Do Consumer Generated Reviews Work?

John Hope-Johnstone

Olá!  In 1995, when Amazon.com  first began letting customers post reviews of products, many people, (myself included), thought the Internet retailer had lost their collective marbles. Letting consumers rant about products in public was a recipe for retail suicide we thought. Now, almost 15 years later, customer reviews are as common as hyperlinks, and a retail Web site that does not have feedback loops is considered irrelevant. In fact, more than 5 million consumers have posted tens of millions of reviews on Amazon.com, reports the Seattle company.

Do consumer generated reviews effect business? Yes says the Nielson company in a July 2009 study of 25,000 consumers in 50 countries. Ninety percent of consumers surveyed noted that they trust recommendations from people they know, while 70 percent trusted consumer opinions posted online.

Jonathan Carson, President of Online, International, for the Nielsen Company was reported as saying, “The explosion in Consumer Generated Media over the last couple of years means consumers’ reliance on word of mouth in the decision-making process, either from people they know or online consumers they don’t, has increased significantly.”

The 2009 report gives this graph as example of consumer trust:

Nielson Trust in Advertising

Back in 2007, comScore, Inc., a leader in measuring the digital world, announced the results of a study conducted with The Kelsey Group, a leading research and strategic analysis firm focused on local media and advertising, that examined the impact of consumer-generated reviews on the price consumers were willing to pay for a service delivered offline. The study, based on a survey of more than 2,000 U.S. Internet users in October 2007, revealed that consumers were willing to pay at least 20 percent more for services receiving an “Excellent,” or 5-star, rating than for the same service receiving a “Good,” or 4-star, rating.

The study reported the non-Internet sales impact of online reviews for restaurants, hotels, travel, legal, medical, automotive and home services. Nearly one out of every four Internet users (24 percent) reported using online reviews prior to paying for a service delivered offline. Of those who consulted an online review, 41 percent of restaurant reviewers subsequently visited a restaurant, while 40 percent of hotel reviewers subsequently stayed at a hotel.

More than three-quarters of review users in nearly every category reported that the review had a significant influence on their purchase, with hotels ranking the highest (87 percent). Ninety-seven percent of those surveyed who said they made a purchase based on an online review said they found the review to have been accurate. Review users also noted that reviews generated by fellow consumers had a greater influence than those generated by professionals.

The report went on to say that, “comScore asked the study participants how much they would be willing to pay for a particular service based on the quality of the service. The results showed that consumers were willing to pay between 20 percent and 99 percent more for an Excellent (5 star) rating than for a Good (4 star rating), depending on the product category.”

This underscores the need in the service industry to not just give good service (which is expected by the consumer) but to give outstanding service that is “remarkable” by the consumer. This then becomes part of the purchase “bragging rights” whereby the consumer creates “buzz” about the purchase to others not only about the product but the service that went along with it.

To support this hypothesis that consumer generated reviews really do affect buying behavior, a 2007 study by Deloitte & Touche USA reported that;  “almost two-thirds (62%) of the respondents to an online poll said they now read online product reviews written by other consumers. More than eight in 10 (82%) of those who read reviews said that their purchasing decisions have been directly influenced by those reviews. People have used the reviews both to confirm initial buying decisions and to change them”, the study found.

While the percentages were slightly higher for younger shoppers, all age groups are reading and acting on online reviews, according to Deloitte. In addition, 69% of the respondents said they have shared online reviews with friends, family or colleagues, the report stated.

But what about negative reviews. Even the best of brands will receive negative reviews at some point. According to a study by Euro RSCG Worldwide, 20 percent of consumers reportedly lash out at or about companies or their brands, due to the anonymity of social media. But that leaves 80 percent of consumers who do not. In other words, 20 percent makes up those who are unhappy with your products or services; if you only have 10 unhappy customers out of the 1,000 you serve, then less than one percent of your customer base is likely to lash out.

Ignoring any negative comments is foolish, it only feeds the problem. Respond, and respond immediately. Inspect the problem being reported, fix it if it exists, and report back. Keeping the dissatisfied consumer in loop all the way.

Today, we are not teaching new employees to “complete the loop”. Completing the loop simply means whom ever you pass the negative comment onto, YOU never negate contacting the complainer back yourself and keeping that customer in the loop every step of the way. You cannot overkill communications to a dissatisfied customer and all of their followers on the consumer review site.

I hope this has brought some thought to you about consumer generated reviews. Please post a comment or some additional information about consumer generated reviews. Thanks for reading.

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