The Crucial Factor of Online Reviews

by Robin Fiedler

Online shoppers are highly influenced by customer reviews and ratings so much so that they can make or break a sale. Not only do ratings affect the sale of products, but the more consumer reviews a product has the lower the number of returns. 4stars

It's already well-established that consumer purchases are influenced by word-of-mouth. "Recommendations from family and friends trump all other consumer touchpoints when it comes to influencing purchases, according to ZenithOptimedia" as reported by Bazaarvoice. With the increase of online shopping, another influence on consumer purchases comes from e-word-of-mouth, the customer ratings and product reviews.

In 2008, research showed "61% of people rely on user reviews for product information or research before a buying decision is made," lists Bazaarvoice. Similarly Shop.org reports 59% of consumers are influenced by reviews, but on the retailer side, 78% feel ratings and reviews are the number-one factor, according to Internet Retailer. And so after the 2009 holiday shopping season rang up a significant increase in online sales and online traffic, the number of retailers offering consumers the chance to read and write online reviews is increasing.

Just having an option to write and read reviews on a product page, however, is not enough. In fact, it may discourage consumers from buying. "If a consumer sees no reviews for product after product, they're going to go to another site where they can read reviews-and the retailer without reviews may have just lost a sale," says Pehr Luedtke, CEO of PowerReviews Inc.," quoted in Bill Siwicki's Internet Retailer article.

Internet Retailer reported on Petco's experience with product reviews and ratings on its website. "We've got numbers that show increased sales on items with higher reviews, and the increases are substantial," says John Lazarchic, vice president of e-commerce at Petco Animal Supplies Inc.," and the majority of product ratings are high. Studies show that positive reviews are the norm. "Across all of Bazaarvoice US clients, 80% of product ratings are 4 or 5 stars out of 5."

Besides influencing buying decisions, the consumer reviews have affected product returns. For Petco's site "On average, products with reviews have a 20.4% lower return rate than products without reviews. . . . Products with more than 50 reviews have a 65% lower return rate than products with no reviews." Siwicki writes that less returns added up to annual savings for Petco since returns can be up to 10% of the sale.

All of this has led to e-tailers offering contests, reward points, and even adding a ratings system or reviewer status levels for the reviewers themselves to encourage consumers to write product reviews, which leads to the question whether retailers are bribing consumers to write positive reviews. So do we trust the online product ratings? Bazaarvoice reports, "90% of consumers online trust recommendations from people they know; 70% trust opinions of unknown users."

Although retailers' innovative and multi-media advertising campaigns may drive consumers to "check out" or desire a product, the final decision to buy or not to buy a product from any given retailer is driven by fellow consumers' feedback rating and reviewing a product's quality; it's the power of worldwide consumer gossip.

Sources

"Industry Statistics: Power of Word of Mouth." Bazaarvoice. Jan. 2010.

Siwicki, Bill. "Getting Them to Write." Internet Retailer. Jan. 2010.