Online reputation management: Estimating the impact of management responses on consumer reviews†

Management responses to online reviews are becoming an increasingly important reputation-management strategy. In this paper, we empirically investigate the relationship between a firm’s online reputation and its decision to respond to reviews. We focus on the hotel industry, and present several findings. First, we show that hotels are likely to start responding when they experience a negative shock to their ratings. Second, we show that once hotels start responding, they respond to positive, negative, and neutral reviews with approximately the same frequency. Third, we estimate the impact of management responses on hotel ratings by exploiting a difference in managerial practice across two hotel review platforms, TripAdvisor and Expedia: while hotels regularly respond on TripAdvisor, they almost never do so on Expedia. Based on this observation, we use difference-in-differences to show that responding hotels see an average increase of 0.1 stars in their TripAdvisor ratings after they start responding. We also find that after hotels start responding, they receive a larger volume of positive reviews. Interestingly, even though negative reviews become less frequent, the length of the average negative review increases. To explain these results, we argue that consumers with a poor experience become less likely to leave short indefensible reviews when hotels are likely to scrutinize them, leading to fewer, but more detailed, negative comments. By contrast, consumers who had a good experience are happier to leave a review when hotels will notice it. Our results highlight an interesting trade-off for managers: fewer negative ratings at the cost of longer and more detailed negative feedback