Understanding Impacts of Online Consumer Reviews on Purchase Intentions

Among Millennials

A Thesis Presented to
The Department of Marketing at
K J Somaiya Institute of Management Studies and Research, Mumbai

In Partial Fulfillment
of the Requirements for the PGDM RM

by

GURPREET SINGH
ROLL NO.-22
MARCH/2019

Under the Supervision of

PROF. DR. JAYA IYER
 Student’s Declaration

I, Gurpreet Singh, declare that the master’s thesis titled “Understanding Impacts of
Online Consumer Reviews on Purchase Intentions among Millennials” submitted by me
in partial fulfillment of the requirements for the award of PGDM-RM at K J Somaiya
Institute of Management Studies and Research, Mumbai, is the record of the work
carried out by me during the period from July, 2018 to March, 2019, under the guidance
of Prof. Dr. Jaya Iyer.
To the best of my knowledge the thesis is a record of authentic work carried out by me
during the said period and has not been submitted to any other University or Institute for
the award of any degree/diploma.
I further declare that the material obtained from other sources have been duly
acknowledged in the thesis.

Signature of the Candidate

Date:
Place:
 Certificate of Faculty Guide

Certified that the work incorporated in the master’s thesis titled, “Understanding Effects
of Online Consumer Reviews on Purchase Intentions among Millennials” submitted by
Gurpreet Singh was carried out under my supervision.

This is his original work and any such materials that have been obtained from other
sources have been duly acknowledged in the thesis.

Signature of the Faculty Guide

Date:
Place:
 Table of Contents

List of Figures

List of Tables

Acknowledgement

Executive Summary

Chapter 1 – Introduction

Chapter 2 - Literature Review

Chapter 3 - Research Methodology

Chapter 4 - Data Analysis

Chapter 5 - Discussion and Summary of Results

Chapter 6 – Conclusion

References
 List of Figures

3.1 Research Model

4. 1) Pie Chart for Age
2) Pie Chart for Gender
3) Pie Chart for Educational Qualification
4) Pie Chart for Awareness of E-Wom
5) Pie Chart for Impact on buying decisions
6) Bar Graphs for All variables
 List of Tables

4.1 Table for ANOVA of Gender Vs Factors

4.2 Table for ANOVA of Age Vs Factors
4.3 Table for Factor Analysis
4.4 Table for Grouping of Factor Analysis
4.5 Table for Component Transformation Matrix
 Acknowledgements

Among the wide panorama of people who helped and motivated me to complete
my project, I am grateful in providing and documenting the project “Understanding
Impacts of Online Consumer Reviews on Purchase Intentions among Millennials”.

I wish to express my deep sense of gratitude to our Director Dr Monica

Khanna for providing me with the facilities to bring this project to fruition.

I acknowledge our HOD, Prof Vandana Khanna, for providing guidance from
time to time.

I am thankful to my guide, Prof. Dr. Jaya Iyer, for giving me valuable inputs for
the development of my project. Her encouragement proved to be a boon in the path of
the projects success.

Gurpreet Singh
 Executive Summary

Web based electronic trade is developing quickly with the expansion of business Web
locales and the expanding acknowledgment of on-line exchanges by buyers. As another
advertising channel, the World Wide Web contrasts from customary retail organize from
various perspectives. Buyers shopping on the web can't contact or smell items, as would
be conceivable in customary retail outlets, so their buy decisions must be founded on the
item data introduced on the Web website. On-line merchants look to defeat this constraint
by allowing shoppers the chance to share item assessments on-line. This buyer made data
is useful in settling on buy choices since it gives circuitous encounters of items.

As opposed to a conventional dealer, an on-line merchant by and large gives customers

two kinds of item data. It can offer merchant made item data by means of its Web website
or other customary correspondence channels, for example, notices, and it can likewise
offer shopper made item data by enabling purchasers to post remarks on its Web
webpage. Customer made data, an on-line shopper survey, is new data displayed from the
point of view of buyers who have bought and utilized the item.

It incorporates their encounters, assessments, and sentiments. The client situated data
gave along these lines is, as a result, another sort of verbal correspondence. As a free item
data asset, on-line audits are expanding in ubiquity and significance.

