Soothing the unsatisfied or pleasing the satisfied? The effects of managerial responses to positive versus negative reviews on customer ratings and financial performance

Abstract

Managerial responses (MRs) have gained increasing attention as an important intervention strategy for addressing online customer reviews. This study seeks to answer the question of how a firm should prioritize responding to customers’ positive reviews (MR-P) and negative reviews (MR-N). We examine the differential effect of the MR-P ratio and the MR-N ratio on subsequent customer review ratings and a firm’s financial performance. Our findings show that while the MR-P ratio leads to an increase in subsequent customer review ratings and revenue, the MR-N ratio results in a decrease in customer review ratings and revenue in the short run, but contributes to improvements in these metrics in the long run. Furthermore, we find that the influence of MR-P and MR-N on subsequent review ratings diminishes among firms whose MRs contain highly similar content and firms whose competitors actively create MRs. This research not only advances our understanding of the managerial response literature but also provides valuable guidance for firms seeking to maximize the effectiveness of their MR campaigns.