When and why do negative reviews have positive effects? An empirical study on the movie industry

People generally believe that business with negative word-of-mouth, such as negative customer reviews can hardly have good sales. But a number of intriguing examples seem to contradict such beliefs. Academic has so far begun to explore the possible positive effect of negative customer reviews, but without unfolding its underlying mechanism. This paper proposes a mechanism through which the variance of customer reviews moderates the effect of negative reviews on sales.

This study takes a multi-method approach in explaining the phenomenon, including an empirical analysis using secondary data from a movie review website and a movie box office website and a subsequent experimental study in a controlled experiment.

The findings of the study show that the effect of negative customer reviews on product sales is positive when the variance of customer reviews is large. Moreover, customers’ motivation to learn fully mediates the moderating effect of review variance on valence.

The findings provide vital managerial implications and suggest that managers should realize the important role of the review distribution.

This study mainly contributes to research on the negativity bias by identifying an important unexplored moderator and mediator and thus explains why negative customer review increases movie sales.