The paradox of (dis)trust in sponsorship disclosure: The characteristics and effects of sponsored online consumer reviews
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
Section snippets
Study 1: linguistic differences of sponsored versus organic reviews and their helpfulness
The first study focuses on the textual differences between sponsored and organic reviews, as well as the level of perceived helpfulness of the two types of reviews. To predict these differences, we start by understanding how each type of review is created, and how this review creation process influences the motivation of reviewers who are offered compensation for writing reviews, and those who voluntarily write reviews. We focus on two major differences between sponsored and organic reviewers.
Study 2: the effect of sponsorship disclosure on attitude and purchase intention
Understanding the significance of sponsorship disclosure, the FTC and WOMMA started offering guidelines on how to disclose endorsement information. Despite the importance of information disclosure in people's perceptions and behavior, to the best of the authors' knowledge, little research has examined the effects of sponsored online reviews on consumers' attitudes and purchase intentions, compared to those of organic reviews [57]. Wang, Ghose, and Ipeirotis [58] attempted to obtain insights
Discussion and conclusion
The power of both WOM and eWOM has been recognized by marketers who are trying to motivate consumers to spread positive buzz. They often do so by offering incentives such as coupons, free products, discounts, and financial compensation, to name a few. Such sponsored reviews can be misleading for consumers who are not able to discern the difference between sponsored and organic reviews. To protect consumers, governmental regulators established guidelines on how to disclose endorsement
Acknowledgement
The authors would like to thank the Spiegel Digital & Database Research Center at Northwestern University for making the data available for the first part of this study. They also thank participants at the 2018 EMAC conference in Glasgow for their constructive comments on an earlier version of the paper.
Su Jung Kim is an Assistant Professor in the Annenberg School for Communication and Journalism at the University of Southern California. She received her Ph.D. degree in the Media, Technology, and Society program in the School of Communication, and was a post-doctoral research associate in the Spiegel Digital & Database Research Center at Northwestern University. Before joining USC, she was an assistant professor in the Greenlee School of Journalism and Communication at Iowa State University.
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Su Jung Kim is an Assistant Professor in the Annenberg School for Communication and Journalism at the University of Southern California. She received her Ph.D. degree in the Media, Technology, and Society program in the School of Communication, and was a post-doctoral research associate in the Spiegel Digital & Database Research Center at Northwestern University. Before joining USC, she was an assistant professor in the Greenlee School of Journalism and Communication at Iowa State University. Her research centers on the use of big data in communication, advertising, and marketing communications. Her research interests include cross-platform media use and its effects, social media and electronic word-of-mouth (e-WOM), and mobile customer engagement. Her current projects examine how online product reviews influence the perceptions and behaviors of consumers.
Ewa Maslowska is an Assistant Professor in the Amsterdam School of Communication Research, University of Amsterdam, where she also earned her PhD degree in persuasive communication program. She completed a post doc in the Medill IMC Spiegel Digital & Database Research Center, Northwestern University. Her research interests center around consumer behavior, advertising and digital consumer environments. She conducts experimental and data-driven research into the dynamics of consumer engagement.
Ali Tamaddoni is a Senior Lecturer (Assistant Professor) in Business Analytics at Deakin Business School. He received his Ph.D. degree from Monash University. His research interests include customer churn management, and social media analytics. Ali's work has been published in Journal of Service Research and Industrial Marketing Management, among others.