Effect of Online Consumer Reviews/Ratings - Research Proposal Example

Running Head: Effect of Online Consumer Reviews/Ratings Effect of Online Consumer Reviews/Ratings [Institute’s Nowadays, consumer ratings and reviews have a major part in the purchasing decisions. Considering this fact, this research will take account of earlier studies in order to evaluate the influence of online consumer reviews/ratings on consumer behaviors as well as on their purchasing decisions. It has been widely observed that a larger chunk of customers is going through the product- related-reviews provided on the internet to decide whether they should purchase that product. This research will examine this effect by applying both secondary as well as primary research methods in order to achieve the objectives. Table of Contents Abstract 2 Introduction 4 Research Statement 5 Rationale and Significance 5 Objectives 6 Literature Review 7 Research Questions 10 Methodology 10 Data Analysis 12 Ethical Considerations 12 References 13 Introduction The influx and rapid growth of the Internet has broadened customers choices for collecting product information by checking other consumers reviews accessible through internet, and has given customers the prospects to present their individual consumption linked suggestion by taking part in online ratings. One of the key alterations in contemporary customer behavior has been the shift from a passive to a dynamic as well as knowledgeable customer. Internet facilitates consumers to talk about their views, and experiences with, products and services with a large number of other customers (Mudambi & Schuff, 2010, p. 189). Online customer reviews and ratings are often come within utilization by potential customers of associated products who would like to get additional information from those who have bought and utilized a similar product. Online reviews are among the most significant sources of information when a customer is taking a purchase decision, and it is a latest trend of marketing. At the present time, more and more individuals are utilizing the internet to purchase products and services. The most significant distinction from conventional shopping is that customers cannot try the products and services. They have to rely on the information offered by the internet. To conquer this restriction, online retailers made it possible for customers to post product reviews online. These reviews are significant for customers who are deciding about their next purchase decisions. More than 50 percent the customers who visit shops check the online reviews as a significant source in making their buying decision (Moe & Trusov, 2011, p. 455). Customers look for information regarding new products for a number of reasons. Online reviews have been identified as among the most prominent resources of information sharing. Earlier than the Internet period customers shared one another’s product linked experiences by means of conventional ‘word of mouth’. The Internets comprehensive nature has developed the means for online ratings and reviews among customers who have never even met. At the moment, the Internet makes it feasible for customers to talk about experiences and views regarding a product by means of ‘electronic word of mouth’ activity. This trend has been altering people’s behavior as a result of the increase in Internet usage. People often take offline decisions based on the information they found online; in addition, they are likely to depend on the views of other customers when taking decisions regarding issues like which cell phone to buy or what stocks to invest in. The online market facilitates consumers to provide suggestions that help as well as influence prospective customers (Ye et al, 2011, p. 635). The online reviews are network user’s data sharing and dialogues on a number of products or services by network media. Online reviews can include any positive or negative remark made by prospective, existing, or previous consumers regarding a product or business, which is then accessible to millions and millions of people through the Internet. Moreover, this phenomenon is assessable because reviews on a product are accessible on the websites and blogs. Research Statement In this way, the concentration of the researcher will be on the following research statement in order to accomplish the aims and objectives of this research: “To analyze the effect of online consumer reviews/ratings on consumer behaviors and their purchase decisions” Rationale and Significance Online customer reviews offer product information as well as suggestions from the customer point of view. Online ratings and reviews have turn out to be more and more significant as customers carry on to buy products online. When customers are not capable of judging a product personally, they mostly depend on this electronic word of mouth transfer to lessen possibilities concerning poor product value and the reliability of the vendor. Online consumer reviews have a significant part in the decision to buy products or services. According to study by Zhu & Zhang (2010), more or less 68 percent of respondents mentioned that they look for and rely heavily on online reviews, blogs and other similar sources of online consumer opinion ahead of buying any new product or service. In comparison to conventional ‘word of mouth’, the online reviews have the aspects of comprehensiveness of distributing information quickly. All the way through the activity of online customer reviews, customers can find high levels of market intelligibility. Besides, they can undertake a more dynamic part in the value chain and influence goods and prices according to individual inclinations. Moreover, they can have their views conveniently available to other Internet users. It has been noted that product information on online debates has better reliability, significance and are more likely to induce understanding with customers as compared to the data available on marketer-made websites. It has also been observed that online reviews’ influence is greater for negative comments in comparison with for positive comments (Li et al, 2011, p. 90). Customers identify