Managerial responses to online reviews under budget constraints: Whom to target and how

•Full response to negative reviews leads to higher consumption likelihood than selective response.•Selective response to positive reviews leads to higher consumption likelihood than full response.•High-tailored response to negative reviews outweighs low-tailored responses.•Low-tailored response to positive reviews outweighs high-tailored responses. Previous studies provide mixed conclusions on the prioritization of response resources allocation. This paper examines the relative importance of three targeting strategies—full response, random response, and responding to extreme online reviews. It also explores the two levels of response tailoring (high vs. low) on consumers’ purchase likelihood by taking review valance into account. For those firms with sufficient budget, results from three laboratory experiments indicate the following; responding to every negative online review using high-tailored responses, and selectively responding to positive online reviews, using low-tailored responses is an optimal configuration. Whereas, for firms with limited budget, responding to extreme negative online reviews using high-tailored responses is the optimal configuration.