Seeing Stars: How the Mere Presence of Ratings Influences Willingness to Pay

Authors

  • Steven Craig Huff Utah Valley University

DOI:

https://doi.org/10.11634/216796061706546

Keywords:

product ratings, willingness to pay, product menus, judgment and decision-making

Abstract

This article investigates the effects of ordinal product ratings (i.e., product ratings such as stars, diamonds, etc.) when they are superfluous, meaning they are arbitrary and redundant. It finds that ratings do influence willingness to pay even when they are superfluous. When superfluous product ratings are included in a menu, they prompt individuals to categorize products by rating; this categorization exaggerates willingness to pay for products in the highest and lowest ratings tiers (i.e., at the extremes). In the study reported here, participants indicated their willingness to pay for multiple products in five product categories while the presence of superfluous ratings is manipulated. Results reveal an expansion effect; that is, the mere presence of superfluous product ratings in a menu can expand the range of willingness to pay for the products in the menu without influencing perceived quality. Results further reveal the natural consequence of the expansion effect, the rating effect; that is, changing a product’s superfluous rating can change willingness to pay for that product, even when its quality remains constant. These findings suggest that prior research overstates the information effects of product ratings and that firms may be able to act more strategically when deciding: 1) whether to include ratings in their menus; 2) what decision rule they use to assign ratings; and 3) how to craft their product menus to maximize profits.

Author Biography

Steven Craig Huff, Utah Valley University

Steven C. Huff, Ph.D., is Assistant Professor of Marketing at the Woodbury School of Business at Utah Valley University.

References

Alba, J. W., & Chattopadhyay, A. (1985). Effects of context and part-category cues on recall of competing brands. Journal of Marketing Research, 340-349.

Beaulieu, N. D. (2002). Quality information and consumer health plan choices. Journal of Health Economics, 21(1), 43-63.

Bettman, J. R. (1979). Information processing theory of consumer choice. Addison-Wesley Pub. Co.

Black, S. E. (1999). Do better schools matter? Parental valuation of elementary education. The Quarterly Journal of Economics, 114(2), 577-599.

Bruner, J. S., Goodnow, J. J., & George, A. (1956). Austin. A Study of Thinking. New York: John Wiley & Sons, Inc, 14, 330.

Cohen, J. B., & Basu, K. (1987). Alternative models of categorization: toward a contingent processing framework. Journal of Consumer Research, 13(4), 455.

Del Guercio, D., & Tkac, P. A. (2008). Star power: The effect of Morningstar ratings on mutual fund flow. Journal of Financial and Quantitative Analysis,43(4), 907.

Dodson, J. (2013) Mind over Meta. Retrieved from http://www.gamerevolution.com/features/mind_over_meta/2 on June 3, 2014.

Figlio, D. N., & Lucas, M. E. (2000). What's in a grade? School report cards and house prices (No. w8019). National Bureau of Economic Research.

Hauser, J. R., & Wernerfelt, B. (1990). An evaluation cost model of consideration sets. Journal of consumer research, 16(4), 393.

Jin, G. Z., & Leslie, P. (2003). The effect of information on product quality: Evidence from restaurant hygiene grade cards. The Quarterly Journal of Economics, 118(2), 409-451.

Jin, G. Z., & Sorensen, A. T. (2006). Information and consumer choice: the value of publicized health plan ratings. Journal of Health Economics, 25(2), 248-275.

Kahneman, D., & Miller, D. T. (1986). Norm theory: Comparing reality to its alternatives. Psychological review, 93(2), 136.

Leclerc, F., Hsee, C. K., & Nunes, J. C. (2005). Narrow focusing: Why the relative position of a good in its category matters more than it should. Marketing Science, 24(2), 194-205.

Lingle, J. H., Altom, M. W., & Medin, D. L. (1984). Of cabbages and kings: Assessing the extendibility of natural object concept models to social things. Handbook of social cognition, 1, 71-117.

Raudenbush, S. W., & Bryk, A. S. (2002). Hierarchical linear models: Applications and data analysis methods (Vol. 1). Sage.

Scanlon, D. P., Chernew, M., McLaughlin, C., & Solon, G. (2002). The impact of health plan report cards on managed care enrollment. Journal of health economics, 21(1), 19-41.

Wedig, G. J., & Tai-Seale, M. (2002). The effect of report cards on consumer choice in the health insurance market. Journal of Health Economics, 21(6), 1031-1048.

Wright, P., & Barbour, F. (1977). Phased decision strategies: Sequels to an initial screening. Graduate School of Business, Stanford University.

Downloads

Published

09/28/2014

How to Cite

Huff, S. C. (2014). Seeing Stars: How the Mere Presence of Ratings Influences Willingness to Pay. American Journal of Business and Management, 3(3), 161–167. https://doi.org/10.11634/216796061706546

Issue

Vol. 3 No. 3 (2014)

Section

Articles

License

Copyrights for articles published in AJBM are retained by the authors, with first publication rights granted to the journal. The journal/publisher is not responsible for subsequent uses of the work. It is the author's responsibility to bring an infringement action if so desired by the author.