Harnessing the Power of Customer Reviews

12/1/2015
It's no secret that ratings and reviews have a big influence on a consumer's purchase decision. Aside from price, reviews are a top factor in whether or not a shopper will take the plunge in buying a product. But at what point do ratings and reviews have the greatest impact?

For us at PowerReviews, this was a burning question. So to help answer it, we teamed up with Northwestern University's Medill IMC Spiegel Digital & Database Research Center to analyze which attributes of ratings and reviews are most effective and when they have the most impact on driving sales. Here are four key insights we uncovered in the process.

Negative reviews build trust
More often than not, negative ratings and reviews make brands and retailers cringe. However, we found that they should react much differently to such negative feedback.  According to our research, brands and retailers should embrace negative reviews. While it may seem obvious that a customer is more likely to purchase a product with a higher rating, purchase likelihood actually peaks when a product's average star rating falls between 4.2 and 4.5.

Since the ideal product rating isn't 5 stars, negative reviews can actually have a positive impact on sales. The reason is consumers often approach five-star ratings with a healthy dose of skepticism. After all, every new product can't be worthy of a perfect score. Although brands and retailers should always strive to achieve the highest possible rating, a few negative reviews help build trust with consumers and increase the credibility of review data.

Higher prices lead to more impactful reviews
As prices rise, so does the risk associated with the purchase. We examined the effects of star ratings on low- and high-priced products within the same category, and the results are clear: star ratings have a much greater impact on high-priced items. Simply put, consumers spend more time gathering information about purchases with a higher price tag. Sifting through ratings and reviews is one way to do that.

Brands and retailers eager to take advantage of this finding should begin by making expensive items a higher priority when it comes to boosting the number of reviews. While ratings and reviews play a big role in a consumer's purchase decision for almost every item, potential customers rely much more on review data as the amount of money they spend goes up. This applies not only to items in expensive categories (such as electronics or appliances) but also to items that are relatively expensive within a low price category, for example organic wool socks. Give consumers the confidence they need to go through with a purchase by providing them with ample information.

Reviews reduce risk
In addition to price, other factors including safety implications and unfamiliarity with the product or brand also increase the level of risk tied to a consumer's purchase. Although a consumer may initially be hesitant to purchase a product in several high consideration categories, an influx of information in the form of ratings and reviews is the best way to strengthen his or her willingness to complete the sale.

The idea of improving purchase likelihood through reviews is especially important for brands and retailers on the verge of launching a new product. Consumers unfamiliar with an up-and-coming product will want to see some reviews before making a purchase. Unless someone is willing to buy a product they know little about, brands and retailers may have a tough time generating reviews that risk-averse customers crave. An easy solution to that problem is product sampling. By allowing consumers and influencers to test their new product before it's officially released, brands and retailers can begin collecting reviews that will help mitigate risk for future buyers.

Short reviews require high volume
In the past, brands and retailers have tried to gather as many reviews as possible. While more reviews are better, the number of reviews themselves is more important when the review text is short and sweet. Further, our research found that the ideal number of reviews depends upon the length of the reviews themselves. If reviews are short, more are needed in order to make an impact on sales. But when reviews are longer, the number of reviews is not as important.

Sort through review data and identify products where reviews are generally short. Then use post-purchase emails to help increase the number of reviews for these products. It is crucial that brands and retailers simplify the process so that consumers can avoid unexpected roadblocks that will prevent them from ever posting a review in the first place. The more customers that succeed, the greater the impact will be on sales.

It has long been known that ratings and reviews impact purchase decisions. Still though, the circumstances under which reviews are most effective at improving sales have largely remained a mystery to brands and retailers alike. By partnering with Northwestern University, we're able to uncover the relationship between star ratings and purchase probability, the effect of star ratings on products with different price points and the ideal length and number of reviews. For brands and retailers, the task of using product reviews to drive sales just got a whole lot easier.


Theresa O'Neil is senior vice president of marketing at PowerReviews,  a provider of software and network products that empower brands and retailers to generate and display ratings, reviews, and answers to consumer questions — all within a single, flexible, multi-tenant SaaS platform.
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