A new study shows that consumers spend four times as long on sites that feature online reviews as those that do not. Moreover, if the product has a negative review, it converts better, up to 190% more often. This is true whether the reviews are published on unbiased review websites like BrianLett.com or by customers themselves.
Studies also show that online reviews influence 67.7% of buying decisions, and 81% of people are willing to pay a little extra for a product with a good review. But what are the downsides of having a bad review?
Positive and negative reviews influence buying decisions
Consumers often look for reviews of products and services online, and the positive and negative responses profoundly impact purchasing decisions. The impact is not limited to consumers; positive and negative online reviews may also affect a product’s price, demand, and profit. Here are some surprising effects of online reviews:
In one study, Dimensional Research found that nine in ten consumers have read online reviews before making a purchasing decision. Of those consumers, 86% said that both positive and negative reviews influenced their purchase decision. In the survey, respondents were required to be consumers in the US and experience a recent customer service problem with a midsize company. More than half said they read online reviews of a product or service, with Facebook being the most common source for positive reviews.
Positive reviews can boost the value of your product or service.
Online negative or positive reviews reduce the net unit cost of a product, reducing the seller’s profit. Moreover, positive online reviews enhance the demand for a product or service, increasing its sales. However, negative reviews are detrimental to both sellers’ profits. Therefore, sellers should pay attention to online reviews of a product to understand their impact on their bottom line. If the reviews are positive, the seller will benefit from increased demand and prices.
Online reviews are promising sources of data. Consumers trust positive and negative reviews over advertisements, and a good review can influence a customer’s decision to purchase. Positive reviews also improve the credibility of a brand. Positive online reviews influence buying decisions, and consumers are willing to pay a bit more for a good experience. 70% of consumers believe that positive reviews influence their purchasing decisions more than negative ones. This is true whether you are selling outdoor signage or online marketing.
When reading online reviews, consumers do not simply skim over the positive ones. They read them in detail to clearly understand the customer’s experience. A positive review may influence the opinions of other consumers, and a negative review may make the other reviews appear fake. Fortunately, some strategies mitigate the adverse effects of online reviews. First, try reaching out to unhappy consumers. Then, the business can improve its services and products if a negative review is genuine.
Impact of online reviews on price competition
The effect of online reviews on price competition in buying decisions varies depending on the value of each review. The higher the number of reviews, the more valuable the product is to each customer. However, the presence of reviews also reduces the seller’s efficiency. Therefore, online reviews reduce the maximum net shared value in the long run. In other words, sellers are less efficient when reviews are present because their price is reduced and their demand is lower.
The impact of online reviews on price competition in buying decisions damages the seller and the product itself. Positive reviews increase the product’s value and thus increase its price, while negative reviews lower its demand. In addition, similar reviews intensify the competition between the sellers and cause them to lower their prices to compete with each other. This effect is even more substantial in cases where the reviews are positive but negative for the seller.
Consumer reviews are increasingly influential.
For example, the study by Minnema et al. found that a 50-word review of a product can have as much impact as a personal recommendation from a friend. Although site algorithms mask negative reviews, the power of positive reviews is undeniable. Research has shown that 75% of consumers believe in a business after reading a positive review. Moreover, reviews from online consumers have been proven to influence buying decisions.
In conclusion, the impact of online reviews on price competition in buying decisions depends on the value of the reviews. The net shared cost of the product and the level of customer satisfaction. When review values are high, they act as free advertisement for the product and increase the overall demand in the market. Conversely, when the review values are low, they can decrease the need and reduce profits for the seller. While the effects of online reviews on price competition are neutral, the overall market demand is reduced.
Impact of online reviews on profits
When considering the profitability of a product, it is essential to understand how online reviews impact a seller’s profits. Online reviews change an individual customer’s valuation of a product. As a result, the seller’s profit and maximum net shared value decrease when online reviews are present. In addition, the seller’s efficiency suffers as a result of these online reviews. However, the impact of online reviews on profit depends on the type of review and the value of the review.
A study published by Minnema et al. found that consumers spend four times more time on a site after reading an online review than without it. In addition, consumers convert better on sites that feature negative reviews. Higher-priced items with reviews convert at 380%, while cheaper products have a 190% higher conversion rate. Further, consumers who read reviews are more likely to purchase based on the reviews. In addition, 81% of consumers would be willing to wait for a product if it has a good review.
The impact of reviews on profits is not limited to product prices.
It affects both sellers and consumers. The positive and negative reviews may affect profit, efficiency, and demand – three critical aspects of a product’s value. But the negative ones can also negatively affect profit, especially for products with a high margin. That’s why it is crucial to understand the impact of online reviews on profits before implementing any change in your operations.
Positive and negative online reviews both benefit sellers and customers. A positive review can increase the utility of a product, while a negative one will decrease its market size. However, a negative review may reduce the price, reducing the seller’s profits. If both positive and negative reviews have the same value, market demand decreases. This means that online reviews are a mixed bag.
Impact of negative online reviews on sales
You may be wondering what negative reviews’ impact on sales is. Well, first, the bad ones can change the minds of potential customers. However, if you calmly and honestly respond to a negative online review, you may be able to salvage the relationship. Furthermore, if you can resolve the issue quickly, it will not only impress potential customers but also build your brand and customer relationship.
Consumers are likely to purchase from a website with customer reviews. A product with many positive reviews increases the likelihood of the prospective customer buying it. It also gives the potential customer confidence in the development and reduces doubts about its reliability. Overall, it increases brand credibility, which leads to more sales. Unfortunately, negative reviews can harm the profitability of a business. But there are ways to deal with these problems, and I’ll give you some tips that will help you improve your online presence.
First, bad reviews can have a significant impact on revenue. According to Forbes, businesses that get one-to-1.5-star reviews lose up to 33 percent of their income. Furthermore, 94% of consumers steer clear of businesses with poor reviews. These statistics show that despite companies investing time and resources to improve their reputation, bad reviews can still harm sales. Therefore, companies need to take proactive measures to avoid the effects of negative reviews on their bottom line.
Negative reviews can either hurt you or help you.
While online reviews can negatively impact a company’s sales, they can be beneficial. When you see negative reviews, consumers will likely read your response and decide if you’re trustworthy. A recent BrightLocal survey found that 89% of consumers read a company’s response to reviews. Furthermore, the fact that a company responds to negative reviews increases the brand’s trust with 30 percent of consumers.
In addition to reducing the chance of a potential customer leaving a business, negative reviews can damage the brand image. According to recent studies, consumers who read good reviews are more likely to spend more money with the company. On the other hand, people who read negative reviews are less likely to trust a business and will instead turn to a competitor. Moreover, a negative review can drive away up to 22% of prospective customers and around 30% of current customers.
