JM Insights in the Classroom
There is wisdom in the crowd and among friends, but source matters: On average, crowds exert a stronger herding influence on the average rater. Social influence varies by expertise/experience: Experienced raters discount the crowd but continue to herd toward their friends. Diverging opinions between reference groups create herding and differentiation: When the two reference groups disagree with each other, experienced raters coalesce more on friends’ rating than with the crowd. Brands/Firms can influence online opinion through their product portfolio: Firm’s product portfolio strategy act as a proxy for firm competence and can significantly attenuate herding both from crowd (out-group) and friend (in-group) networks.
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Sunder, Sarang, Kihyun Hannah Kim, and Eric Yorkston (2019), “What Drives Herding Behavior in Online Ratings? The Role of Rater Experience, Product Portfolio, and Diverging Opinions,” Journal of Marketing, 83(6), 93-112.
Consumers’ post-purchase evaluations have received much attention due to the strong link between ratings and sales. However, less is known about how herding effects from reference groups (i.e. crowd and friends) unfold in online ratings. This research examines the role of divergent opinions, rater experience, and firm product portfolio in attenuating/amplifying herding influences in online rating environments. Applying robust econometric techniques on data from a community of board gamers, we find that herding effects are significant and recommend a more nuanced view of herding. Highlighting the role of rater experience, the positive influence of the crowd is weakened and friend influences are amplified as the rater gains experience. Further, divergent opinions between reference groups creates herding and differentiation depending on the reference group and the rater’s experience level. Finally, firms can influence online opinion through their product portfolio in profound ways. A broad and deep product portfolio not only leads to favorable quality inferences; it attenuates social influence. Implications for online reputation management, rating system design, and firm product strategy are discussed.
Special thanks to Kelley Gullo and Holly Howe, Ph.D. candidates at Duke University, for their support in working with authors on submissions to this program.
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