Thesis Defense
How to deal with negative OCRs
Overcoming the negative effect of negative Online Customer Reviews
with the use of price promotions.
Outline of the presentation
› Introduction
3
› Problem statement
4
› Theoretical Framework
5
› Mechanism
5
› Conceptual model & hypotheses
6
› Methodology
7
› Results
9
› Aggregate logit model
9
› Latent class model
10
› Implications
11
› Limitations and future research
12
Introduction
› Among the highest short-term elasticities (You, Vadakkepatt & Joshi 2015). › Negativity bias: negative OCRs weigh heavier than positive OCRs (You,
Vadakkepatt & Joshi, 2015; Lee, Park & Han, 2008). › Dealing with negative OCRs.
Problem statement
› Outbalancing the negative effect of negative OCRs, using price promotions:
› Which level of price promotion is needed to overcome the negative effect of negative OCRs?
Theoretical Framework - Mechanism
› Mechanism: the loss aversion principle: Losses loom larger than gains (Kahneman & Tversky, 1979)
› Perceived losses versus perceived gains (Sandes & Urban, 2013).
Theoretical framework – conceptual model and
hypotheses
› H1: The more negative an OCR, the more negative the effect on purchase intentions.
› H2a: The effect of a negative OCR on purchase intentions becomes more negative (positive) when consumers are prevention (promotion) focused.
› H2b: The relative importance of OCRs increases (decreases) when consumers are prevention (promotion) focused.
› H3a: The effect of a price promotion on purchase intentions becomes less (more) positive when consumers are
prevention (promotion) focused.
› H3b: The relative importance of price promotions increases (decreases) when consumers are promotion (prevention) focused.
› H4: The higher a price promotion becomes, the more positive the effect on purchase intentions is.
Methodology
› Procedure: Choice-based conjoint
analysis, utilities formed by consumer
preferences/intentions.
› Increase realism: filler attributes,
no-choice option, images.
› RFQ. (Higgins et al., 2001).
› Sample: 183 respondents, 43,7%
male, 56,3% female, average age was
28.
Results aggregate logit model
› Main findings:
› The more negative an OCR is, the more negative the effect on purchase intentions becomes ✔
› The higher a price promotion becomes, the more positive the effect on purchase intentions becomes ✔
› Aggregate model:
› Slightly negative and negative OCRs can be outbalanced with a price promotion ✔ › Promotion focus moderates the relative importance of both price promotions and
Results – Latent class model
› Segment 1: (n=138)
› All levels of negative OCRs can be outbalanced with a price promotion ✔
› For promotion focused consumers, a 25% price promotion is sufficient to outbalance a very negative OCR ✔
› Promotion focus moderates the relative importance of both price promotions and negative OCRs ✔
› Price promotions more important. › Segment 2: (n=45)
› No price promotion needed to outbalance the negative effect of a slightly negative OCR ✔
› 10% price promotion sufficient to outbalance a negative OCR ✔
› When prevention focused: a 10% price promotion is needed for a slightly negative OCR ✔
› Promotion focus moderates the relative importance of both price promotions and negative OCRs ✔
Implications
› Depending on consumer characteristics, price promotions can (in most cases) be used to outbalance the negativity of a negative OCR.
› The relative importance of both negative OCRs and price promotions are partially dependent on the regulatory focus of consumers.
› Specifically for consumers in segment 1: price promotions could be used to overcome the negativity of negative OCRs
Limitations and future research
› Limitations
› Trade-off reliability – validity
› Intention as a predictor of behaviour?
› Unbalanced design: numbers-of-levels-effect › Only negative OCRs
› Future research › Added none-option
› Experience goods, low-involvement › Positive OCRs
References
› Bijmolt, H. J. van Heerde, Pieters, R.G.M. (2005), “New Empirical Generalizations on the Determinants of Price Elasticity,” Journal of Marketing Research, 42 (May), 141– 56.
› Higgins, E. T. (1997). Beyond pleasure and pain. American psychologist, 52(12), 1280.
› Higgins, E. T., Friedman, R. S., Harlow, R. E., Idson, L. C., Ayduk, O. N., & Taylor, A. (2001). Achievement orientations from subjective histories of success:
Promotion pride versus prevention pride. European Journal of Social Psychology, 31(1), 3-23.
References
› Kahneman, D. (1979). Prospect theory: An analysis of decisions under risk. Econometrica, 47, 278.
› Lee, J., Park, D. H., & Han, I. (2008). The effect of negative online consumer
reviews on product attitude: An information processing view. Electronic commerce research and applications, 7(3), 341-352
› Sandes, F. S., & Urdan, A. T. (2013). Electronic word-of-mouth impacts on
consumer behavior: Exploratory and experimental studies. Journal of International Consumer Marketing, 25(3), 181-197.
› Tellis, Gerard J. (1988), “The Price Elasticity of Selective Demand: A Meta-Analysis of Econometric Models of Sales,” Journal of Marketing Research, 25 (November), 331–41.
› You, Ya, Gautham G. Vadakkepatt, and Amit M. Joshi. "A Meta-Analysis of
