Online Reviews as a Driver of New Product Sales
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TL;DR
Analyses of panel data of 332 new products from Amazon.com indicate that negative reviews affect new product sales more than positive reviews, but also in a positive way, suggesting a significant cascade effect.
Abstract
This study reports several surprising findings and new insights about the effect of online product reviews on the sales of new products. Analyses of panel data of 332 new products from Amazon.com indicate that negative reviews affect new product sales more than positive reviews, but also in a positive way. Different from the proposition of the diffusion model, e-WOM has a strong effect on new product sales early on and such effect decreases over time. Moreover, the volume of page views by followers is far more influential than that of reviews by opinion leaders, especially in the early period of product lifecycle, suggesting a significant cascade effect. The effects of page views and valence of online reviews are stronger than that of volume, more so for search products than for experience products. Thus, marketers need to consider the distinctive influences of various aspects of online reviews when launching new products and devising e-marketing strategies.