Purchasing Power

Online Reviews Fuel Decisions

By Yardi Blog Staff on Aug 21, 2017 in News

Have you ever decided on purchasing a product online or going to a new restaurant as a direct result of an anonymous user’s review? As the popularity of various shopping or social platforms rises–such as Amazon or Yelp–so does the importance of online reviews.

Studies show that at least 90 percent of people say that online reviews influence their purchase decisions, and at least 88% of people trust online reviews from strangers as much as personal recommendations.

A study by the Harvard Business School found that positive reviews have a direct correlation with increased sales. For example, restaurants that boost their Yelp rating by one star see an increase in revenues anywhere between 5 to 9 percent.

It is no surprise that businesses around the world are deciding to pour resources into obtaining more reviews for their products in hopes of generating more sales. Businesses increase the incentives for leaving reviews by using tactics such as giving set discount amounts in their customers’ purchase, or even providing credit that can be redeemed on their website for future use.

In addition, online review companies such as SharedReviews or RateItAll operate like social networking websites, where users can rate items in various categories such as food, games, movies, and many other things. In return, users will receive a share of the revenue that the online review company earns.

However, some studies show that paying users to leave reviews leads to a significant decrease in the number of reviews on their sites. According to a study done about a social shopping platform in China, after introducing a credit reward system in exchange for reviews, the number of reviews on the platform decreased by 30 percent. Why would that be?

A possibility could be that customers with large social media followings are more careful about leaving online reviews. Once companies begin compensating these types of users for their reviews, these users are less incentivized to review for fear of undermining their honest image. In short, nobody wants to be a “sell out.”

Researchers found that the number of online reviews from people with more than five friends on social media networks dropped almost 90 percent when companies began offering monetary compensations. Inversely, users with no friends saw an increase in the number of reviews up to 1400 percent.

The idea that people could be paid to share their opinions also reflects the possibility that their reviews are disingenuous and biased. As more companies are beginning to seek out paid reviews, people are becoming more skeptical about the authenticity of online reviews. Other factors, such as the quality or number of reviews, are also considered when judging the authenticity.

Of the 88 percent of people that trust online reviews from strangers as much as personal recommendations, half of them place importance on the number of reviews, and the other half focuses on the quality of the reviews.

In a world where a star can dictate the success or the failure of a business, the importance of maintaining the integrity of online reviews is growing. Generating a positive online presence has become one of the strongest marketing assets for businesses. True, the rise in popularity of reputation marketing has cut the amount of time and resources needed for both businesses and consumers. But how long will it be before this solution backfires?