fellow customers’ views to be less prejudiced. They as well find fellow consumers’ experiences more convenient to be connected with. In addition, customers seriously think about online opinion when taking purchasing decisions. Objectives Following are the objectives of this research: To evaluate how online platform of customer reviews influence the purchasing behavior. To examine the level to which these reviews modifies the buying decisions To study the psychological as well as social adjustments in customer’s decision making after checking the online reviews To evaluate what part online reviews play with respect to their accessibility, readership, and categorization. Literature Review Consumer ratings/reviews have a major influence on the customers’ buying behavior. Businesses are required to spend not just time but also resources in evaluating the extent of its influence on the purchasing behavior to have a better understanding of their clientele. It will be convenient for the companies to plan their promotional strategies if they recognize what influences the customer attitude or purchasing pattern. It incorporates being aware of the thinking process of the customers concerning how they judge and choose among the easily accessible alternatives. “Firms must also consider how society influences consumer behavior; there are several factors in the environment that have an impact on consumer perceptions, attitudes, and behaviors” (Perner, pp.1-14, 2008). A clear perception in addition to appropriate handling of these aspects is of great help for marketing experts in making customers to support their brands. A growing majority of customers now take the decisions regarding the purchase based on product related reviews available online. “The percentage of customers who follow online reviews have exceeded those that follow newspaper or magazine reviews” (Ahuja, 2009). Due to the same reason, the majority of individuals uses social networking websites and takes active part in comparison-shopping. For the most part, online shoppers take part in social networking by checking and commenting on blogs and customer reviews. As a result, those who mostly do their shopping online are more likely to provide their views than those who opt for conventional shopping. The unique aspect of online ratings is that a lot of information is accessible in comparison with that information obtained from conventional offline sources. Another plus point is that online resources offer both negative as well as positive reviews, which a lot more convenient than acquiring only positive or negative reviews from one source at a time. Various studies have specified that online reviews are presented in different types and they vary with respect to their reach, their extent, as well as their source. “A strategy that marketers use to ensure that positive comments reach the users is that they make some online reviews more easily accessible by placing them close to online product ads” (Chatterjee, pp. 129-133, 2001). As a result, reviews given at online stores are easily searchable and have huge influence on buying pattern. “Online consumer reviews/ratings or word of mouth has an impact on hybrid decision processes or recommendation-based heuristics in which the buyer seek out others’ experiences to lessen the uncertainty in decision making” (Olshavsky and Granbois, pp. 94, 1979). In addition, “the impact that a negative review has on the purchase is far more influential than a positive one” (Brown and Reingen, pp. 350-362, 1987; Weinberger, Allen and Dillon, pp. 398-404, 1980). In recent times, it has been widely observed that companies have to face the problem by the huge amount of easily accessible of information - both negative as well as positive - to their target market. This sort of information is traced to environmental factors, governmental bodies, customers, and, in some cases, even rival companies. Negative reviews have a more powerful influence as they put the question mark on the quality of the product, and also raise the doubt as well as uncertainty in customers’ mind and hence, hold him or her from making the purchase. During the year 2007, a study, carried out by “comScore and the Kelsey Group, examined the impact of online consumer reviews on the prices that consumers would pay for the products” (comScore & The Kelsey, 2007). It incorporated more or less two thousand internet users in US and showed that consumers would give approximately twenty percent of additional charges for those products that have the maximum positive ratings and reviews in comparison to what they pay for the similar product having a lower rating. In accordance with the study, the online customer ratings have a huge influence on offline buying decisions. The study also indicated that every fourth internet user follows online reviews for hotels and lodges, eateries, legal services, and home services, before coming to a decision to make a purchase or not (comScore & The Kelsey, 2007). In the year 2007, a study carried out by Deloitte & Touche USA LLP (Deloitte & Touche, 2007), revealed that more or less 82 percent of the customers who check online ratings and reviews before deciding to make the purchase or not are under direct influence of those ratings. It should also be taken into account that the number of young people is comparatively higher for checking and following online reviews; however, individuals from every age bracket are relying on online consumer reviews. Moreover, the influence of these customer reviews is not just confined to the online users, around 70 percent of users who check these ratings and reviews share them with their immediate circle of family and friends (Deloitte & Touche, 2007). These studies indicated that online reviews are gaining more and more influence on purchasing decisions of the customers. Customers look for advice to get with sufficient information to ahead of finalizing their decision to buy. With easily accessible internet, individuals are capable of networking conveniently with each other, which have given rise to better information richness as well as sharing. People provide opinions, recommend, and