Navigating by the Stars: What Do Online Consumer Ratings Reveal About Product Quality?

Online consumer product ratings have become important inputs to consumer and managerial decision-making but little is known about their antecedents. We developed a database covering 1280 products across 121 product categories consisting of consumer ratings and selling prices from Amazon.com, quality scores from Consumer Reports, and brand equity judgments from a proprietary industry survey. We analyzed the actual relationships among these variables and also assessed consumer intuitions about these relationships. The research revealed a mismatch between consumer beliefs and reality. Consumers believe that review ratings reflect purchase value, i.e. quality minus price. In reality, average review ratings are only weakly related to product quality and, controlling for quality, are positively related to price and brand equity. We argue that review ratings are poor indicators of quality because consumers are influenced by extrinsic marketing variables when rating products, and because average review ratings are often based on small and noisy samples. These results suggest that consumers should proceed with much more caution than they do when using review ratings to inform their purchase decisions.