Journal of Operations Management 25 (2007) 985–997

www.elsevier.com/locate/jom

Customer expectations in online auction environments:

An exploratory study of customer feedback and risk
Byron J. Finch *
Miami University, Department of Management, Oxford, OH 45056, United States

Available online 1 December 2006

Abstract
The importance of understanding the needs of the customer is a widely-accepted pre-requisite to providing quality products and
services. For product purchases through traditional channels, customers are known to have expectations for the product they are
buying as well as for the services associated with its purchase. Online transactions, in which the buyer has no prior knowledge of the
seller, are becoming increasingly common and are fraught with risks not present in traditional channels. Feedback about sellers in
these risky markets contains a mix of product-related and service-related comments. This exploratory study identifies preliminary
relationships between customers’ emphases on product or service dimensions of quality in their feedback and the risks to which the
customer is exposed.
# 2006 Elsevier B.V. All rights reserved.

Keywords: Quality management; e-Commerce; Service operations

1. Introduction service, satellite radio), and catalog retailers (free

In recent decades, the management of product and
service quality has become an integral component of
good business practice. While distinctions between
product and service quality have been made by
researchers (Yang et al., 2003; Parasuraman et al.,
1988; Fitzsimmons and Fitzsimmons, 2000), customers
must often blend the two because products and services
accompany each other. Sellers of products often
differentiate their products from those of a competitor
by bundling services to enhance the purchase process and
benefit the customer after the sale. Examples of
businesses involved in such bundling behaviors include
computer producers (in-home service, warranties),
automobile producers (free maintenance, free emergency
* Tel.: +1 513 529 3159; fax: +1 513 529 2342.
E-mail address: finchbj@muohio.edu.
shipping, shipping alternatives). Retailers have long
known that customers define quality in terms of both
product and service attributes (Mehta et al., 2000).
Researchers have argued that quality should be
viewed multi-dimensionally, and that the definition of
quality depends on the context (Reeves and Bednar,
1994). Customers are concerned about a variety of
issues in their evaluation of quality and the relative
importance of each depends on the situation. As
businesses devote resources to enhancing product and
service attributes in hopes of attracting customers, the
multi-dimensional and contextual nature of quality begs
the questions: ‘‘What is most important to the
customer? Does service-or product-related quality
matter most?’’ and ‘‘What characteristics of the
transaction context make a difference?’’
Internet retailing is a rapidly-growing channel for
business-to-consumer (B2C) transactions. As the

