The paradox of (dis)trust in sponsorship disclosure: The characteristics and effects of sponsored online consumer reviews

Highlights

• This study addresses the issues of sponsorship in the context of online reviews.

• Sponsored reviews, reviews written by consumers who are offered a form of compensation, have been considered as biased and dishonest without empirical data that examined their content.

• Analyses of online reviews data revealed that sponsored reviews are more elaborate, objective, complex, positive, and less extreme than organic reviews. (Study 1)

• Despite the seemingly elaborate and evaluative content, sponsored reviews are perceived as less helpful possibly due to the presence of a sponsorship disclosure statement.

• An online randomized experiment showed that sponsorship disclosure increases suspicions about a reviewer's ulterior motives and hurt consumers' attitudes or purchase intentions when a review is positive. (Study 2)

Abstract

Online consumer reviews (OCRs) have become one of the most influential persuasive messages with respect to purchase decisions. Knowing this, marketers have started incentivizing consumers to write reviews, hoping that they can increase the volume of positive reviews. However, little research exists on the content characteristics and effects of sponsored OCRs. This paper examines the different characteristics and effects of sponsored and organic OCRs, and the mechanisms by which consumers recognize and process these two types of reviews, using mixed methods in two studies. The findings of a text mining analysis (Study 1) suggest that sponsored reviews provide more elaborate and evaluative content; however, they are perceived as less helpful than organic reviews. The findings of a randomized experiment (Study 2) suggest that sponsorship disclosure increases suspicions about the reviewer's ulterior motives and decreases consumers' attitudes and purchase intentions when a review is positive. Sponsorship disclosure does not hurt attitudes or purchase intentions when a review is negative.

Introduction

With the development of new communication technologies, online consumer reviews (OCRs) have become prevalent in people's everyday decision-making. OCRs constitute a particular form of electronic word of mouth (eWOM) that allows consumers to share their consumption experiences and make product recommendations. Consumers turn to the Internet to seek out other people's opinions on virtually everything, from simple decisions such as buying kitchen towels to bigger decisions such as buying a car.

According to Nielsen's latest report on “Global Trust in Advertising,” approximately two-thirds of global consumers report that they trust consumer opinions posted online, making eWOM one of the top 3 forms of advertising they trust [1]. The persuasive power of traditional word of mouth (WOM) has been studied since the 1960s [2]. WOM is influential in part because it is believed to represent the unbiased opinions of consumers [3]. Also, both WOM and eWOM can save consumers' time and effort by reflecting on product quality and reducing the risks and uncertainty entrenched in purchase decisions [4,5].

Marketers have recognized this increasing role of eWOM in the era of social media and have employed diverse tactics to create positive buzz about their products or services. One of such tactics is sponsored reviews—which are created by consumers who are offered a form of compensation, such as coupons, discounts, raffles, free samples, or remuneration by companies, third-party review platforms, or e-commerce sites [6,7]. On the contrary, organic reviews refer to those that are written by consumers who do not receive any type of incentive. Companies provide incentives to consumers in order to generate a large number of reviews with the hope that those individuals offered incentives would write positive reviews, which would ultimately increase sales [7,8]. It is not difficult to find online reviews that disclose the compensated nature of such reviews on many e-commerce websites. For example, Walgreens provides the following statement in its sponsored reviews: “This review was collected as part of promotion.” Amazon, when it allowed sponsored reviews on its website, included disclosure statements such as, “I received this product at a discount in exchange for my unbiased review.”

Nevertheless, sponsorship practices have increased controversy and attracted public critique to the extent that some see them as unfair, biased, and even deceptive [9]. Companies and regulators alike have carefully approached this issue to prevent consumers from being misinformed. Regulatory institutions such as the Federal Trade Commission (FTC), Australian Competition and Consumer Commission, European Commission, and industry organizations such as the Word of Mouth Marketing Association (WOMMA) have mandated the disclosure of “material connections” and have started offering guidelines on how to disclose endorsement information [10,11]. In line with this, in October 2016, Amazon announced that they would ban sponsored reviews written by those who received free or discounted products as a result of a study that suggested sponsored reviews' average rating is higher than that of organic reviews [77].

Despite the raised concerns about the nature of sponsored reviews, online retailers (e.g. Walgreens) and review platforms (e.g. BzzAgent) are still relying on incentivization to encourage review writing. What is unknown is how sponsored reviews, in comparison to organic ones, are different in nature and influence consumers' perceptions and behaviors. To the best of authors' knowledge, little research has examined the effects of sponsored online reviews. One exception is a recent study by Petrescu et al. [7], which looks into the effect of incentivization on number of reviews, overall sales, and consumer information search. This calls for an objective investigation to look into pros and cons of sponsored reviews and to see how different they are from organic reviews and more importantly how they are perceived by consumers and how they exert an influence on consumers' attitudes and purchase decisions.

Regarding this, the purpose of this study is twofold. First, it examines how sponsored and organic reviews differ in their content characteristics. We argue that, contrary to public perception, when sponsored reviews are practiced appropriately, they can provide unbiased and elaborate content. Second, it investigates how consumers process these two different types of reviews, form attitudes, and make purchase decisions using the persuasion knowledge model.

The current research addresses the aforementioned issues in two studies. Study 1 conducts a secondary analysis of OCRs and compares differences in the linguistic styles between sponsored and organic reviews by using text mining techniques. It also examines whether consumers differentially evaluate the helpfulness of the two types of reviews. Study 2 employs a randomized online experiment to extend our understanding of how consumers recognize and process sponsored and organic reviews, and how consumers are influenced by sponsorship disclosure when they read OCRs.

Taken together, this study demonstrates the paradox of (dis)trust in that sponsored reviews provide more objective and less extreme content yet are perceived less helpful and hurt consumers' attitudes and purchase intentions. Overall, the findings of this research contribute to the literature on endorsement communications including native advertising, product placement, incented blogs, and incentivized online reviews. These two studies also provide regulators with guidelines on more effective sponsorship information disclosure. Finally, they deliver important managerial implications for marketers increasingly investing in compensated eWOM, many of whom object to disclosure, fearing negative consumer responses.¹