This page is part of a global project to create a better online reviews system. If you want to know more or give your feedback, write at [email protected] and we’ll grab a beer ;)
The question has been partially addressed in previous sections: it’s all about building trust. In today's world, it's a necessity—62% of consumers say they won’t support brands that engage in review censorship $^1$.
Here’s why a business should invest in online reviews:
- Public reviews: acquire customers
- Show validity: Demonstrate to potential customers that they are a reliable choice by maintaining a good rating (more on this in the “Threshold Effect” section).
- Stand out: Outshine competitors with higher ratings and better comments.
- Showcase real examples: Provide real-life examples of usage to convince readers that the business is a perfect fit for their needs.
- Indicate purchase history: Reviews often equate to purchases in customers' minds; the more reviews, the more credible the business appears (discussed further in the “Number of Reviews” section).
- Private reviews (also applicable to public reviews): improve service
- Customer retention: Retain unhappy customers before it's too late.
- Identify major issues: Learn about key problems to address. While companies use other indicators to measure performance (e.g., the number of overdue deliveries for a delivery service), it's crucial to capture customer satisfaction—the ultimate target (e.g., is the delivery time acceptable to customers?). Issues reported in reviews may span multiple departments, whereas internal indicators are typically department-specific. Online reviews provide valuable consumer feedback for better marketing strategies, including brand perception $^2$.
- Understand specific expectations: Gain insights into expectations in various markets (countries, regions, seasons, demographics) that may differ from the global view.
- Internal reporting: Foster a customer-focused culture and build trust between departments through transparency. Departments can use customer satisfaction indicators to showcase their performance to top management.
- Engage with customers: Active consumer reviews increase engagement with the company $^3$.
- Generate user content (UGC): Encourage happy customers to create content that can be integrated into marketing strategies to attract new customers.
- Benchmark competitors: Compare specific standards (e.g., “Is our Net Promoter Score better than the industry average?”- although NPS or average ratingg are not always relevant, because it depends on where and how it has been captured, we’ll show that later).
Achieving a high volume of positive reviews can significantly boost revenue. Research indicates that products with a high volume and positive ratings see increased sales and revenue $^4$.
The impact is substantial: a one-star increase on Yelp can lead to a 5-9% revenue increase $^5$.
Additionally, companies will likely receive organic reviews even if they don't register on public platforms (Google, Trustpilot, etc.). To manage their e-reputation, it's in their best interest to participate actively in this process (more on this in the “Consent” section).
Lastly, since competitors are also leveraging online reviews, it’s crucial for businesses to stay competitive by surpassing them in both the number of reviews and average ratings.
$^1$ Trustpilot, 2020.
$^2$ “Mining Marketing Meaning from Online Chatter: Strategic Brand Analysis of Big Data Using Latent Dirichlet Allocation”, Tirunillai and Tellis, 2014.
$^3$ “Social Network Integration and User Content Generation”, Huang, Hong, and Burtch, 2017.
$^4$ “A Meta-Analysis of Electronic Word-of-Mouth Elasticity”, You, Vadakkepatt, and Joshi, 2015 & “Do online reviews matter? — An empirical investigation of panel data”, Duan, Gu, and Whinston, 2008.
$^5$ “Designing Better Online Review Systems”, Harvard Business Review, Geoff Donaker, Hyunjin Kim, and Michael Luca, 2019