This Paper presents the positive, negative and quality perspective of reviews which help
consumers take buying decisions. The study is done focusing only on millennials. Using
SPSS One way ANNOVA and Factor analysis various results are found which will help
businesses implement
 Chapter 1
Introduction

Word of mouth has always been one of the main sources to buy products and services and
it is bit of a challenging task for organizations to spread positive word of mouth through
its customers. In a world full of electronic data availability, organizations try to gather
consumer behavior through their data analytics team. Every organization runs to retain
consumers and gain more customers and when E-commerce websites are concerned,
electronic word of mouth (E-wom) plays a major role. Electronic word of mouth is
nothing but online consumer reviews given for products/services after their purchase.
Online consumer reviews provides insights for prospective buyer of same product by
providing relevant information which helps them in taking decisions weather to buy the
product or not. This is something E-commerce websites can't control but it can be
questioned that reviews can be altered. Here comes the flaw in this concept that firms in
order to survive in this competitive market indulge in doing wrong practices of paid
reviews or fake reviews.
Fake reviews tempt to produce more sales because consumers believe it to be true. What
annoys consumers is their lack of understanding between fake and genuine reviews and
they don’t want to end up buying products that are not suitable for them.
Therefore Electronic word of mouth or online consumer reviews plays a very important
role in today’s world and businesses should provide genuine reviews to retain consumers.
 Chapter 2
Literature Review

1. According to a study done on Online consumer reviews impact on sales and price
strategies by Peter De Maeyer from Singapore Management University gives a
broader perspective on firm’s action on sales and pricing strategies due to growing
impact of online consumer reviews. The paper focuses on six dimensions i.e. sales and
related dependent variables, reader characteristics, product, review dimensions,
reviewer characteristics and product category. The focus was substantive rather than
methodological and the study was relatively new and it expanded quickly during past
five years.

2. According to a study done on online reviews-Does it matters? by Wenjing Duan, Bin

Gu and Andrew B. Whinston from University of Texas at Austin examines persuasive
effect and awareness effect of online consumer reviews on movie sales. It talks about
the impact of online reviews on box office collection and results found that there is no
significant relation between rating of online consumer reviews and movies box office
revenues which suggests that there was no persuasive effect of online reviews on
consumer purchase decision. Surprisingly the study shows that there was significant
relation between the volumes of online posting giving rise to awareness effect of
study. The study finds a link towards online user reviews and attributes it to word of
mouth which plays significant role in purchase decisions.

3. Manipulation of Online Reviews

Sometimes firms tend to manipulate the online reviews to increase their sales. It is
very unlikely to find out which review is true and it completely depends on reader’s
discretion and intuition. It is unknown that manipulation of reviews helps in
increasing sales. According to study by Nan Hu, Indranil Bose, Noi Sian Koh and
Ling Liu talks about how consumer reacts to manipulated reviews. They used simple
statistical method to examine writing style of reviewers and effectiveness of
manipulation through ratings, sentiments and readability. The study found that 10.3%
of the products are subject to online reviews manipulation. It talks about how
consumer should be aware of manipulation and should delve deep before making any
purchase decision.
4. According to a study done on “Impact of online consumer reviews on sales: The
moderating role of product and consumer characteristics” by Feng Zu from Marshall
School of Business and Xiaoquan Zhang from Hong Kong University of Science and
Technology focuses on characteristics of product and consumer moderate the influence of
online consumer reviews on product sales. The study finds that there is differential impact
of online consumer reviews across products in the same product category and suggests
firms that there marketing strategies should align with the characteristics of product and
consumer. Online consumer reviews can significantly influence consumer’s purchase
decisions as these reviews are a good proxy for overall word of mouth (WOM), study
suggests.

5. According to a study done on “Information role of Online Product Reviews” by Xinxin Li

from University of Connecticut and Lorin M. Hitt from Wharton School of Business
explains self-selection bias arising from online consumer reviews that impact consumer’s
purchase decision and consumer surplus. It talks about consumers entering early into
market to provide reviews and how it creates a positive word of mouth (WOM) for other
consumers. And it relates to surplus or decrease of consumer surplus. The study is done
taking book reviews on Amazon.in and it suggests that firms can benefit by altering their
strategies for pricing and marketing.

