Reviewing Ratings May 2012
Instantly accessible consumer ratings and reviews have added a new dimension to product and service marketing and provided consumers with a more objective (at least in theory) source of information to guide purchase decisions. Given their increasing commercial importance, reviews and ratings have become a vital part of corporate marketing campaigns, and platform providers for such evaluations are attempting to develop new concepts that eliminate arbitrariness, biases, and plain fraudulent use.
Companies will have to monitor how their own products and services are faring, but they will also have to identify misleading or even fraudulent strategies by competitors.
Positive ratings drive consumer purchases and have become an important part of the decision process when consumers are spending money. Several organizations publish product and service reviews and ratings for the benefit of consumers. In the United States, Consumers Union (New York, New York), a nonprofit organization that publishes Consumer Reports magazine, tests products and informs consumers. Similar organizations exist in other countries as well—Germany has Stiftung Warentest (Berlin, Germany), and the United Kingdom has the Consumers' Association (known as Which?; Hertford, England). Ratings, reviews, and reports from organizations play an important role in consumers' decision-making process; however, peer reviews can be more authentic because they focus on daily needs and realistic use situations rather than technical product and service analyses.
The effects of rating and review sites' success go beyond merely driving revenue: The sites also can level the playing field between national and global chains and local service providers. Michael Luca—an assistant professor of business administration in the Negotiation, Organizations, and Markets Unit at Harvard Business School (Boston, Massachusetts)—examined the impact of review sites on restaurants and discovered that getting an extra point on a review can have a large impact on a restaurant's revenue. However, this impact is on independent restaurants only, because reviews do not affect chain restaurants. Luca notes that chain-restaurant market share decreased as Yelp's (an online platform for user reviews; San Francisco, California) market penetration increased. Possible implications of the research for brands and scale are intriguing. Brands have been a proxy for reviews because a brand promise was a sort of guarantee that a chain restaurant would maintain a certain level of quality. Review sites may reduce the value of a brand—especially among younger consumer segments—because they enable consumers to find independent restaurants vetted by peer consumers. The increasing importance of such rating and review platforms might have been a driver for Google's (Mountain View, California) September 2011 purchase of Zagat, a company that publishes a popular survey-based restaurant-rating guide.
Despite all the benefits that reviews and ratings provide consumers with, criticisms about reliability, objectivity, and usability exist. Eric K. Clemons, a professor of operations and systems management at the Wharton School of the University of Pennsylvania (Philadelphia, Pennsylvania), found a number of shortcomings with existing rating systems. For instance, fans of a particular author provide high ratings for his or her books regardless of the books' actual merit. Raters also do not feel compelled to provide ratings for products and services that are only adequate, which leads to a bipolar distribution of ratings. In a 2009 study, computer scientist Vassilis Kostakos found that a fairly small percentage of users provided the majority of reviews. These super raters drown out more typical users. "What appears to be a wise crowd is just an oligarchy of the enthusiastic" ("Manipulation of the Crowd" Scientific American, July 2010; print). Review sites may also suffer from manipulation by business owners or other people directly involved with a product or service.
In fact, direct manipulation of review sites by business owners and employees is only part of the problem. Oftentimes, businesses entice consumers to write positive reviews for them in exchange for discounts on further purchases or other rewards. Consumers' writing fake reviews to cash in has caught the attention of regulators. Mary K. Engle, the Federal Trade Commission's (Washington, DC) associate director for advertising practices: "Advertising disguised as editorial is an old problem, but it's now presenting itself in different ways.... We're very concerned" ("For $2 a Star, an Online Retailer Gets 5-Star Product Reviews," New York Times, 26 January 2012; online).
Other commentators also see problems when ratings spill over to less commercial products such as news articles. Wired writer Chris Colin perceives fundamental issues with "thumbs-up" and "Like" buttons as they see use on Digg (San Francisco, California) and Facebook (Menlo Park, California). "Yelpification of the universe is so thorough as to be invisible.... Our ever more sophisticated arsenal of stars and thumbs will eventually serve to curtail serendipity, adventure, and idiotic floundering" ("Rate This Article," Wired, August 2011; print). In other words, users who allow ratings and reviews to guide them completely may limit their perspective on the world. Colin quotes Erik Davis, technoculture critic and former Wired contributor, who warns that "we've started replacing actual experience with someone else's already digested knowledge."
Web 2.0 is meant to provide audiences with the chance to chime in, and ratings are supposed to help users find good products, services, and content; however, when the world becomes rated, average opinions might receive undue weight. Some products are for a small consumer segment only and do not benefit the majority of consumers, and some articles are meant to be provocative.
New approaches attempt to change the nature of ratings and reviews, making them more objective. Bundle (New York, New York) "believe[s] that businesses should be rated by real data—not just by people's subjective opinions" (www.bundle.com). The company analyzes credit-card data to extract information such as the number of repeat customers a business has, the amount of money customers typically spend in a business, and the frequency of customer visits to a business. Currently, Citi (New York, New York) provides Bundle with the credit-card-transaction data, which are stripped of personal information about cardholders and instead attached to a unique identifier to allow analysis. Actual purchase behavior indicates whether customers are satisfied with a product or service. Another new company is trying to reduce the impact of third-party ratings and reviews by allowing users to test products for themselves. Ybuy (Manhattan Beach, California) offers a subscription service that gives members the opportunity to use a product for 30 days before either returning or purchasing it.
Ratings and reviews by peer consumers will remain a powerful force that manufacturers and service providers will have to take into account. The field of platform providers, though, is likely to change, and new approaches are vying for consumer interest. Companies will have to monitor how their own products and services are faring, but they will also have to identify misleading or even fraudulent strategies by competitors. Consumers might also grow tired of subjective and biased opinions—at least across some product and service categories—and search for different ways to judge and assess offers when making purchase decisions.