Management Response to Online Customer Reviews in Distribution Channel: A Perspective of Manufacturers

Abstract

In a distribution channel where multiple manufacturers and retailers compete intensively, manufacturers’ investment decisions on directly communicating with end consumers are strategic. In this study, we examined the interactive relationship between the manufacturers’ management response strategies to online customer reviews and the channel structure formed in the online market. We collected data from Amazon.com, where the manufacturers, instead of the retailers, decide whether and how to respond to the customer reviews. The study illustrates the interaction of channel structure and manufacturers’ management response strategies to the reviews. On the one hand, if a manufacturer invests in responding to customer reviews, more retailers are willing to carry its product. On the other hand, if more retailers sell a manufacturer’s product, or if there are more intensive intra-competition in the retailer channels, the manufacturer is more likely to invest in management response.