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April 25, 2019

Do customer reviews really matter?

Cracking how consumers evaluate potential purchases has become something of a Holy Grail for e-retailers in recent years.

By GlobalData

In economics, there’s a concept called Goodhart’s law, which roughly states that when you come up with and use a metric to evaluate as an indicator of the economy, it inevitably loses its evaluative power as people game it.

Are online reviews trustworthy?

With so many dodgy companies writing their own five-star reviews, or angry mobs bombing reviews with one- or zero-star ratings, do user reviews really matter anymore?

What do user reviews do?

Cracking how consumers evaluate potential purchases has become something of a Holy Grail for e-retailers in recent years. Walker Sands, as reported in the Washington Post in 2017, revealed that a third of American adults use a computer or phone to buy something at least once a week and CNBC’s All American Economic Survey reported that 76% of Americans would do most of their holiday shopping on Amazon.

Whereas in brick-and-mortar stores consumers can examine the product physically to get a feel for its quality, the limits and benefits of the internet have supplied consumers with a mechanism for a far more distributed ‘word of mouth’ – user reviews.

Online user ratings and reviews are one of the most important influencers of online purchasing behaviour as they are free, widely available and at least theoretically independent from manufacturers and retailers. The Pew Research Center found that 82% of US adults said they sometimes or always read online reviews for new purchases.

Amazon’s A9 ranking algorithm is skewed towards products with positive reviews because they are suggestive of positive consumer experience and an increased conversion rate, with a study from the Spiegel Research Center finding that they increased conversion by 270%.

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Studies suggest that negative reviews are more salient for consumers because they are viewed as more trustworthy and informative. In psychological terms, consumers use negative reviews to better understand the risks and potential losses of a purchase. More extreme responses appear to be more useful and enjoyable to consumers than moderate ratings.

The popularity of online reviews means that they are increasingly relied upon by consumers and businesses. However, the influence generated by reviews has created an incentive to game the system, to either positively or negatively influence sales without first buying the product.

How prevalent are fake reviews?

The consumer group Which? claimed in 2019 that Amazon is flooded with fake five-star reviews and further claims that these are unverified, commonplace and should be easy to prevent. Prevention could be accomplished through filtering out unverified sales and analysing the unique qualities of individual reviews, as well as checking how frequently and intensely the reviews are posted.

However, even verified reviews are open to some abuse, with some consumers concerned that sale details are then used by unscrupulous traders to write their own reviews for verification purposes.

Negative reviews are also subject to threats from fake reviews, as motivated fans and internet trolls have taken to “review bombing” hated products, games, movies and books often before release, in order to distort the market upon release.

Do user reviews really matter? Yes, and they should be embraced as a foundational pillar of e-commerce strategy.