Negative Online Reviews Provide Strategic Opportunity for Companies

May 4, 2022

Negative Online Reviews Provide Strategic Opportunity for Companies

New research shows managers shouldn’t always respond to reviews

When service-industry companies respond with the right mix of rational and emotional cues that match the nature of complaints in negative reviews, it can positively impact the perception and ratings of future customers as well as the complaining customer.

In the paper titled “Effects of Managerial Response to Negative Reviews on Future Review Valence and Complaints” published recently in Information Systems Research, T. Ravichandran, a professor at Rensselaer Polytechnic Institute, and his co-author, Chaoqun Deng of Baruch College, found that responding to negative reviews has a positive impact on future reviews but  responding to positive reviews holds limited impact.

“In the online context, negative reviews have a bigger impact than positive comments,” Dr. Ravichandran said. “It's a very strategic issue for companies to be able to address customer complaints in an effective manner since their responses will be observed and perceived by all the potential customers.”

Dr. Ravichandran and his co-author used advanced machine learning and natural language processing to analyze more than 67,000 Trip Advisor reviews for all hotels in Boston and Honolulu over a 10-year period.

With this extracted data, they established a framework of three distinct kinds of online customer complaints. Procedural complaints pertain to the perceived unfairness of the speed, flexibility, and accessibility of the service; distributive complaints pertain to perceived fairness of the tangible outcomes received by the customers for the time and resources they invested; interactional complaints relate to perceived injustice in the politeness, effort, and empathy of employees.

They then outlined two ways in which managers could respond: emotionally and rationally.

Dr. Ravichandran found that the mix of rational and emotional cues in a response should depend on the nature of the complaints for it to be effective. For example, complaints referring to the speed and flexibility of the service should be met with a rational response explaining the reasons for the service failure and the steps taken to address such failures. Negative reviews complaining about the nature of interactions with the hotel staff should receive an empathetic apology to make the customer feel heard and appreciated.

The findings provide guidance for managers to interact with their customers openly and skillfully in the review community in response to expressed dissatisfaction in order to restore their company’s reputation and brand image.

“If reviewers perceive that there has been an issue in the past and the company has effectively addressed that, then they're less likely to complain about the same issue going forward,” Dr. Ravichandran said. “Managerial responses to previous reviews set their expectations and also modify customer complaining behavior.”

In addition to holding the Irene and Robert Bozzone ’55 Distinguished Chair in Lally, Dr. Ravichandran serves as the associate dean for research, the director of the Ph.D. program, and the director of the Center for Supply Networks and Analytics. His research broadly focuses on how digitization shapes the behaviors of firms, individuals, and markets.

“In the digital age, understanding customer behaviors and how they relate to products and services happens through digital platforms,” Dr. Ravichandran said. “This research highlights how the research expertise in business disciplines combined with the technological resources at Rensselaer could provide actionable insights on important issues firms face in managing in the digital age, a central theme in the transformational research thrusts in the Lally School of Management and at Rensselaer.”

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About Rensselaer Polytechnic Institute

Founded in 1824, Rensselaer Polytechnic Institute is America’s first technological research university. Rensselaer encompasses five schools, over 30 research centers, more than 140 academic programs including 25 new programs, and a dynamic community made up of over 6,800 students and 104,000 living alumni. Rensselaer faculty and alumni include upwards of 155 National Academy members, six members of the National Inventors Hall of Fame, six National Medal of Technology winners, five National Medal of Science winners, and a Nobel Prize winner in Physics. With nearly 200 years of experience advancing scientific and technological knowledge, Rensselaer remains focused on addressing global challenges with a spirit of ingenuity and collaboration. To learn more, please visit www.rpi.edu.