-143.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:24:y:2005:i:2:p:218-240. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.