Right on cue? Category‐switching in online marketplaces

Abstract Research Summary When and why do producers change the categorization of their offerings? Prior categorization research assumes that producers engage in ongoing efforts to proactively optimize their categorical positioning, but this assumption may not hold for many producers due to their limited attentional capacity. Our theoretical account instead highlights the role of expectation violation cues—salient pieces of information indicating a violation of audience expectations—as triggers that can lead producers to revise their category choice. Our longitudinal study of 84,667 Airbnb hosts' categorization choices finds that negative customer reviews—an important form of expectation violation cue—significantly increase the likelihood of category‐switching, particularly in categories with heterogeneous expectations. Our study suggests that many producers might be less proactive about their category choices than previous research assumed. Managerial Summary How businesses categorize their products and services influences their commercial success; yet, there exists very limited understanding of when, why, and how businesses revise their category choices. Our study, which tracked the category choices of over 80,000 Airbnb hosts over time, reveals that Airbnb hosts most commonly switch categories after receiving negative customer reviews, particularly when a review indicates that the accommodation did not meet customer expectations and if the previously chosen category lacks a clearly defined set of expected features. When switching categories, hosts tend to choose categories that are relatively similar to their prior choices and that seem to accommodate a wide variety of offerings. These patterns suggest that many businesses might be less proactive about their category choices than previous research assumed.