Can Lower Ratings Drive Higher Demand?

Can Lower Ratings Drive Higher Demand? Exploring the Role of Online Reviews in Different Product Life Cycle Stages

From a perspective of Product Life Cycle (PLC), we argue that the economic impact of online product reviews is not always positive. By linking movie reviews to two movie life cycle stages, in-theater versus online release, we observe the role change of review valence in influencing the movie consumption. More specifically, for movies with high user ratings, the review valence has a stronger positive influence on the demand in the online release stage than on the demand in the in-theater stage. For lower rating movies, however, the effect is reversed, i.e. a lower review valence induces a higher demand in the online release stage than in the in-theater stage. We find interesting differences in these effects depending on the movie’s “country of origin” (Hollywood vs. domestic Chinese movies). We provide explanation using the theory of diffusion of innovation, consumer waiting behavior, and the Means-End model. Additionally, using a time threshold approach, we find different patterns for the magnitude change of the review impact in different movie PLC stages. To address potential endogeneity issue, we use a system of equations approach.

Poster Number: 2