PROJECT REPORT

University Business School , Chandigarh

Panjab University
University Business School , Chandigarh
Panjab University
MBA INTERNATIONAL BUSINESS

Submitted to:
Tejinder Pal Singh
Assistant Professor
UBS Chandigarh

Submitted by:
Kunal Kochhar
Madhur Khurana
Ayush Gupta

CONTENTS

INTRODUCTION................................................................................................. 1
CONCEPTUAL MODEL ........................................................................................ 5
RESEARCH METHODOLOGY ............................................................................... 6
SPSS ANALYSIS ........................................................................................ 7
HYPOTHESIS TESTING .............................................................................. 8
CONCLUSION .................................................................................................... 9
REFERENCES..................................................................................................... 10
APPENDIX........................................................................................................ 11

Introduction
Internet-based electronic commerce is growing rapidly with the increase of commercial Web
sites and the increasing acceptance of on-line transactions by consumers. As a new marketing
channel, the World Wide Web differs from traditional retail formats in many ways. Consumers
shopping online cannot touch or smell products, as would be possible in traditional retail
outlets, so their purchase judgments must be based on the product information presented on
the Website. On-line sellers seek to overcome this limitation by giving consumers the
opportunity to share product evaluations on-line. This consumer-created information is helpful
in making purchase decisions because it provides indirect experiences of products. In contrast
to a traditional seller, an on-line seller generally provides consumers with two types of product
information. It can offer seller-created product information via its Web site or other traditional
communication channels such as advertisements, and it can also offer consumer-created
product information by allowing consumers to post comments on its Web site. Consumercreated information, an on-line consumer review, is new information presented from the
perspective of consumers who have purchased and used the product. It includes their
experiences, evaluations, and opinions. The user-oriented information provided in this way is,
in effect, a new kind of word-of-mouth communication. As an independent product information
resource, on-line reviews are increasing in popularity and importance.
An on-line consumer review is an important factor in product sales. For example, Amazon.com
began to offer consumers the option of posting product comments on its Web site in 1995. At
present, Amazon.com has about 10million consumer reviews covering all of its product
categories. These reviews are one of its most popular and successful features. Other on-line
sellers in many product categories are adopting the same strategy of providing a venue where
consumers can voice their opinions. Half the consumers who visit on-line shopping malls
consider consumer reviews important in their buying decisions.
The quantity and quality of on-line consumer reviews are important characteristics affecting
consumer information-processing. The number of on-line reviews of a product (review
quantity) may be taken as representing the product's popularity since it is reasonable to

assume that the number of reviews is related to the number of consumers who have bought
the product. Since there is no standard format, the content of on-line reviews (review quality)
varies from short to long and from subjective to objective.A high-quality review is one that is
more logical and persuasive and supports its evaluation with reasons based on the facts about a
product.
The present paper investigates whether the quantity and quality of online consumer reviews
can affect consumers purchasing intention and how these effects are changed by consumer
involvement. In addition, it shows the underlying mechanism through which on-line consumer
reviews influence purchasing intention. The study focuses on the effects of positive on-line
consumer reviews as a new kind of positive word-of-mouth. Several hypotheses are proposed,
and an experiment has conducted that addresses these questions in the context of positive online consumer reviews.

Variables Studied: The Independent Variable in our research is Consumer review.

Dual Role of Consumer Reviews: Dual Role of On-Line Consumer Reviews. Two
types of product information are available to an on-line consumer in contrast to an off-line
consumer. One is seller-created information via a traditional communication channel, such as
advertisements, and the other consists of on-line consumer reviews created by prior buyers
based on their experiences, evaluations, and opinions of products. An on-line consumer review
has a dual role, functioning both as an informant and as a recommender.
As an informant, it provides user-oriented product information, while as recommender; it
provides recommendations by previous consumers in the form of electronic word-of-mouth
(eWOM).

Effects of Review Quantity and Quality on Purchasing Intention:

As consumers' guide information, anonymous transmission of online reviews makes more
consumers are willing to provide their own real-life experience, even if it is a negative one. But
the sellers will take action to force consumers to rewrite the negative reviews information,

making some of the information cannot be trusted. So the customers are afraid to give real
comments. Besides, brushing reputation behavior makes consumers cannot distinguish which
transaction is fake, increasing judging difficulty according to the comments. Consumer learning
refers to the process that consumers acquire knowledge, experience, skills, and improve their
buying behavior constantly during the purchase. Consumers attitudes are affected by the
quantity and ratings of online reviews. When consumers want to buy a thing, they are hinted by
the positive or negative comments, they will like or dislike the goods. When high-quality
reviews emerging, consumer impulse will continue to generally get strengthened. When lowquality reviews emerging, consumer impulse is generally reduced.

Hypothesis:
H1: The quality of on-line consumer reviews positively affects consumers' purchasing intention.
H2: The quantity of on-line consumer reviews positively affects consumers' purchasing
intention.

Moderating Variable: Involvement is defined as the perceived personal relevance of a

product based on the individual consumer's needs, interests, and values. Involvement can be
either situational or enduring i.e. high or low.
H3: The quality of on-line consumer reviews has a stronger positive effect on the purchasing
intention of high-involvement consumers than of low-involvement consumers.
H4: The quantity of on-line consumer reviews has a stronger positive effect on the purchasing
intention of low-involvement consumers than of high-involvement consumers.

Control Variables
We have taken 7 control variables to study. These are necessary to control such as general
attitude, prior knowledge, positiveness, perceived informativeness, Seller information,
popularity.

