COMMON CENTS

It’s Written in the Stars: Why “Real” Online Reviews Matter

By Tim Bailey

The world of online ratings and reviews is nothing new. In fact, it was back in 1995 when Amazon.com first began letting customers post reviews of products online. Fast forward 19 years and we now have the majority of today’s consumers “seeking stars” before making a decision to purchase.
The power of online reviews is incredible and increasing every year. Neilsen Ratings found that consumer reviews are the second most trusted source of advertising, with 70 per cent of consumers trusting that source. It is an increase of 15 per cent in four years, now placing online reviews second only to actual recommendations from friends and family.
 
Seeking the Truth
The growth of online reviews has spawned a growth in fake reviews from a variety of sources. A marketing department may plant glowing reviews for its own company or even negative reviews of a competitor. Internet trolls often review products or services without any rhyme or reason. Enterprising industries have sprouted up promising to help companies amass only positive ratings and reviews—or bury any negative reviews deep down in the search pages. Bing Liu, a data-mining expert at the University of Illinois, Chicago estimates that about one-third of all consumer reviews on the Internet are fake.
Generating “real” customer reviews that engage prospects can create a dramatic differentiator for a company. This requires a strategy that consistently encourages customers to provide open feedback through relevant channels. If shoppers or search engine providers find that online reviews are fake, the potential damage to a brand can be significant. For that reason, it is important for companies to encourage customers to provide honest and genuine feedback. If all reviews are glowing and all ratings are 5-stars, shoppers will be suspicious and the brand image of that company will appear disingenuous.

Lessons from the Negative
It is not a perfect world and it would be naďve for any company to expect to achieve a perfect report card in online customer ratings and reviews. Many companies fear that increased transparency creates a risk of negative issues being exposed. Interestingly, research has found that roughly 75 per cent of all reviews posted online are positive; the occasional negative review should be viewed as a growth opportunity, as it provides information and insight to improve. It also adds online legitimacy to a business, as the majority of consumers are realistic, and not are expecting to find perfection.
It is dangerous to think that a negative review can be ignored when research by Cone Inc. has found that “80 percent of consumers have changed their minds about a purchase based only on negative information found online.”  The key to success lies in how the occasional negative review is managed by a business to turn it into a beauty mark instead of a blemish. According to research conducted by PeopleClaim, 95 per cent of unhappy customers will return if an issue is resolved quickly and efficiently, When a negative review occurs, it is important for a company to acknowledge the issue, take ownership and work quickly to find a resolution. That level of effort and authenticity demonstrates the genuine caring that consumers reward.

Power of the Positive
Positive reviews are a powerful weapon in the hunt for market share. In addition, search engine providers have a thirst for “real” ratings and reviews and businesses that have that type of online content available from a credible source can gain an advantage in the highly competitive realm of search engine rankings. Positive product reviews are remarkably influential and “87 percent of consumers said a favourable review has confirmed their decision to go through with a purchase,” according to research by Cone Inc.

Close to Home
Reviews now impact every brand from large multi-nationals through to local independent business owners. Home builders and renovators must be aware and proactive when it comes to online customer reviews. Even a small business in a small market cannot hide in today’s “word of mouse” society. Eighty-five per cent of consumers say that they read online reviews for local businesses — up from 76 per cent in 2012 — according to a 2013 research study conducted by BrightLocal.com. In addition, 73 per cent of consumers say positive customer reviews make them trust a business more — up from 58 per cent in 2012. Since trust is a critical factor in the home buying decision, “real” customer reviews are an essential resource for today’s home shoppers.

Tim Bailey is Division President of Avid Ratings Canada, a leading provider of customer loyalty research and consulting to the home building industry. Through the Avid system, industry-leading clients improve referrals, reduce warranty costs, and strengthen their brand. He can be reached at tim.bailey@avidratings.ca.