0272-6963/$ – see front matter # 2006 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2006.10.007
986 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
Internet’s popularity as a business channel has
increased, customers have demonstrated their penchant
for quality goods and services there, as well. Despite the
fact that Internet transactions have become common, a
remaining characteristic of the Internet retail environ-
ment is the risk perceived by customers. This is true for
well-known Internet retailers, but as one moves from
well-known retailers to completely unfamiliar mer-
chants, the perceived risks for buyers increase. These
online markets, in which the buyer and seller have no
previous relationship, differ significantly from tradi-
tional retail markets. Despite the perceived risks, online
markets with these characteristics have become quite
commonplace. For example, customers increasingly use
shopping robots to seek the lowest prices, which are
often offered by a merchant the customer has never
heard of. Third party merchants sell books, CDs, and
other products through Amazon.com’s storefront.
Online markets in which the buyer has no previous
relationship with the seller are probably best exempli-
fied by online auctions, which involve millions of buyer
and seller pairs who are unfamiliar with each other.
This study explores the online auction market
environment to determine if customers’ quality-related
expectations – more particularly their emphasis on
service- or product-oriented quality dimensions – vary
as the context of Internet auction transactions vary. The
contextual focus is on risk, the characteristic of the
online auction market that most significantly distin-
guishes it from more traditional markets. The study also
identifies preliminary relationships between the custo-
mer’s definition of quality (as expressed by their
emphasis on product- or service-oriented dimensions)
and the context (the level of risk to which the customer
is exposed). The source of the data is the feedback from
buyers on eBay, the largest Internet auction house. It is
that source of data that makes this work particularly
appropriate for this special issue on Innovative Data
Sources for Empirically Building and Validating
Theories in OM.
2. Literature review
2.1. Theory building
Exploratory research is an important component of
the theory development process. Handfield and Melnyk
(2003) describe the theory-building process as begin-
ning with discovery and description, proceeding to
mapping, and then to relationship building, theory
validation and theory extension/refinement. Exploratory
research is intended to expand the map of existing
theory and identify new variables, which form the
empirical foundation that links theory to reality
(Eisenhardt, 1989; Flynn et al., 1990) and guide future
research. The contribution of this study is one of
mapping and relationship building. It defines quality in
the online auction context through the identification of
ambiguity and price as variables that influence
customers’ quality focus. This literature review
examines previous theoretical developments in three
pertinent areas: defining quality, seller reputation and
feedback, and risk.
2.2. Defining quality
Quality has been widely accepted as an important
component of value (Cravens et al., 1988; Zeithaml,
1988), but scholars have not converged on a single
definition (Sousa and Voss, 2002). They have, however,
distinguished between dimensions of product quality
and dimensions of service quality. Garvin’s (1984)
product quality dimensions of performance, features,
etc. provide a foundation for understanding the scope of
product quality. Parasuraman et al. (1988) and
Fitzsimmons and Fitzsimmons (2000) include such
attributes as reliability, responsiveness, assurance, etc.
to form the basis for understanding service quality. The
list of service quality dimensions has been modified by
Grönroos (1988), Silvestro and Johnston (1990), Finn
and Lamb (1991), Collier (1991), Cronin and Taylor
(1992), and others. Recognizing that some dimensions
of service quality may not be relevant in the online
context, Zeithaml et al. (2001), Burke (2002), Madu and
Madu (2002), Parasuraman and Zinkhan (2002) and
others have proposed additional dimensions of online
service quality that address website design and
performance issues. These dimensions include such
things as the availability of product prices, product
specifications, access to customer service, etc. (Burke,
2002).
In an agenda for future quality research, Sousa and
Voss (2002) recommended two points for consideration.
First, they recommend the use of multi-dimensional
measures of quality, stressing (from Garvin, 1984) that
competitive advantage results from a match between the
importance a market assigns to a particular quality
dimension and the organization’s performance on that
dimension. Second, and of greater importance for the
purposes of this study, Sousa and Voss (2002)
recommended the use of different definitions of quality
in different contexts, encouraging researchers to focus
on defining quality in a way that encompasses the
relevant dimensions for the organization’s output.
 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
Different customers have different concepts of what is
important, and the same customer attaches different
levels of importance in different situations. Thus,
customer expectations which define quality can be
expected to differ from one situation to the next
(Carman, 1990; Reeves and Bednar, 1994; Rosen and
Karwan, 1994; Chowdhary and Prakash, 2005). Such
contextual characteristics as differences in price, market
share, cost, the nature of organizational output, time,
and constituencies all affect how the customer may
define quality.
2.3. Seller reputation and feedback in the online
auction context
In an online auction environment, seller reputation is
important information for buyers because they have
many alternatives from whom to purchase, they
typically have no previous experience with a particular
seller (Resnick and Zechhauser, 2001), they cannot
meet the seller face-to-face, they cannot examine the
product being sold, and they must pay for the product
before it is shipped to them. Online auction houses have
recognized this need and have developed reputation
systems to capture customer feedback and make it
readily available to potential buyers. Since feedback is