6. With increasing impact of online consumer reviews, many sellers had used
advertisements of online consumer reviews to increase their sales and build trust in
consumers. A study done by Jumin Lee from Kyung Hee Cyber University, Hyung Park
from LG and Ingoo Han from KAIST Business School talks about credibility perspective
and information influence perspective on online consumer reviews. They obtained data
via two way factorial experimental research design and their findings shows that the more
the credibility; the more the purchase intention of consumers. Their study is limited to
shopping malls only and there is lot of potential to explore the scope on e-commerce
platforms.
7. According to a study done on “The impact of electronic word‐of‐mouth: The adoption
of online opinions in online customer communities” by Christy M.K. Cheung,
Matthew K.O. Lee and Neil Rabjohn from University of Hong Kong explains the
extent to which online consumer reviews are accepted and adopted and what are the
factors that encourages adoption. The research model used by them was Dual-Process
theories in which an information adoption model was developed to examine those
factors. A survey form was floated regarding consumer reviews using virtual
platforms to obtain data. This paper is one of the first to develop and empirically test a
theory‐driven information adoption model for opinion seekers in online customer
communities.

8. Selecting brand or company for purchasing products and services after going through
online consumer reviews can change the decision making is what is suggested by
Fahri Karakaya and Nora Ganim Barnes from Charlton College of Business through
their paper on “Impact of online reviews of customer care experience on brand or
company selection”. Structural equation modelling was used to collect data from 320
respondents in the USA. The study found that socially based websites have more
impact than search engines while gathering information and making choice of
selection for brand or company to purchase products or services. Focus was more
towards the customer care experiences rather than product quality as discussed by
consumers on online platforms.
 Chapter 3
Methodology

The aim of this research paper is to study the impact of online reviews on buying behavior.
To gain more knowledge about the topic secondary research has been carried out. After
understanding various aspects related to the topic, a primary questionnaire was developed.
This questionnaire was used for the purpose of primary research. As there was not much of
research paper available on the online reviews impact on purchase decisions, this research has
been carried out in an exploratory manner. The questions are distinctly evaluated.

Secondary Research

Different papers were referred while researching for this thesis. Many of the research papers
were based on topics like Impact of reviews on manipulation on reviews, Quality of reviews,
etc. but very few on the impact of it on purchase intentions. The research work carried out on
millennials. There were hardly any papers with research considering only this age group.
Thus these papers served as references for various factors to be included and considered for
carrying out research on impact of online reviews on consumer buying behavior.

Primary Research

A survey questionnaire was developed for the primary research. It included demographics
questions like age, gender, level of education, household monthly income. Few questions
were then asked to know about consumers ecommerce use like how often they shop online,
why they like to shop online, how many times they check online reviews before purchasing a
product. After that the questions included were to check the positive and negative association
of reviews with consumers and its impact on them.

3.3 Target Audience

The target audience majorly consists of post-graduation students of the college. Also
graduated and working population in age group of 23-38 is a part of the respondents for the
survey.

Total of 97 responses were collected from the above mentioned target audience.

.
 Research Model

The Impact of online reviews on purchase decisions was spread between 20 questions
which were then grouped to to answer one single question i.e. purchase intention of
consumer with respect to demographics of consumers. Below model explains the concept
followed to find out relation among them.

Positive Association, Negative Association and Quality of reviews are factors considered
which is linked to Purchase intentions.

Positive Association Negative Association Quality of Reviews

Purchase Intentions

Fig 3.1
We have to study consumer sentiments based on the below attributes. The antecedents of
Consumer Sentiments are:

1. Positive Association

a. Product Information
Online reviews are meant to provide useful information to consumers
before they make a purchase. E-commerce websites have huge advantage
of showing good reviews so that repeat purchases take place on their
platform. Sometimes E-commerce vendors go for paid reviews and that
annoys consumers. It helps consumers by providing relevant information
such as performance of product after three or four months of purchase

b. Star Rating
Rating takes place automatically when a product is reviewed by consumers
and all ratings clubbed together gives an average rating of product. As
mentioned by Peter in his research that usually 1-Star rating products are
not bought whereas 4-Star products are bought frequently.
2. Negative Association

a. Time Consuming
Online reviews are linked with waste of time activity as mentioned by few
of researchers. They say that a consumer would not spent more than 5 mins
on online consumer reviews before making purchase and 20% of them
won’t even read the reviews for purchase purposes. Even in survey form
15.4% of respondents feel that reading online consumer reviews is a waste
of time.

b. Fake and Paid reviews

Here comes the flaw in this concept that firms in order to survive in this
competitive market indulge in doing wrong practices of paid reviews or
fake reviews. Fake reviews tempt to produce more sales because
consumers believe it to be true. What annoys consumers is their lack of
understanding between fake and genuine reviews and they don’t want to
end up buying products that are not suitable for them.

