 | Prof. Victor LiAssociate Professor Lingnan University |
Dr. Yiwei (Victor) Li is an Associate Professor at the Faculty of Business, Lingnan University. He completed his Ph.D. and master’s degrees in marketing, and a bachelor’s degree in business administration, at The Chinese University of Hong Kong. He has also been a visiting scholar at the Yale School of Management, Yale University, and a postdoctoral scholar at HKU Business School, The University of Hong Kong. Victor is an empirical modeler applying diverse methodologies, including natural experiments, applied econometrics, Bayesian statistics, and machine learning. His research interests span social networks, influencer marketing, crowdfunding, social media marketing, and word-of-mouth. His work has been published in leading journals such as Nature Communications, Journal of Marketing, Journal of Consumer Research, PNAS Nexus, Journal of Economic Behavior and Organization, Research Policy, Journal of the Academy of Marketing Science, Annals of Applied Statistics, and Harvard Business Review.
More Ratings or Higher Ratings:
Does Management Response to Customer Reviews Really Drive Sales?
Abstract:
With the growing significance of online WOM in various facets of business, it has become commonplace for firms to implement management response (MR) to intentionally influence customer WOM. While much of the current literature has focused on understanding how MR affects subsequent WOM, very few studies have explicitly examined the sales impact of MR. To accurately evaluate the effectiveness of MR in driving consumer WOM and, ultimately, sales, we develop an innovative hazard difference-in-differences (hazard DID) modeling approach in the ratings model, which is further integrated into a sales model with control functions to correct for potential endogeneity in price and MR. Analyzing the review and response data for 168 San Diego hotels on both Tripadvisor and Expedia, along with their corresponding daily revenue data, our results suggest that MR impacts sales not only directly but also, to a greater extent, indirectly by influencing future ratings. Importantly, we reveal a unique tension in firms’ MR practices: efforts to improve rating valence often come at the cost of reduced rating volume, which ultimately decreases sales. Therefore, firms are advised to adopt a balanced approach: rather than solely aiming for high rating valence, they should also strive to increase WOM volume to enhance sales performance. We drive this point home by being the first to suggest that firms need not worry about responding to positive reviews (MRP), even if it could potentially lower rating valence. Instead, they should leverage MRP to expand their WOM base, as the additional sales from increased WOM volume will outweigh the potential sales decrease due to reduced valence. Lastly, we propose the disclosure of quality change (in MR) as a potential cue to address the arised tension, enabling firms to achieve more engagement and higher ratings simultaneously. In summary, these novel insights provide a pathway for firms to effectively leverage MR for wide-ranging customer engagement and significant economic benefits.
Authors and affiliations:
Chunyu Li1, Sheng Liu2, Yiwei Li3, Xiangnan Feng4, and Jianmin Jia5
1Guangdong University of Foreign Studies
2The Hong Kong Polytechnic University
3Lingnan University
4Fudan University
5The Chinese University of Hong Kong, Shenzhen