the only information regarding seller reputation, high
feedback scores should result in more buyers bidding on
a seller’s products, increasing competition for that
seller’s goods, and raising selling prices.
Houser and Wooders (2000) showed that a better
reputation did, in fact, result in higher selling prices in a
study of 95 auctions of Intel Pentium III 500 processors.
Ba and Pavlou (2002) tracked auctions on 18 different
new products (682 auctions total), finding significant
correlations between positive ratings and price pre-
miums in 13 of the 18 products. Research by Standifird
(2001), Melnik and Alm (2002), McDonald and
Slawson (2002), and Lucking-Reilly et al. (2000) also
found positive relationships between seller reputation
and selling price. The importance of reputation is
further supported by evidence of sellers’ efforts to
improve their reputation. Discussion groups devoted to
improving seller feedback ratings are very active, for
example. Illicit attempts to improve feedback through
implied threats of retaliatory feedback or feedback
extortion are also common (Steiner, 2003).
Previous research has shown that the relative
importance of quality dimensions depends on the
context. Customer feedback intended for use as
reputation information can also be used to help sellers
identify the quality characteristics important in a given
987
context. The use of customer feedback for this purpose
is particularly attractive because, unlike that of other
types of feedback, the response rate for online auction
feedback is very high—between 50 and 70% (Steiner,
2003).
2.4. Risk
Massad and Tucker (2000) examined differences in
consumer risk for online versus person-to-person
auctions. They considered several risks associated with
online purchases from Hofacker (1999). Those risks
were not restricted to just auctions, but two are
particularly relevant to the auction environment and
form the basis for the contexts examined in this study.
The first is the risk that the seller might defraud the
buyer. The second is the risk that the product may not
meet expectations. The buyers’ exposure to risk is a
function of the amount at stake and the likelihood of an
undesired outcome. Here, the risk exposure is deter-
mined by the amount of the bid (price) and the degree to
which a product can be accurately described (product
ambiguity). The higher the price, the greater the
potential loss. The greater the ambiguity, the more
likely the product will fail to be what was expected.
While the price and ambiguity of the product are
independent of one another, the two combine to create
risk to which a buyer is exposed.
Consistent with previous research on quality, this
paper suggests that the importance of various quality
dimensions depends on the context. The quality
dimensions examined are the buyers’ emphasis on
product versus service quality. The contexts examined
are the different levels of risk to which the customer is
exposed, determined by the product price and product
ambiguity. These two determinants of risk, and four
resultant risk contexts, are illustrated in Fig. 1.
2.5. Research propositions
This exploratory study has two objectives. First, it
seeks to determine if customers emphasize different
dimensions of quality for different contexts (defined by
different levels of risk). If customers emphasize
different dimensions of quality for different risk
contexts, one would expect that that would be reflected
in the feedback content and the feedback content would
differ from one context condition to another.
Proposition 1. The customer’s emphasis on product
versus service quality differs among the four risk con-
texts. These differences will be reflected by differences
988 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
Fig. 1. Transaction risk context as a function of product price and
ambiguity.
in frequency of product-oriented and service-oriented
feedback across the four contexts.
Second, it attempts to identify preliminary relation-
ships between the context and whether customers
emphasize product-or service-oriented dimensions of
quality. Beyond simply observing differences voiced in
seller feedback, if relationships between the context and
feedback content exist, one would expect to see patterns
that indicate relationships between feedback content
and the customer’s risk exposure.
Proposition 2. When examined in aggregate, relation-
ships between the risk context and the frequency of
product-oriented and service-oriented feedback will be
apparent.
Proposition 2a. The importance of service-oriented
dimensions of quality will be greatest at low levels of
risk.
Proposition 2b. The importance of product-oriented
dimensions of quality will be greatest at high levels of
risk.
3. Research methodology
3.1. Data collection
eBay’s feedback forum provided the data used in this
study. A brief overview of eBay is important to fully
understand this information. eBay is an online auction
house established in 1995. It has grown rapidly to over
48 million active users and over 12 million items listed
at auction in more than 18,000 categories. eBay
estimates that more than 430,000 people make most
or all of their income through its auctions. Revenues for
2004 were projected to be $3.4 billion, on $32 billion
worth of merchandise. That makes it the largest online
marketplace. If it were a retailer, it would be nearly the
size of Lowe’s (Siskos and Stevenson, 2003; eBay’s
Secret, 2004).
eBay takes no ownership of products sold, acting
strictly as the seller’s agent, nor does it provide
guarantees related to the quality of products and
services offered or the reliability of the sellers or buyers.
eBay’s revenues come from listing fees and commis-
sions. Upon completion of an eBay transaction, a
winning bidder is allowed to post a feedback message of
no more than 80 characters in eBay’s Feedback Forum.
Online auction buyers define their seller feedback as
positive (I’m satisfied), negative (I’m not satisfied), or
neutral (I have mixed feelings), followed by a comment
of their own, which can often be interpreted as ‘‘and
here’s why . . ..’’ Despite the fact that a product is being
purchased, feedback frequently mentions service
aspects of the transaction. The entire feedback record
of a member is translated into a quantitative score
(positive = 1, neutral = 0, negative = 1).
In this research, high-price products are defined as
