Impact of Average Rating on Social Media Endorsement: The Moderating Role of Rating Dispersion and Discount Threshold

Abstract

This paper examines how a restaurant’s online review ratings affect consumers to endorse deal vouchers sold by the restaurant via social media before they redeem the vouchers. While the effect of the average of review ratings is straightforward, we focus on examining how the effect is moderated by the dispersion of review ratings and the discount threshold set for the group-buying deals. A comprehensive literature review suggests that a large rating dispersion can deliver two different messages to consumers (uncertainty in product quality and uniqueness of product taste) and thus may either positively or negatively moderate the effect of average rating on social media endorsement. Discount threshold may serve as a quality signal, reinforcing the effect of average rating. The empirical results show that the effect of average rating is greater when review ratings are more dispersed and the discount threshold is relatively large. The findings generate important managerial and research implications. The online appendix is available at https://doi.org/10.1287/isre.2017.0728 .