.
3. Quality Of Reviews

Quality of reviews means benefit arises from reviews. It’s a customer

perspective to view reviews as a quality or not. In our survey form it is
observed that people don’t buy products with 1-Star rating and buy
products with 4 or more Star rating and that depends on quality as well as
quantity of reviews.
 Chapter 4
Data Analysis

ANOVA:
Since we are measuring difference in response variable w.r.t single factor we call this
technique as one way ANOVA or Single Factor ANOVA.
To determine whether there is a significant difference between different attributes with
respect to different genders. (Male/Female)

Ho: The Importance of attributes is same for all gender

H1: There exists a significance difference on attributes for all gender

Ho: µ1= µ2
H1: µ1≠ µ2

Table : 4.1
Test of Homogeneity of Variances

Critical value df1 df2 P value

Useful .123 1 95 .727

Provide information .770 1 95 .383
Accurate decisions. .906 1 95 .344
Easy .003 1 95 .953
Accept Ho : There is no
Waste of time .087 1 95 .769
significant difference in
Value of product .142 1 95 .707 these factors w.r.t. gender
Time consuming .639 1 95 .426 of the audience
Exciting .321 1 95 .572
1 Star rating .222 1 95 .639
Fake Reviews .070 1 95 .791
Negative product attitude .348 1 95 .557
4 Star rating .477 1 95 .491
Paid reviews .094 1 95 .760
Not genuine .473 1 95 .493
Feel annoyed .002 1 95 .963
Feel helpful .365 1 95 .547
Beneficial .042 1 95 .839
Provide reviews .000 1 95 .994
Quality reviews .006 1 95 .938
Rely on reviews .243 1 95 .623
 To determine whether there is a significance difference on importance of attributes with
respect to different age groups. (27-31/23-27/31-34/35-38)

Ho: The Importance of attributes is same for all age group

H1: There exists a significance difference on attributes for all age group

Ho: µ1= µ2= µ3

H1: µ1≠ µ2 ≠ µ
Table 4.2
Test of Homogeneity of Variances

Critical Value df1 df2 P value

Useful 3.182 3 93 .028

Provide information .548 3 93 .651
Accurate decisions. 1.157 3 93 .330
Easy .032 3 93 .992
Waste of time 2.160 3 93 .098
Value of product .705 3 93 .551
Time consuming 2.340 3 93 .078
Exciting 1.189 3 93 Accept Ho – There is no
1 Star rating .859 3 93 .465 significant difference in these
factors w.r.t. age of audiences
Fake Reviews .587 3 93 .625
except for one variable i.e.
Negative product attitude 3.338 3 93 .023 Negative product attitude
4 Star rating 1.841 3 93 .145
Paid reviews .274 3 93 .844
Not genuine 1.987 3 93 .121
Feel annoyed 2.264 3 93 .086
Feel helpful 1.874 3 93 .139
Beneficial 1.607 3 93 .193
Provide reviews .333 3 93 .802
Quality reviews .751 3 93 .524
Rely on reviews .582 3 93 .628
 Factor Analysis:

Table 4.3

Rotated Component Matrixa

Component

1 2 3

Useful .863
Provide information .827
Accurate decisions. .850
Easy .766
Waste of time .236
Value of product .600
Time consuming .696
Exciting .624
1 Star rating .683
Fake Reviews .691
Negative product attitude .607
4 Star rating .667
Paid reviews .719
Not genuine .500
Feel annoyed .583
Feel helpful .609
Beneficial .831
Provide reviews .587
Quality reviews .473
Rely on reviews .450

