Following the Crowd – Reviews Sites
How important are customer reviews to shoppers? Very important, as it turns out. The fact is, 90% of consumers read online reviews before visiting a business. And 88% of consumers trust online reviews as much as personal recommendations. Consumer review sites including Yelp, Citysearch, and TripAdvisor have become the first destination for recommendations on everything from dinner to dentists. It is interesting to note how these sites actually impact a huge part of company reputations, especially for a local business.
Connecting this study back to how we observe the impact that networks have on the people within them, we see jarring similarities between decision making theories and customer choices. People are easily influenced by others in many ways and in this instance, it is the opinion of others. Customers make sequential decisions each with the information of only the past reviewer’s experiences. These reviews can heavily impact how the customer proceeds: negative reviews could steer the customer away from the business, while positive reviews could attract customers. Once we reach a certain number of reviews, we can observe an information cascade. The study shows that each rating star added on a Yelp review translated to anywhere from a 5 percent to 9 percent boost on revenues – much more than expected. The phenomena shows correlation with the herding experiment in which customers may come to the business regardless of their own opinions because they see an abundance of positive reviews from other customers.
Looking at local restaurants specifically, the correlation between reviews and revenue seems to be much more apparent than compared to the impact on chain restaurants. This again makes sense because of customers’ tendency to follow the crowd. Since many chain restaurants are well known and reviewed across the world, customers can make decisions to choose whichever place is highly praised by others. When customers first visit a local restaurant, their decision is purely based on whatever reviews are readily available to the public, and thus they purely rely on these types of review sites. This observed behavior actually divides review sites like Yelp and those similar to it, because it can be both a good and bad thing. Consistency of reviews were found weakest when there were a low number of reviews, and this could kill off a business entirely with just a couple of bad reviews. Customers who have never heard of a business would never blink an eye to it if they spotted both a low number of reviews and on top of that, a couple of negative reviews. On the other hand, most small businesses in small communities wouldn’t have any platform to get reviews to start with, so if it wasn’t for review sites, they could get no positive attention either.
Human decision making is a complicated process, and as consumer reviews continue to influence these decisions, the issue of authenticity arises. Following the crowd is an easy thing to do but at what point can we trust these reviews over our own judgment?
Link to website:
https://hbswk.hbs.edu/item/the-yelp-factor-are-consumer-reviews-good-for-business