those having prices in the range of $300 to $1000. Low-
price products are defined as those having prices less
than around $25. Low-ambiguity products are defined as
being identical from one alternative to another. They are
brand new and in the original package, and two products
with the same descriptions but being offered by two
different sellers can safely be assumed to be identical.
High-ambiguity products, on the other hand, are defined
here as products that are not exactly like alternatives
that may be described similarly. They may be used,
second-hand, antique, or even one-of-a-kind items.
Therefore, two high-ambiguity products described
similarly cannot be assumed to be identical. The low-
price/low-ambiguity (LPLA) product has the least
amount of inherent buyer’s risk, while the high-price/
high-ambiguity (HPHA) product presents the greatest
risk exposure.
For each of the four risk contexts identified in
Fig. 1, the researcher selected a representative eBay
product category. Within each product category,
sellers were identified from auctions in progress.
The rationale used to identify the four representative
eBay product categories follows. For low-ambiguity
products, the broad eBay category topic of computers
and electronics was selected because eBay is host to
many sellers of new and factory-refurbished products.
Previous research (Houser and Wooders, 2000; Ba and
 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
Pavlou, 2002) on reputation systems used computer-
oriented products with success. The classification of
transactions in this category as low-ambiguity is
not to suggest that all computers sold are identical. It
merely indicates that the buyer, upon reading the
description of the item, knows precisely what the
product is. Another advantage of this category is that
it contains a broad range of prices, making it possible
to easily distinguish between low- and high-price
products.
For the low-price low-ambiguity (LPLA) product,
the eBay category of electronics and computers/
consumer electronics/PDAs was selected. eBay breaks
that category down into subcategories by PDA brand
name, such as Palm, Dell, Sony, and Hewlett-Packard.
Each PDA brand category includes a subcategory for
accessories. Sellers of LPLA products were identified
from the accessories categories of the various PDA
brands. Sellers offered PDA cases, antennae, chargers,
and other accessories that sold for less than $25. Product
listings were required to have the words ‘‘New,’’ ‘‘Mint
in Box,’’ ‘‘Factory Refurbished,’’ ‘‘Factory Sealed,’’
‘‘New in Box (NIB),’’ ‘‘With Warranty,’’ or other
indication in the product description that the product
was, in fact, not used.
eBay’s electronics and computers/computers and
office/laptops category was the source for the high-price
low-ambiguity (HPLA) risk condition. Sellers specia-
lizing in laptop sales across the various brand
subcategories of Apple, IBM, Compaq, Acer, Dell,
Gateway, etc. were identified. Indications that the
products were new or refurbished and not used, were
also required. Prices of laptops ranged from $400 to
over $1000.
Coins were selected as the high-ambiguity product
because they are sold in various conditions that play a
critical role in determining value. Coins have also been
used successfully in previous research (Melnik and
Alm, 2002) on reputation systems. Another advantage
of coins is that coin sellers specialize in ways that
reduce price variability for individual sellers. Not
surprisingly, the coins sold by sellers specializing in
Lincoln cents sell for lower prices than the coins of
sellers specializing in gold coins.
The eBay category of coins/coins:US/Lincoln Wheat
1909–1958 and coins/coins:US/Lincoln Memorial
1959-now provided the source for low-price high-
ambiguity (LPHA) product seller feedback. These
sellers were high-volume collectable penny merchants.
Coins sold by these sellers were typically less than $25.
The eBay category of coins/coins:US/gold was used
for high-price high-ambiguity products. Sellers of coins
989
for collector value, rather than for bullion value, were
identified. Products sold by these sellers typically sold
for amounts between $300 and $1000.
To ensure that the seller was an actual business,
rather than someone just cleaning out a closet, small-
volume sellers (those with low feedback ratings) were
screened out. eBay calculates the feedback rating by
summing the unique positive feedbacks (+1) and the
unique negative feedbacks ( 1). For three of the four
products it was possible to only use sellers with a
feedback rating of greater than 1000. A rating of 1000
means that the seller had a minimum 1000 sales, but
given the typical feedback response rate of approxi-
mately 50–70%, probably had more than 1000. Sellers
of laptops did not deal in the high volumes of the other
products, so they were included if they had a minimum
feedback rating of 600.
For each product, twenty sellers with adequate
feedback ratings were identified, and the most recent 50
positive feedback posts for each were gathered. The
selection of twenty sellers for each of the four risk
contexts and the most recent 50 positive feedbacks for
each of the sellers ensured that each risk category had
the same total number of feedback posts (1000) and that
they were for high-volume sellers. Going to a greater
number of sellers would have meant using sellers that
had smaller sales volumes.
3.2. Describing and measuring feedback content
Each feedback post was classified on one of four
feedback variables:
- service content only
- product content only
- both service and product content (if both were present)
- nonspecific.
Service content-only feedback contained comments
that were associated with the service received and
included such issues as shipment or delivery speed,
packaging, communication, and problem resolution, as
well as comments that specifically praised the transac-
tion or service. Product content-only feedback con-
tained comments addressing issues such as how good
the product was, whether the product was exactly as
described, or that mentioned the product’s condition.
Both service and product content feedback contained
comments relating to both the service and the product.
Nonspecific feedback content provided no specific
product-or service-oriented comments but praised the
seller or just gave the seller a grade. Examples of
990 B.J. Finch / Journal of Operations Management 25 (2007) 985–997

