Can online reviews reveal a product's true quality? Empirical findings analytical modeling of online word-of-mouth communication

• Main Authors: HU, Nan, Pavlou, Paul, ZHANG, Jennifer
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2006
• Subjects: Bi-Modal Distribution; Online Reviews; Word-of-Mouth; Computer Sciences; E-Commerce; Numerical Analysis and Scientific Computing
• Online Access: https://ink.library.smu.edu.sg/sis_research/332; https://ink.library.smu.edu.sg/context/sis_research/article/1331/viewcontent/1134707.1134743_pv.pdf
• Institution: Singapore Management University

As a digital version of word-of-mouth, online review has become a major information source for consumers and has very important implications for a wide range of management activities. While some researchers focus their studies on the impact of online product review on sales, an important assumption remains unexamined, that is, can online product review reveal the true quality of the product? To test the validity of this key assumption, this paper first empirically tests the underlying distribution of online reviews with data from Amazon. The results show that 53% of the products have a bimodal and non-normal distribution. For these products, the average score does not necessarily reveal the product's true quality and may provide misleading recommendations. Then this paper derives an analytical model to explain when the mean can serve as a valid representation of a product's true quality, and discusses its implication on marketing practices.