Analyst Forecast Revision and Market Sales Discovery of Online Word of Mouth

Abstract

Online word-of-mouth (WOM) communication in the form of online product reviews, such as those provided by consumers who have previously purchased a product, has become a major information source for consumers and marketers about a product's quality. The literature has thus far used online product reviews to predict a product's sales and future success, and found a positive relationship between the mean review scores and product sales. However, the questions that whether consumers appreciate both quantitative and qualitative aspects of online review and how do they use review information remain unaddressed. Using portfolio methodology, this paper empirically shows that consumers do appreciate the quality value difference between a good review and a bad review, and respond more to a review written by a reviewer with better reputation and higher exposure. Furthermore, it shows that the impact of online review on sales is moderated by the information environment of product. Finally, we find that the impact of reviewer exposure and product coverage on sales is moderated by the innovation level of review signal