Table 1
Example feedback and classification
Service- Product- Both service- Non-specific
only only and product-oriented
transaction
Praise: Nice Laptop! Great customer service! 1 1 1
Praise: Excellent Service!! Perfect Product!! Fast shipping!! AAA+++ 1 1 1
Praise: Very Pleased! Very happy with purchase 1
Praise: GREAT LAPTOP!HONEST SELLER!!! 1
Praise: Item in nice shape 1
Praise: Product as described, excellent deal, super fast delivery aaa+++ 1 1 1
Praise: Good Seller 1
Praise: Excellent product for the price 1
Praise: Great customer service!! Took care of problems quickly! 1
Praise: Great emails and packaging. I’ll buy from him again 1
Praise: THE BEST 1

Table 2
Frequencies for feedback variables
Non-specific Service-oriented only Product-oriented only Both service-and product-oriented
1000 Low-price low-ambiguity 148 468 69 315
1000 High-price low-ambiguity 148 330 113 409
1000 Low-price high-ambiguity 143 299 165 393
1000 High-price high-ambiguity 179 272 154 395

classified feedback are presented in Table 1. For the first
two feedback posts in Table 1, since service-oriented
and product-oriented comments were present, it was
classified as both service and product-oriented. Because
the general content of the third feedback post did not
specify product or service, it was classified as non-
specific. The fourth and fifth feedback posts were
product-only.
Feedback classification was performed indepen-
dently by two-trained classifiers. Both were provided
an explanation of the four feedback variables and the
classification process and were provided written
instructions for classification. Sample key words
were provided for service feedback, product feed-
back, and nonspecific feedback. Examples of actual
feedback that had been correctly classified were used
in the training process as well. Each classifier
completed all 4000 feedback items. While it is
common to examine inter-rater reliability when
multiple raters are used for scaled or numerical data,
the use of multiple raters for categorical data does not
lend itself to the same treatment. Percent agreement is
often used as an indicator of consensus for categorical
data classification. The two classifiers agreed on the
classification of 84.4% (3496 out of 4000) feedback
posts. After comparison of the two sets of feedback,
and the identification of inconsistencies, the classi-
fiers were asked to re-visit each item that they
disagreed on and come to consensus on the
classification of each of those items. The tests of
propositions were then performed on the complete
set of classified data. The actual frequencies for each
of the four feedback variables are presented in
Table 2.
4. Results
4.1. Introduction
The analyses were completed in two steps, corre-
sponding to the two propositions. The first addressed
Proposition 1, to determine if there were differences in
feedback content (service- versus product-orientation)
across the four risk contexts. The second addressed the
Proposition 2, that relationships between the risk
context and the frequency of product-oriented and
service-oriented feedback content will be apparent.
More specifically, that the importance of service-
oriented dimensions of quality will be greatest at low
levels of risk (Proposition 2a) and the importance of
product-oriented dimensions of quality will be greatest
at high levels of risk (Proposition 2b).
 B.J. Finch / Journal of Operations Management 25 (2007) 985–997 991

4.2. Feedback differences between risk contexts

In the analysis for Proposition 1, a chi-square test

was performed on the product-only and service-only
frequencies across all four risk contexts (shown as
LPLA, HPLA, HPHA, and LPHA in Fig. 2). Testing
was limited to the product-only and service-only
feedback because those were the only categories in
which the customer could be shown to have a clear
emphasis on one or the other. Feedback that mentioned
both product and service issues demonstrated a
customer’s interest in both, but no emphasis on one
or the other could be deduced.
The results of the chi-square analyses of feedback
variable frequencies among the four risk contexts are
presented in Table 3. The high chi-square value (90.8) Fig. 2. Percentages associated with feedback frequencies.
relative to the critical value (11.3449) demonstrates
with near certainty ( p < .01) that the relative impor-
tance of service versus product dimensions, as exhibited The Marascuilo procedure compares all pairs of
by the proportions of service-only and product-only proportions by comparing the absolute values of the
feedback, differs among the four risk contexts shown in proportion differences for each pair to a distinct critical
Fig. 2. This supports Proposition 1. range at the desired level of significance. A pair of
feedback frequencies, each expressed as a proportion of
4.3. Preliminary relationships between risk and 1000, are deemed significantly different from each other
customer feedback content if the absolute difference exceeds the critical range for
that pair. Thus, conclusions can be drawn as to which of
The chi-square test performed for Proposition 1 the four risk contexts have significantly more or less
indicates that at least one significant difference exists product-only or service-only feedback out of the 1000
among the frequencies of the product only or service only possible for each. For example, if the frequency of
feedback proportions among the four risk contexts. It product-only feedback (expressed as a proportion of
does not identify which feedback variables were actually 1000) in the LPLA risk context is less than that of the
different. For the second phase of this analysis – the product-only feedback in the HPLA risk context, the
identification of preliminary relationships between the Marascuilo procedure determines whether that differ-
service-or product-orientation of the feedback content ence is significant. The procedure was performed within
and risk context suggested in Proposition 2 – the the product-only and service-only feedback frequencies
Marascuilo procedure (Berenson et al., 2002; Maras- separately, comparing frequencies for each pair of risk
cuilo, 1966) was used as a follow-up to the chi-square. contexts at p < .01.

Table 3
Results of chi-square analysis
Low-price High-price Low-price High-price
low-ambiguity low-ambiguity high-ambiguity high-ambiguity
Service only frequencies 468.00 330.00 299.00 272.00
Service only expected frequencies 393.13 324.31 339.69 311.87
Service only chi-square values 14.26 .10 4.87 5.10
Product only frequencies 69.00 113.00 165.00 154.00
Product only expected frequencies 143.87 118.69 124.31 114.13
Product only chi-square values 38.96 .27 13.32 13.93
chi-square = 90.8
Degrees of freedom = 3
p = .01 critical value = 11.3449
 992
Table 4
Summary of marascuilo analysis: pairwise comparisons of frequency of service only feedback across risk contexts
Risk contexts being compared LPLA vs. HPLA LPLA vs. LPHA LPLA vs. HPHA HPLA vs. LPHA HPLA vs. HPHA LPHA vs. HPHA
Actual frequencies 468 & 330 468 & 299 468 & 272 330 & 299 330 & 272 299 & 272
being compared
Critical range calculations .073 .072 .071 .070 .069 .068
for p < .01
Absolute values of .138 .169 .196 .031 .058 .027
proportion differences