advice a number of products by means of online blogs, reviews and ratings. Companies are aware of how this rapidly growing influence of online customer reviews affecting their sales and as a result, they are taking many steps to provide the customers with positive as well as accurate information with the aim of facilitating them in deciding in favor of the company’s products. Research Questions Based on the abovementioned literature review and identified research statement, the proposed research will be able to answer the following research questions: What is the extent of awareness regarding online reviews among potential customers? What is level of influence of online reviews and ratings on buying patterns of customers? What are the factors that motivate customers to check online reviews before arriving at a buying decision Methodology Even though identification of research statement has an important part in forming the basis for the research, nonetheless, it has been a known fact that methodology is among the very important factors that ease the process of a research in fulfilling the identified aims and objectives. The research proposal will now incorporate depiction of the chosen methodology that will let the researcher to gather information on the influence of online ratings as well as reviews on purchasing pattern and relevant decision of the customers. Research has showed that a small number of professionals have tried to identify this area under discussion, and therefore, the researcher will go through such researches’ observations to gain a critical point of view for the proposed study. To achieve the same, secondary research methodology will be selected as basis of the proposed research that will take account of assessment and analysis of obtainable data on the known subject in the shape of books, articles in relevant journals and periodicals. Books and journals are taken as the most precise as well as reliable sources of data gathering that will let the researcher to get accurate information associated with the study. In addition, the researcher will also try to include the periodicals that will provide ratings as well as reviews on different products and serviced. Apart from books, articles in relevant journals and periodicals, internet will also be used as one of the key means of secondary data collection. Besides websites, a number of businesses now have online presence and hence, online availability of official reports, data and other publications on the website of these companies saved time of the research. Nonetheless, it will be of extreme importance to recognize and choose genuine websites because of presence of inaccurate information. Apart from secondary research methodology, the researcher will apply primary research method, which is a competent technique of authenticating obtained data throughout the secondary research stage. Next, the researcher will choose participants on random basis, and will conduct surveys by using questionnaire. The questions included in the questionnaire are: How many times do you shop during a month? How often do you use internet to look for reviews regarding products and services? Before buying something, do you go through the ratings and reviews of that particular product and / or service? To what extent, online rating and review have an effect on your decision to make a purchase. At last, primary methodology will help the researcher in gathering data concerning the influence of online customer reviews/ratings that will be the major plus point of the primary research methodology. To achieve this, the research will adopt a reasonable approach by applying both primary and secondary research methodologies. Data Analysis The control of excellence, quantity and rating in reviews on customers’ purchase decision will be assessed in this research. Logistic regression will be utilized to analyze the data and find out what effect these different aspects of reviews have. This section will analyze the three key points: affirmative reviews has got a positive effect on buying patter, buying intention increases if the number of reviews for a particular product are high, and a raise in ratings increases the purchase intention. With respect to the quality of the reviews, the influence of three aspects will be analyzed, the existence of objective as well as subjective remarks, specifications of the discussed product, and appropriateness of the reviews. Both the existence of information on product specs as well as appropriateness of the reviews has a positive influence on buying pattern. The presence of objective and subjective remarks showed a positive influence too; however, this cannot be confirmed statistically. Ethical Considerations Participants will not be compelled or forced to be a part of this research. Participation will be voluntary and participants will be given the choice to leave the research whenever they would like to. The particular standards for selecting the participants will not demonstrate discrimination against anyone based on faith, family status, cultural or societal basis, and disability or any other health related condition. The research will not cause any sort physical or emotional threats to any of the participants. All of gathered information will be handled in strict confidential, and anonymity of participants plus of educational society(s) will be certain. No recognizing information is will be revealed except without the earlier written endorsement from the participant. Participants will be told about the kind of the study as well as its objective by providing them with an ‘Information Sheet’, so they will be capable of making a knowledgeable in addition to well-informed decision about taking part in the study. References Ahuja. 2009. “Online Buyers scouring for deals”. Report Business. Retrieved on December 02, 2010: www.reportonbusiness.com Brown and Reingen. 1987. “Social ties and word-of-mouth referral behavior.” Journal of Consumer Research. Volume 14, pp. 350-362. Chatterjee, Patrali. 2001. “Online reviews: Do consumers use them?” Advances in Consumer Research. 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