Customer
reviews posted online are the third most trusted form of advertisement, ranking just
behind recommendations from people that are known to consumers and branded
websites, according to the 2013 Nielsen study on “Global
Trust in Advertising and Brand Messages”. Not only are reviews highly trusted, they also
have a big impact on actions taken by consumers, as 70% of the participants responded
to have taken actions after reading reviews.
As many
consumers are reading reviews and also the US federal trade commission (FTC)
recommends checking reviews about products and companies in their online
shopping tips before making purchases, it is safe to say that there is a
strong interest by advertisers to utilize reviews to impact their bottom line.
What are the impacts of reviews?
A Harvard
Business School study reveals the impact positive reviews have on restaurants.
According to the study a one-star increase in Yelp ratings leads to a 5-9
percent increase in revenue for independent restaurants. Also the hotel industry
enjoys positive effects as, according to a Cornell
University study, every 1% increase in a hotel’s online review score and
lead to a 0.54% increase in the occupancy rate. The positve effect of reviews on ecommerce sites can be seen in significant onsite conversions increases. The earliest adopters to leverage the effects of consumer reviews in this area were ebay and Amazon. Other ecommerce companies started early to collect reviews in a systematic way. eBags.com built their own review solution in 1999 and reported to have collected in excess of 2.5 million reviews by the end of 2012. A
study lead by the german ECC Handel found that merchants
with online reviews see increases in the conversion rate by 25% on average.
Unsurprisingly the increase was even higher for goods with higher prices, standing at 28%. Individual results can even be significantly higher as onlineshoes.com reported a 119% conversion
rate increase. Reviews showing up in AdWords Ads in the form of seller rating extensions tend to lead to a higher CTR's of on average 17%, which will ultimately help improving quality scores.
What are your experiences with consumer reviews? What kind of positive effects have you noticed?
In my next
post I will be looking into the practice of generating fake reviews and what
measures are being taken to penalize this practice.
Check this
great video
by OnGuardOnline.gov (by the FTC) on reviews