B.J. Finch / Journal of Operations Management 25 (2007) 985–997

Significant difference p < .01 p < .01 p < .01 - - -
(abs value of difference
> critical range)
Interpretation Frequency of service Frequency of service Frequency of service No significant No significant No significant
only feedback in only feedback in only feedback in difference between difference between difference between
LPLA > HPLA LPLA > LPHA LPLA > HPHA HPLA and LPHA HPLA and HPHA LPHA and HPHA

Table 5
Summary of marascuilo analysis pair wise comparisons of frequency of product only feedback across risk contexts
Risk contexts being compared HPLA vs. LPLA LPHA vs. LPLA HPHA vs. LPLA HPLA vs. LPHA HPLA vs. HPHA LPHA vs. HPHA
Actual frequencies 113 & 69 165 & 69 154 & 69 113 & 165 113 & 154 165 & 154
being compared
Critical range .043 .048 .047 .052 .051 .055
calculations
for p < .01
Absolute values .044 .096 .085 .052 .041 .011
of proportion
differences
Significant difference P < .01 p < .01 P < .01 - - -
(abs value of difference
> critical range)
Interpretation Frequency of product Frequency of product Frequency of product No significant No significant No significant
only feedback in only feedback in only feedback in difference between difference between difference between
HPLA > LPLA LPHA > LPLA HPHA < LPLA LPHA and HPLA HPHA and HPLA HPHA and LPHA
 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
Fig. 3. Generalized relationships identified in Propositions 2a and 2b
analysis.
The results of the service-only feedback analysis
(associated with Proposition 2a) presented in Table 4
show that the frequency of service-only feedback for the
LPLA product (the lowest risk product) is significantly
greater than the frequency of service-only feedback for
HPHA (the highest risk product). It also shows that the
frequency of service-only feedback for the lowest risk
product (LPLA) is significantly greater than that of
LPHA and HPLA products. In summary, the frequency
of service-only feedback in the lowest risk product
(LPLA) is significantly greater than the frequency of
service-only feedback for any other risk context. These
results support Proposition 2a, that the importance of
service-oriented dimensions of quality will be greatest
at low levels of risk.
Table 5 provides the results of the Marascuilo
procedure for the frequencies of product-only feedback
associated with Proposition 2b. The results of the
HPHA/LPLA (highest risk versus lowest risk) compar-
ison in the third column show that the frequency of
product-only feedback for the HPHA product was
significantly greater than the frequency of product-only
feedback for the LPLA product. The results also show
that the LPHA product had significantly greater
product-only feedback than the LPLA product and
the HPLA product also had significantly greater
product-only feedback than the LPLA. These results
demonstrate that the products with higher risk (HPLA,
LPHA, and HPHA) had significantly greater product-
only feedback than the product with the lowest risk
(LPLA), and lend support for Proposition 2b, that the
importance of product-oriented dimensions of quality
will be greatest at high levels of risk.
Unlike the relationships identified for Proposition 2a,
however, the results for Proposition 2b (product-only
feedback) do not show that the highest risk product had
993
significantly greater product-only feedback than the
‘‘medium’’ risk products. They show that products with
‘‘some’’ risk (high price, high ambiguity, or high both)
had significantly greater frequency of product-only
feedback than the lowest risk context (LPLA). While
these results show support for Proposition 2b one could
argue that it is not as strong as the support shown for
Proposition 2a.
These relationships are generalized in Fig. 3, which
shows a shift in emphasis from service-oriented quality
dimensions to product-oriented quality dimensions as
risk increases.
5. Discussion
5.1. Support and extensions of prior research
This exploratory research provides strong evidence
pointing to customers emphasizing different dimen-
sions of quality under different contexts in the online
auction environment. The previous research that
stressed a contextual view of quality included Reeves
and Bednar (1994), Rosen and Karwan (1994),
Chowdhary and Prakash (2005). Although the Reeves
and Bednar (1994) and the Rosen and Karwan (1994)
research was conducted prior to the existence of the
Internet as we know it today, both studies are relevant to
this research and their work is extended here. Both
studies stressed the need for quality-related research
that acknowledges the contextual nature of quality and
relative importance of different service quality char-
acteristics. The Chowdhary and Prakash (2005) work
also seeks to advance the contextual view of quality
definitions, and reexamines two-factor theory (satisfiers
and disatisfiers). In the Internet environment, advances
in defining quality have been made by such studies as
Zeithaml et al. (2001), Burke (2002), Madu and Madu
(2002), and Parasuraman and Zinkhan (2002). All of
those studies examine quality expectations in the
Internet environment, but focus on traditional Internet
fixed-price retailers and their websites. None focus on
service performance in an online auction environment.
The exposure to risk in the online auction environment
is significantly different that the more traditional
Internet retailing environment. The influence of that
risk on customer expectations differentiates this study
from previous research and extends the understanding
of quality into that realm.
It seems logical that the quality issues to which
customers would pay the most attention would be driven
by the issues that most concern them. The fact that there
are more service-only feedback posts than product-only
994 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
feedback posts by buyers in low-risk contexts does not
necessarily mean that those buyers submitting service-
only feedback do not care at all about product quality.
Likewise, in high-risk contexts the increased emphasis
on product quality issues does not mean that service
quality does not matter. It more likely indicates that they
are more attentive to service issues or more attentive to
product issues. Carman’s (1990) contention that the
