The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms

• Published in: Management science Vol. 49; no. 10; pp. 1407 - 1424
• Main Author: Dellarocas, Chrysanthos
• Format: Journal Article
• Language: English
• Published: Linthicum INFORMS 01.10.2003; Institute for Operations Research and Management Sciences; Institute for Operations Research and the Management Sciences
• Series: Management Science
• Subjects: Auctions; Business reputation; Business studies; Communication; Cooperation; Design; Design engineering; Digital technology; Digitization; Electronic commerce; Electronic Markets; Feedback; Game Theory; Information feedback; Internet; Interpersonal communication; Management science; Market mechanisms; Mechanics; Mechanism design; Negative feedback; Online Feedback; Organizations; Positive feedback; Power; Product development; Quality control; Reputation Mechanisms; Reputations; Studies; Trust; Word of mouth advertising
• ISSN: 0025-1909; 1526-5501
• DOI: 10.1287/mnsc.49.10.1407.17308

Online feedback mechanisms harness the bidirectional communication capabilities of the Internet to engineer large-scale, word-of-mouth networks. Best known so far as a technology for building trust and fostering cooperation in online marketplaces, such as eBay, these mechanisms are poised to have a much wider impact on organizations. Their growing popularity has potentially important implications for a wide range of management activities such as brand building, customer acquisition and retention, product development, and quality assurance. This paper surveys our progress in understanding the new possibilities and challenges that these mechanisms represent. It discusses some important dimensions in which Internet-based feedback mechanisms differ from traditional word-of-mouth networks and surveys the most important issues related to their design, evaluation, and use. It provides an overview of relevant work in game theory and economics on the topic of reputation. It discusses how this body of work is being extended and combined with insights from computer science, management science, sociology, and psychology to take into consideration the special properties of online environments. Finally, it identifies opportunities that this new area presents for operations research/management science (OR/MS) research.