The Review Economy and Why You Need a Review Strategy

Today’s consumers expect readily available, honest, open and complete information on all products and services. They want unbiased information that will help them make the right choice. The evolved buying process these days means that consumers are routinely referring to real user reviews as a source of reliable guidance to help them make their purchase decisions.

Honest user reviews provide insight into the value, reliability and quality of services and products – directly from people who have already purchased them. These days it would be almost unthinkable to book a hotel room without firstly checking the hotel’s reviews, or to make an expensive purchase decision, such as an automobile or a vacation, without firstly finding out what other purchasers have said.

What is The Review Economy?

Research conducted by Northwester University tells us that 95% of shoppers refer to online reviews before committing to a purchase. The research also highlights how the purchase likelihood for a product with five reviews was an incredible 270% higher than the purchase likelihood for a product with zero reviews.

The review economy acknowledges how online reviews have such a massive impact on purchase decisions. The number of reviews, the existence of negative reviews, average star ratings, review frequency and when reviews have been submitted are all review-related factors which can influence purchase decisions.

The clear power that online reviews have in influencing sales makes it important for retailers to develop appropriate strategies to monitor and display reviews, interact with negative reviewers and elicit influential, positive reviews from happy customers.

The BBC Radio 4 show The Bottom Line focused this week on the Reviews Economy in a show entitled “Feedback Frenzy.” On it, they discussed the power of online reviews and how they are changing the relationship between businesses and customers.

On the show, the guests discussed how online reviews and ratings are a manifestation of word of mouth… “word of mouth on steroids” as one guest put it. The discussion pointed out that businesses around the world are now taking reviews incredibly seriously. They are spending time, effort and money on improving customer experience. Businesses are also benefitting because they gan gain so much more insight than they previously had.

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How to Use the Review Economy

Research has shown that although online reviews have the power to dramatically influence purchase decisions the magnitude of this influence depends on many factors including:

  • Price of the product or service
  • Degree of uncertainty or risk associated with the purchase
  • Review star ratings
  • Existence of negative reviews
  • Total number of reviews

For example, it has been found that reviews had a greater influence on purchase likelihood for higher priced products than for lower. The reason is that when the price is higher there is more perceived risk in the buyer’s decision. The additional information gained through reading reviews helps mitigate that risk.

Another fact is that reviews have greater impact for items which require higher levels of consideration. For example, products related to health and safety or products for which a recurring payment commitment is required.

Review star ratings also have an impact but it is worth noting that the sweet spot is an average of between 4.2 and 4.7 stars. Averages of 4.7 to 5.0 are seen to be ‘too good to be true’ and some prospective customers will think that consistent 5 star ratings are simply fake.

Online shoppers will purposely seek out negative reviews. As noted, people are skeptical of perfect review ratings and in many cases a few negative reviews can be more believable. It has been found that consumers spend four times as long on a site when interacting with negative reviews and there is a 67% increase in conversion rate.

The Four Vs

When reading reviews online shoppers pay attention to four key review attributes.

  • Valence
    • This refers to the average review star rating and the review descriptions.
      • As noted, 4 star reviews are perceived as more trustworthy than consistent 5 star ratings.
  • Volume
    • The total number of reviews when compared with other possible choices.
      • The overall quantity of reviews has been found to be second only to the average star rating in terms of importance to the consumer.
  • Veracity
    • The perceived trustworthiness of the reviewer and whether the reader thinks the reviewer is representative of them.
      • Reviews with associated names and identities tend to be trusted more than those without.
  • Velocity
    • The times when reviews have been submitted and the frequency of review postings.
      • In B2C environments review recency is important. Over 50% of consumers say that a review must be under 1 month old to affect their buying decision.

Reviews provide huge potential benefits for online vendors. Consumers clearly want to read reviews before making a purchase decision, especially for high-end products and high-consideration products and services.

Businesses need effective review strategies that recognise the behaviour of their customers, how reviews influence them and ensures that people are seeing the information they need right where they want to find it. Monitoring reviews, optimising review presentation and continuously eliciting fresh reviews should all be part of an effective review strategy.

Even bad reviews can be made into positives. Your response can become a marketing tool. Everyone makes mistakes but it’s how you fix them that counts.

The Review Economy Evolution

Customer reviews and comments made on social media about products and services provide enormously valuable insight into how customers are using products, what they expect from them and where those products and services are failing to meet customer expectations. Reviews and comments have evolved to become highly valued indicators of valuable product development pathways. Here are a few thoughts on how product reviews and feedback can be used.

  • Product development
    • Customer feedback will often highlight features and capabilities desired by users which can be incorporated into the product development cycle.
    • Reviews can sometimes indicate demand for innovative new products which don’t currently exist.
  • Derive case studies
    • Finding customers who are happy to act as case studies can be tricky. But customer reviews can highlight delighted purchasers who are more likely to be happy to act as a valuable case study.
    • Negative reviews can also be a valuable source of case studies. Turning an unhappy customer into a happy one is a very positive story to share.
  • Provide sales intelligence
    • There is a lot to learn from reviews regarding the attitudes of the targeted market. Feeding this intelligence back to sales teams helps them to ensure that they are addressing concerns.
    • Monitoring reviews and comments submitted by specific customers and accounts helps to develop a deeper understanding of client needs and desires. This intelligence can be hugely beneficial to sales teams when talking to these clients.

Product and service reviews are an important way in which users communicate with suppliers. By paying close attention to valuable feedback from their customers and acting on the information provided businesses are able to stay ahead of the competition, reduce customer churn and maximise valuable customer loyalty.

If you’d like more feedback from right within the interactions and emails you’re already having with your customers, give Customer Thermometer a try: