Journal of Management Information Systems

Volume 23 Number 2 2006 pp. 149-171

When Online Reviews Meet Hyperdifferentiation: A Study of the Craft Beer Industry

Clemons, Eric K, Gao, Guodong Gordon, and Hitt, Lorin M

ABSTRACT: We analyze how online reviews are used to evaluate the effectiveness of product differentiation strategies based on the theories of hyperdifferentiation and resonance marketing. Hyperdifferentiation says that firms can now produce almost anything that appeals to consumers and they can manage the complexity of the increasingly diverse product portfolios that result. Resonance marketing says that informed consumers will purchase products that they actually truly want. When consumers become more informed, firms that provide highly differentiated products should experience higher growth rates than firms with less differentiated offerings. We construct measures of product positioning based on online ratings and find supportive evidence using sales data from the craft beer industry. In particular, we find that the variance of ratings and the strength of the most positive quartile of reviews play a significant role in determining which new products grow fastest in the marketplace. This supports our expectations for resonance marketing.

Key words and phrases: differentiation, online reviews, product positioning, product variety, resonance marketing, word of mouth