1. General Attitude: The survey asked the questions about the general attitude of an
individual towards reviews present online.
2. Prior-knowledge: The survey asked the question about whether the individual has prior
knowledge about the product or not.
3. Reviews Positiveness: The survey asked the consumer view towards the positiveness of
reviews.
4. Perceived informativeness: The survey asked the questions how the consumer
perceived the reviews present online.
5. Seller Created information: Objectivity, understandability, credibility and clarity of seller
information is judged.
6. Product Popularity: This variable is used to find out the popularity of product among
consumers.

Table 1 Seller Product Information

Conceptual Model
Quality

Consumer
Reviews

Involvement
(Moderating
Variable)

Quantity

General Attitude
Review Positiveness
Seller Created Information
Perceived Informativeness
Product Popularity
Prior Knowledge

Table 2 Consumer Reviews

Consumer
Purchase
Intention

Research Methodology: The three independent variables were review quality (high vs.
low), review quantity (few vs. moderate), and involvement (high vs. low).100 Students
participated in our research project from different departments of Panjab university. The
experimental product was a smart watch, a mobile device with a touch screen display, designed
to be worn on the wrist reason for using this product was the popularity of the product among
the youth. The Product was displayed along with product seller information and the consumer
reviews on a Google form. The seller-created information consisted of an overview of the
product and its functions. A picture of the product was provided, but its brand name was
hidden to remove any brand effect. All of this information was replicated from real on-line
shopping sites.
An on-line shopping experiment could be affected by the characteristics of the subjects (e.g.,
prior on-line shopping experience) and the stimulus (e.g., prices or brand names of products).
Multiple methods were used to control for the effects of possible confounding variables in
order to improve the study's internal validity Individual differences, including personality,
cognitive style, and personal Web experiences, were controlled for these factors by randomly
assigning subjects to the experimental conditions. Four measurements were used to check this.
In addition, the perception that each review of the product was positive had to be controlled
because the study was only considering positive reviews. This control was measured by two
items. (See Appendix at the end for the questionnaire containing items)
Demographics:

72 %

28 %

SPSS Analysis
1. Firstly the 5 control variables i.e. Product Popularity, Product Informativeness, General
Attitude, Review Positiveness and Seller Created Information were gone under factor analysis
using extraction method of principle Component Analysis where two components were
extracted. Component 1 having eighn value 2.501 explaining 50.021 % of variance and
component 2 having eighn value 1.010 explaining 20.206 % of the variance. Thus the control
variable General Attitude, Product Popularity, Review Positiveness were grouped together to
make the first factor for general attitude toward reviews and other two Seller Created
Information, Product Informativeness grouped together to make the second factor for general
attitude toward reviews. These two factors and prior product knowledge were used as
covariate variables for testing the hypotheses.
2. Secondly, The hypotheses were tested by performing an ANCOVA.

The Assumption of Homogeneity of Regression Slopes: This assumption presumes that

the relationship between the covariate and the dependent variable is the same for all
combinations of the factors. We used the Univariate General Linear Model procedure to
test for the significance of an interaction term in the model made up of the covariate
and the factors which come out to be p= .404 which makes the covariate interaction
statistically insignificant thus the assumption is checked.

The Assumption of Homogeneity of Variance: Analysis of covariance assumes that the

variance of the dependent variable is homogeneous across all of the cells formed by the
factors (independent variables). We used the significance of Levenes test for equality of
variance as our criteria for satisfying the assumption, which SPSS provides as part of the
output. Levenes test is a diagnostic statistic that tests the null hypothesis that the
variance is homogeneous or equal across all cells. In our test p= .118 making our null
hypothesis accept hence, this assumption is also accepted.

Hypothesis Testing:
Main Effect

H1: The quality of on-line consumer reviews positively affects consumers' purchasing
intention. The analysis indicated the presence of the main effect of review quality thus
the first hypothesis is accepted as it has significant value of .035 i.e. p<0.05

H2: The quantity of on-line consumer reviews positively affects consumers' purchasing
intention. . The analysis indicated the presence of the main effect of review quantity
thus the second hypothesis is accepted as it has significant value of .006 i.e. p<0.05
Thus, both hypotheses 1 and 2 were accepted.

Interaction Effect

H3: The quality of on-line consumer reviews has a stronger positive effect on the
purchasing intention of high-involvement consumers than of low-involvement
consumers. The review quality X involvement interaction .615, p > 0.05 revealed that
review quality has no significant impact on purchasing intention under highinvolvement conditions than under low-involvement conditions. Thus, Hypothesis 3 was
rejected.

H4: The quantity of on-line consumer reviews has a stronger positive effect on the
purchasing intention of low-involvement consumers than of high-involvement
consumers. The review quantity X involvement interaction .032, p < 0.05 revealed that
review quantity has a significant impact on purchasing intention under low- involvement
conditions than under high-involvement conditions. Thus, Hypothesis 4 was accepted.

Conclusion
Three major findings emerge from the research. First, the quality of on-line consumer reviews
has a positive effect on consumer purchasing intention. Reviews that are logical and persuasive,
with sufficient reasons based on specific facts about the product, have a strong positive effect
on purchasing intention. Second, consumers' purchasing intention increases along with the
number of reviews. The existence of many reviews indicates that the product is popular, and
this is what increases purchasing intention. Third, this paper shows the insignificant review
quality X involvement action effect, and the significant quantity X involvement. This study
makes several practical contributions.
Its major results emphasize the importance of properly managing on-line consumer reviews.
Since on-line reviews function both as informants and recommenders, they can be used
strategically as a communication channel. For example, on-line sellers can provide a review
format that enables reviewers to post high-quality reviews focusing on the informant role of
on-line consumer reviews. Using click-stream data, on-line sellers can categorize consumers by
level of involvement and show reviews that fit their involvement up front. Once sellers develop
a system for recommending appropriate reviews to consumers involved at both high and low
levels, the effects of on-line consumer reviews will be more convincing.

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