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Article

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

Online reviews have become one of the most effective tools to influence consumer behavior and level of sales. In this paper we consider determinants of online reviews and ratings. The study is based on more than three thousand online reviews from Russian consumers of durable goods (electronics and home appliances). We found 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 about that product. Based on differences in the effectiveness of information transmission about quality, products were divided into two categories: experience goods and search goods. We provide an econometric model that helps explain not only the dynamic but also the direction of consumers’ ranking of a product depending on the number and content of existing reviews.