Ideas for Leaders #356

Online Customers Reviews: Loyalty and Deception

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Key Concept

While it might seem easy for competitors to hurt a rival’s sales by posting negative reviews, research reveals that many of the most negative product reviews are written by loyal customers trying to influence company strategy. 

Idea Summary

Many Internet retailers give customers the opportunity to review their products on their site, and some Internet companies even specialize in reviews only (e.g. Yelp and TripAdvisor). Given, as research shows, the impact that online customer reviews can have on the success of a product or service, it is no wonder that special attention is paid to the legitimacy of the reviews. One fear is that competitors will post negative reviews on the site for the obvious purpose of moving the company’s customers to their products, a concern with merit.

However, when Eric Anderson of Kellogg and Duncan Simester of MIT Sloan researched the negative reviews on the site of a private label apparel company, they made two unexpected discoveries. First, they discovered, after rigorous analysis of the data supported by linguistic analysis of the reviews, that many of the negative reviews were written by people who had not purchased the product.

Yet, these were the reviewers who were the most negative about the product; reviewer who did not purchase the product rated that product with twice as many 1’s (the lowest rating) as reviewers who had purchased the product.

The second discovery was even more startling: these negative reviews were written by valuable customers. Reviewers who had not purchased the product they reviewed had lower household incomes and less education than reviewers who had confirmed purchases. However, the reviewers without a purchase were higher volume customers. While they had not bought the product they reviewed, they purchased 30% more items than reviewers who had a confirmed purchase record, even though they may have been customers for a slightly shorter period.

Why would loyal customers post negative reviews of products they didn’t buy? An analysis of the data leads to three possible explanations:

  1. The customer had a bad experience with the company and decided to write a review as retribution.
  2. The customer wants to act as self-appointed brand manager, sees a product online that they don’t approve of, and write a negative review to offer their opinion.
  3. The customer uses the act of writing reviews as a chance to enhance their social status.

The data suggests that the first two are more likely explanations for many of the negative reviews.

Business Application

Very few customers write reviews. In this case of this firm, for every 1,000 customers, 15 wrote reviews, and only 1 wrote a review without a confirmed transaction. However, that 1 out of a 1,000 still represented 12,000 reviewers posting a total of 15,000 negative reviews on the firm’s site. And those 15,000 negative reviews have an impact. Sales of products negatively reviewed dipped some 2% after the review appeared. (Unfortunately, the negative impact of negative reviews is greater than the positive impact of positive reviews.)

What can companies do to avoid these kinds of reviews? First, don’t pursue legal action against these reviewers. They are, after all, your best customers.

Second, try to redirect the customer’s activities. Many of these reviewers just want to be heard; give them the avenue to connect with your company. If customers have an outlet for offering advice and making complaints, they are more likely to avoid the negative review process.

Finally, and most directly, require reviewers to demonstrate proof of purchase. Expedia allows only customers who have purchased the product to write a review.

Unfortunately, if a consensus emerges that only reviews linked to the actual purchase of products are legitimate, websites such as TripAdvisor or Yelp — aggregators of reviews of products they do not sell — are in trouble. In the future, review sites may want to partner with firms that can provide access to transaction information.

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Authors

Institutions

Source

Idea conceived

  • January 2014

Idea posted

  • April 2014

DOI number

10.13007/356

Subject

Real Time Analytics