ABSTRACT

The project, Product Rating System, Internet Based Best Quality; in this research, we examine the role of product quality in the relationship between product sales and online customer ratings. Specifically, we measure the differential effects of ratings on sales across products of varying quality levels. We present a sales model that incorporates a measure of latent product quality. We simultaneously model the arrival of product ratings in an effort to separate the effects of social influences and dynamics from the underlying propensity for consumers to post positive, neutral or negative ratings for a given product. The results of this model component provide the foundation for our proposed measure of latent product quality. By explicitly addressing the effects of product quality, our empirical results reconcile conflicting results that have been presented in previous research. Our results also suggest that the effect of ratings on sales has previously been overstated. We show that while the relationship between sales and ratings is strong for higher quality products, ratings have a minimal (if any) effect on sales for lower quality products. These results have significant implications for our understanding of word-ofmouth effects and how they may vary across product of different quality levels. It suggests that the "buzz" generated for a product could make or break a fundamentally good product, but what it cannot do is create success for a bad product.