How Do Monetary Incentives Affect Online Product Reviews and Sales?

Online retailers employ various strategies, such as reviewer reputation systems and online communities, to encourage consumers to write online product reviews. Monetary incentives---a widely used extrinsic motivation in the business world---are not commonly used by online retailers to encourage consumers to write online product reviews. One plausible explanation is because of the cost of monetary incentives, albeit the trade-off between the cost of monetary incentives versus the benefit of having more online product reviews has not been examined. With a unique panel data set from a major Chinese online retailer that has been offering monetary incentives to encourage consumers to write product reviews, we examine how monetary incentives affect online product reviews and sales. Interestingly, we find that small rewards---less than 1.5 yuan for each product review, can increase product sales significantly. Our findings suggest that paying for product reviews can be an effective strategy for online retailers to increase sales.