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.
Grouping:
Table 4.4

Factors Groups
Useful
Provides Information
Accurate Decisions
Easy
1-Star rating Positive Association
Negative Product Attitude
4-Star rating
Not genuine
Feel Helpful
Beneficial
Waste of time
Time Consuming
Fake Reviews
Negative Association
Paid Reviews
Feel Annoyed
Quality of Reviews

Value of product
Exciting
Quality of reviews
Provide Reviews
Rely on Reviews
Table 4.5
Component Transformation Matrix

Component 1 2 3

1 .942 .002 .337

2 -.075 .976 .204
3 -.328 -.217 .919

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser
Normalization.
 Chapter 5
Discussion and Summary of Results

Using statistical analysis, it was found that approximately 76.3% of sample finds online
reviews to be somewhat distracting which in turn affects their purchase behavior. Thus,
we can also see that 76.3% of the respondents were of the opinion that online reviews do
directly influence their purchase decisions. 51% of the respondents find online reviews
useful and beneficial whereas 46% of respondents find online consumer reviews is a time
consuming process.

Also, only 25% of the sample was influenced not to buy a product or service based on the
online reviews with a 1-star rating whereas 66% of them buy products with a 4-star rating.

Using technical analysis, it was found that most of the parameters are positively co-
related with each other. Also, the data collected is adequate for the research (KMO=0.88
which is greater than 0.5). It was also seen that the variables are correlated to each other
(p=0.00 which is less than 0.5).
Using ANOVA, we found that there is no significant difference in the perception of
factors with respect to gender and there is significant difference in familiarity of products
and relevance of program with respect to different age groups. All other factors have no
significant difference in perception.
Using factor analysis, we use 0.5 as our limiting factor to suppress the small coefficients.
So, after suppressing we get that there are five groups:
Group 1: Positive Association
Group 2: Negative Association
Group 3: Quality of Reviews
 Chapter 6
Conclusions

Online reviews were found to be somewhat distracting to the consumers. This in

turn would affect their purchase decisions and influence their buying behavior. Now-a-
days, Quality reviews are more prominent with the youth due to its effectiveness and
prominence. Thus, online reviews through e-commerce websites are found to have a
greater impact on the consumers mind as compared to actual word of mouth.
It was also found that the consumers could remember the reviews they found useful and
viewed multiple times and rating of product impacts their decisions. Thus, it can be
inferred that brand recall is high and the product is also driven into the awareness set of
the consumer. Consumers are found to be well aware and known about the products and
their features. But somehow this did not effectively trigger into purchase of the product or
service.
Since the purchase decision is not highly influenced, it is inferred that Online Reviews
does not drive the product or service into the decision set of the consumers.
As seen, brand recall is high amongst consumers. Also, there is a strong brand attitude
both positive and negative where the prominence of former is large. Moreover,
consumer’s sentiments are also influenced by paid and fake reviews which annoy them.
 References

1. De Maeyer, P. (2012). Impact of online consumer reviews on sales and price strategies: A
review and directions for future research. Journal of Product & Brand
Management, 21(2), 132-139.

2. Duan, W., Gu, B., & Whinston, A. B. (2008). Do online reviews matter?—An empirical
investigation of panel data. Decision support systems, 45(4), 1007-1016.

3. Hu, N., Bose, I., Koh, N. S., & Liu, L. (2012). Manipulation of online reviews: An
analysis of ratings, readability, and sentiments. Decision support systems, 52(3), 674-684.

4. Zhu, F., & Zhang, X. (2010). Impact of online consumer reviews on sales: The
moderating role of product and consumer characteristics. Journal of marketing, 74(2),
133-148.

5. Li, X., & Hitt, L. M. (2008). Self-selection and information role of online product
reviews. Information Systems Research, 19(4), 456-474.

6. Lee, J., Park, D. H., & Han, I. (2011). The different effects of online consumer reviews
on consumers' purchase intentions depending on trust in online shopping malls: An
advertising perspective. Internet research, 21(2), 187-206.

7. Cheung, C. M., Lee, M. K., & Rabjohn, N. (2008). The impact of electronic word-of-
mouth: The adoption of online opinions in online customer communities. Internet
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8. Karakaya, F., & Ganim Barnes, N. (2010). Impact of online reviews of customer care
experience on brand or company selection. Journal of Consumer Marketing, 27(5), 447-
457.
Appendix