Deriving the Pricing Power of Product Features by Mining Consumer Reviews
Increasingly, user-generated product reviews serve as a valuable source of information for customers making product choices online. The existing literature typically incorporates the impact of product reviews on sales based on numeric variables representing the valence and volume of reviews. In this paper, we posit that the information embedded in product reviews cannot be captured by a single scalar value. Rather, we argue that product reviews are multifaceted, and hence the textual content of product reviews is an important determinant of consumers' choices, over and above the valence and volume of reviews. To demonstrate this, we use text mining to incorporate review text in a consumer choice model by decomposing textual reviews into segments describing different product features. We estimate our model based on a unique data set from Amazon containing sales data and consumer review data for two different groups of products (digital cameras and camcorders) over a 15-month period. We alleviate the problems of data sparsity and of omitted variables by providing two experimental techniques: clustering rare textual opinions based on pointwise mutual information and using externally imposed review semantics. This paper demonstrates how textual data can be used to learn consumers' relative preferences for different product features and also how text can be used for predictive modeling of future changes in sales. This paper was accepted by Ramayya Krishnan, information systems.
Volume (Year): 57 (2011)
Issue (Month): 8 (August)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anindya Ghose & Arun Sundararajan, 2006. "Evaluating Pricing Strategy Using e-Commerce Data: Evidence and Estimation Challenges," Papers math/0609170, arXiv.org.
- Olivier Toubia & Duncan I. Simester & John R. Hauser & Ely Dahan, 2003.
"Fast Polyhedral Adaptive Conjoint Estimation,"
INFORMS, vol. 22(3), pages 273-303.
- Toubia, Olivier & Simester, Duncan & Hauser, John & Dahan, Ely, 2003. "Fast Polyhedral Adaptive Conjoint Estimation," Working papers 4171-01, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Toubia, Olivier & Simester, Duncan & Hauser, John & Dahan, Ely, 2003. "Fast Polyhedral Adaptive Conjoint Estimation," Working papers 4279-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- David Godes & Dina Mayzlin, 2004. "Using Online Conversations to Study Word-of-Mouth Communication," Marketing Science, INFORMS, vol. 23(4), pages 545-560, June.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Green, Paul E & Srinivasan, V, 1978. " Conjoint Analysis in Consumer Research: Issues and Outlook," Journal of Consumer Research, Oxford University Press, vol. 5(2), pages 103-23, Se.
- Sanjiv R. Das & Mike Y. Chen, 2007. "Yahoo! for Amazon: Sentiment Extraction from Small Talk on the Web," Management Science, INFORMS, vol. 53(9), pages 1375-1388, September.
- Timothy J. Gilbride & Peter J. Lenk & Jeff D. Brazell, 2008. "Market Share Constraints and the Loss Function in Choice-Based Conjoint Analysis," Marketing Science, INFORMS, vol. 27(6), pages 995-1011, 11-12.
- Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
- Ariel Pakes, 2002.
"A Reconsideration of Hedonic Price Indices with an Application to PC's,"
NBER Working Papers
8715, National Bureau of Economic Research, Inc.
- Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
- Judith Chevalier & Austan Goolsbee, 2003. "Measuring Prices and Price Competition Online: Amazon.com and BarnesandNoble.com," Quantitative Marketing and Economics, Springer, vol. 1(2), pages 203-222, June.
- Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
- John H. Roberts & Glen L. Urban, 1988. "Modeling Multiattribute Utility, Risk, and Belief Dynamics for New Consumer Durable Brand Choice," Management Science, INFORMS, vol. 34(2), pages 167-185, February.
- Brynjolfsson, Erik & Smith, Michael D. & Yu, (Jeffrey) Hu, 2003.
"Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers,"
4305-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Erik Brynjolfsson & Yu (Jeffrey) Hu & Michael D. Smith, 2003. "Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers," Management Science, INFORMS, vol. 49(11), pages 1580-1596, November.
- Jehoshua Eliashberg & Sam K. Hui & Z. John Zhang, 2007. "From Story Line to Box Office: A New Approach for Green-Lighting Movie Scripts," Management Science, INFORMS, vol. 53(6), pages 881-893, June.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Dan Horsky & Sanjog Misra & Paul Nelson, 2006. "Observed and Unobserved Preference Heterogeneity in Brand-Choice Models," Marketing Science, INFORMS, vol. 25(4), pages 322-335, 07-08.
- J. Miguel Villas-Boas & Russell S. Winer, 1999. "Endogeneity in Brand Choice Models," Management Science, INFORMS, vol. 45(10), pages 1324-1338, October.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Yubo Chen & Jinhong Xie, 2008. "Online Consumer Review: Word-of-Mouth as a New Element of Marketing Communication Mix," Management Science, INFORMS, vol. 54(3), pages 477-491, March.
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:57:y:2011:i:8:p:1485-1509. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.