Marketers know reviews matter, but are they aware just how much reviews can impact their bottom line?
A recent study by Northwestern University’s Spiegel Research Center, and ratings and reviews solutions provider PowerReviews, sought to answer this question by analyzing review data and millions of customer engagements from three etailers — one high-end gift company and two lower-priced consumer product companies.
The results? When comparing two similar types of products from the high-end retailer, the researchers found that the purchase likelihood for a product with five reviews is 270% greater than the purchase likelihood of a product with no reviews.
Here’s a summary of some of the other key findings from the study’s report: “How Online Reviews Influence Sales.”
1) Reviews have a greater influence on conversion for high-priced and high consideration products
Based on data from the high-end retailer, the researchers saw a 190% lift in conversion rate for a lower-priced product featuring reviews and a 380% life in conversion rate for a higher-priced product featuring reviews.
Price can influence how “risky” a purchase is considered to be, notes the report, but it’s not the only factor. According to the report, other influencers might include how the product reflects a consumer’s identity or whether it’s a routine buy.
“This [decision uncertainty] is where the influence of a review is greatest,” says Tom Collinger, executive director of the Spiegel Research Center.
2) Negative reviews aren’t necessarily a negative
While it may seem logical that higher ranked products would experience higher conversion rates, this isn’t always the case. According to the report, purchase likelihood is optimum when a product achieves a four to 4.7 rating out of five. Products that are in the 4.7 to five range can create a sense that the product is “too good to be true”, notes the report, and are less likely to be purchased. In other words, critical reviews can create a sense of credibility, the study says.
“The influence of negative reviews is greater than the influence of positive reviews,” Collinger says.
3) Volume of reviews is not a main factor
According to the report, high-priced products need a minimum of five reviews to drive the greatest conversion while low-priced products typically see “significant impact” with two to four. However, as the graph below notes, having significantly more reviews doesn’t equal more sales.
“If you have too much [in terms of] volume of reviews,” Collinger says, “it inhibits the encouragement of subsequent reviewing.”
Based on data from the high-end retailer, the report shows that almost all of the increase in purchase likelihood happens within the first 10 reviews and that the first five reviews are the biggest influencers. Then again, Collinger says that the researchers were unable to determine if these reviews had been curated to reflect positive sentiment and ratings.
4) Source of reviews matters
The researchers also analyzed the effectiveness of having verified buyers write reviews versus anonymous reviewers. According to the report, verified buyers are customers who have purchased items and received post-purchase emails asking them to review the products; anonymous reviewers, however, are those who have purchased an item but their purchase cannot be directly attributed to a review prompt.
The report found that verified buyer reviews are “substantially more positive.” According to the study, the average star rating from verified buyers is 4.34 out of five while the average star rating from anonymous reviewers is 3.89. The report also discovered that there is a higher percentage of five-star ratings from verified buyers while there is a higher percentage of one-star ratings from anonymous reviewers.
In addition, the report says purchase likelihood jumps 15% when consumers see verified buyer reviews (which can be indicated by a verified buyer badge) versus anonymous reviews.
However, reviewers can be influenced by bias, too. As the report notes, verified buyers experience fewer points of “friction” than anonymous reviewers in that anonymous reviewers have to go to a review site, create an account, and then write their review while verified buyers just have to make a few clicks after receiving an email prompt. Therefore, the researchers hypothesize that anonymous reviewers who had a very negative experience are more inclined to go through those extra steps, the report notes.
What’s more, verified buyers often don’t see other people’s ratings when they click through a prompted email and are taken to a page to write a review, the study notes; anonymous reviewers, however, do. As a result, anonymous reviewers can be influenced by other people’s ratings or comments, the report states.
5) Experience trumps all
While reviews are influential, Collinger says the most important thing is to get the product and shopping experience right.
“If you get the product and the shopping and buying experience right,” he says, “all of the other things work.”
Note: All graphs are from the study’s report: “How Online Reviews Influence Sales”