Determinants of Online Word-of-Mouth: Evidence from Durable Goods Market

Abstract

Online reviews became one of the most effective tools that influence consumer behavior and level of sales. In this paper we consider determinants of online review rating. The study is based on more than three thousand online reviews from Russian consumers of durable goods (electronics and home appliances). It was found that there is a significant difference in the level of influence between new and old reviews. Moreover, the higher the total numbers of reviews available, the higher the number of reviews taken into account by a particular consumer. Another finding is that both average online rank and price of a product are positively correlated with variance of reviews on that product. Based on the differences in the effectiveness of information transmission about quality of products, products were divided into two categories: "experience" products and "search" products. At the last stage, we provide an econometric model that allows to explain not only dynamic but also the direction of consumers’ rank of a product.