relative importance of quality attributes in different
situations is an important component of the quality
evaluation is probably at play here. The work by
Chowdhary and Prakash (2005) that examines satisfiers
and dissatisfiers may be relevant. It could be, for
example, that under high risk conditions when positive
feedback is dominated by product-oriented feedback,
negative feedback could be dominated by service-
oriented feedback.
5.2. Managerial implications
The results of this study provide online auction
merchants with specific direction and may have
implications for service system design in this environ-
ment. Managers selling predominantly low risk
products should be aware that customers will view
service-oriented quality dimensions as most important.
Conversely, managers selling mostly high-risk products
should be aware that customers will focus on product-
oriented quality dimensions. Those who sell a mix of
high-risk and low-risk products may need to adjust their
business processes to align themselves with customer
expectations appropriately, depending on the product.
These relationships may also provide ways for
merchants to reduce costs by not providing benefits
which are not valued by the customer.
Wemmerlov (1989) distinguishes between fluid
(flexible) and rigid (inflexible) service processes.
Dynamic customer expectations resulting from varying
product price and ambiguity may indicate a need for
fluid processes among those sellers whose wares vary on
risk dimensions, while rigid processes may suffice for
sellers with a very homogeneous product line. A
merchant with a broad product line of computer-related
products, for example, may need to provide fast delivery
for low-price products in order to meet customer
expectations, but may not need fast delivery for high-
price products.
Greater knowledge of customers’ expectations
makes it easier to meet those expectations. Such service
attributes as fast shipping, communication, and problem
resolution will be important for a low-risk product. A
service design that effectively provides those services
will be viewed positively by buyers, and should be
considered by those sellers. For high-risk products,
however, dollars spent to reduce delivery time or
enhance communication may not be viewed by
customers as important.
In the high-risk context, the customers’ risk is that
the product will not be what is expected, and that
exposure increases as the price increases. This risk can
be reduced by the seller in several ways. The product
description should be complete and detailed, commu-
nicating as many important details about the product as
possible. Adding high-quality photos that provide
extensive information about product condition would
also reduce ambiguity. The seller can also encourage
potential buyers to ask questions if they have them, and
offer to provide more details or photos off-line. In some
cases, particularly with some common collectible
products, third-party graders provide services that can
be used to remove product ambiguity.
6. Limitations and future research
6.1. Limitations
The major limitations of this study are tied to two
issues—the data source and the generalizability of the
results. The use of this unobtrusive data collection
method has the obvious advantages of data richness and
the data not being affected by the collection methods or
experimental design. It brings limitations, however,
when compared to the more traditional approaches like
surveys and experiments. More traditional methods
allow the researcher to establish controls that may make
the data a better fit for analysis, but the researcher’s
involvement with the data creation may also contam-
inate it. An unobtrusive measure eliminates that
contamination, but the data, as exemplified here, are
unlikely to be as ‘‘neat’’ as the researchers would like.
Unlike a survey, for example, which is designed with
the analysis in mind, this mode of data collection
requires more effort to convert the raw data to a form
that can actually be analyzed. The researcher must then
make sure that that conversion is unbiased, requiring
multiple interpreters, etc. Data of this type are also more
suited to broader propositions and research questions,
rather than tests of more specific hypotheses possible
with surveys or experiments designed with a particular
hypothesis-testing goal in mind.
A second potential limitation is the generalizability
of these results beyond eBay. eBay was selected as the
market context, but it may have other characteristics
that affect outcomes. For example, it is possible that an
 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
auction rather than a fixed-price market, may have an
impact on expectations. There was no evidence in
feedback content, however, that mentioned that auction
pricing as an issue. It would seem likely, however, that
customers in an auction market would be more willing
to take on risk than customers in a fixed-price market.
Feedback is archived and accessible in several fixed-
price markets (Amazon, for example, or eBay’s fixed-
price Half.com), so the study could easily be replicated
in that environment to see if these results were
generalizable to fixed-price markets.
The current trend is towards more markets with these
characteristics rather than fewer. In the early days of the
Internet, the characteristics of online shoppers were
significantly different from the characteristics of
traditional shoppers. Those differences have disap-
peared. As transaction characteristics associated with
these types of markets become more commonplace, the
generalizability and importance of this data should
increase as well.
Generalizability beyond the business-to-consumer
(B2C) auctions to business-to-business (B2B) auctions,
is an issue that could have far reaching implications.
The characteristics of many B2B auctions, however,
differ from B2C auctions like eBay. The two environ-
mental characteristics that distinguish the B2C online
auction – lack of a relationship between the buyers and
sellers and product ambiguity – do not exist to the same
degree in B2B online auctions. The desire to avoid the
risk inherent with ambiguous products leads B2B
auction users to purchase goods or services which lend
themselves to specifications. In fact, B2B reverse
auctions have been shown to be a less desirable
purchasing solution when complexity, as defined by the
number of non-price issues germane to the transaction,
increases (Gattiker et al., 2005; Burt et al., 2003).
Kaufmann and Carter (2004) contend that ‘‘specificity’’
of the product is the most important factor in selecting
an online reverse auction as a good purchasing fit.
The relationships between buyers and sellers in the
B2B auction setting also differ from those in the B2C
auction characterized by eBay. In many B2B auction
scenarios, buys and sellers are familiar with each other
and engage in repeated transactions. The use of
reputation systems, like eBay’s feedback archive, is
critical to the eBay market because of the lack of
ongoing relationships between buyers and sellers and
low occurrence of return customers. Sellers are
concerned about feedback because the feedback
formalizes their reputations to prospective buyers. In
a B2B setting, actual experience is more likely to form
the reputation sellers have with buyers.
995
6.2. Future research
This study succeeded in the most important objectives
for any exploratory project. It began to map new territory,
identified variables that seem to make a difference so that
future research could better focus, and it exposed more
questions to guide future research.
The first question resulting from this study deals with
more precise definitions of quality. The relationships
identified between risk and the customer’s emphasis on
product-or service-oriented dimensions point to custo-
mers defining quality differently in different contexts.
The customer’s definition of quality may, however, go
beyond the product-or service-oriented emphasis and
include specific dimensions of service or product
quality. Now that a link between risk and the
product-or service-orientation of the customer’s quality
emphasis has been identified, future research can extend
the definitions to specific service or specific product
quality dimensions that are most important to the
contexts of the online auction environment. A test of the
validity of traditionally accepted product and service
quality dimensions, as well as quality dimensions more
recently developed as more relevant to e-markets,
would be a good starting point for that project.
Another set of questions that arise from this research
is related to negative feedback. In this study, the
evaluation of positive feedback provides a sense of what
customers view as important. Customer complaints
could also add to that knowledge. Negative feedback is
also a component, although for most sellers a small one,
of seller reputation. Such parallel questions as: ‘‘What is
the content of negative complaints?’’ ‘‘Is negative
feedback the mirror image of positive feedback?’’ and
‘‘Is negative feedback content associated with risk?’’
need to be answered to gain a full understanding of
customer expectations in these risk-prone transactions.
The validity of two-factor theory (satisfiers and
dissatisfiers) examined by Chowdhary and Prakash
(2005) could be tested by including negative and
positive feedback in the feedback analysis.
eBay takes feedback a step further by allowing both
buyers and sellers to respond to feedback they receive.
Sellers rarely respond to positive feedback from buyers,
but seller responses to negative feedback from buyers are
very common. Research on traditional quality-related
feedback indicates that negative feedback can be the most
valuable feedback for a traditional business because it
provides direction for improvement. A cursory review of
sellers’responses to negative feedback from eBay buyers,
however, shows that negative feedback is not viewed as an
opportunity for improvement in this environment. More
996 B.J. Finch / Journal of Operations Management 25 (2007) 985–997
often than not, a seller’s response to negative feedback
from a buyer seems to blame the buyer for the problem,
rather than to take responsibility for it. Many sellers use
the response as an opportunity to warn other sellers not to
sell to that particular buyer, because of the possibility of
receiving negative feedback. Even though many sellers in
this market compete with traditional businesses, the
nature of the communication exchange between the
online business and dissatisfied buyers appears to be
different. The service recovery practices common in
traditional businesses seem absent here. Future research
should seek to determine how relationships between
businesses and customers differ in these environments
and the role, if any, service recovery plays.
This research was made possible by the availability
of a growing source of qualitative data—arguably the
biggest archive of customer feedback on the planet. The
outcomes of this study extend theory relevant to quality
management and service system design. As these
markets grow with increasing use of shopping bots and
sales of fixed-price used goods, the number of buyer’s
exposed to these risks increase. Recognizing that
different customers value different aspects of a
transaction is not new, but the ability to link customer
expectations to risk associated with particular products
opens up new terrain for managing quality in this
growing environment. Understanding the implications
those risks have for sellers’ operations will be important
if those markets are to prosper.
Acknowledgements
The author acknowledges the valuable suggestions
from editors Diane Parente and Tom Gattiker, as well as
those from the anonymous reviewers.
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Byron J. Finch is a professor of management at Miami University in
Oxford, Ohio. He received his PhD in operations management from
The University of Georgia in 1986. He has taught undergraduate and
graduate courses in operations and supply chain management. Dr.
Finch’s research interests involve supply chain management, service
operations, and the utilization of the Internet to improve product and
service quality. He has published in Journal of Operations Manage-
ment, International Journal of Production Research, Academy of
Management Journal, Quality Management Journal, International
Journal of Quality and Reliability Management, and Production and
Inventory Management Journal. He has also authored and co-authored
several texts in operations management.