January 8, 2007
By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

Product Reviews Drive Site Loyalty

The Web has long been a valuable resource for shoppers seeking product information and opinions, and online retailers are turning that to their competitive advantage, according to new research from ForeSee Results. The most recent biannual "Top 40 Online Retail Satisfaction Index" shows that customer product reviews provide an edge in satisfaction and loyalty, leaving those sites that don't provide them on the wrong side of a sales volume gap. Key findings of the study show that consumers desire and remember product reviews, and appreciate having them handy; nearly half (49 percent) of online holiday gift purchasers recall seeing online customer product reviews, and 39 percent of those who bought from sites with reviews cite the reviews as the primary factor influencing the purchase decision. Among first-time buyers on review-equipped sites, 42 percent said they were the primary factor. The reason, according to Larry Freed, president and CEO of ForeSee Results, is that customer reviews replace something once missing from online shopping: the advice, testimonials, and useful chatter of sales associates and fellow shoppers on the retail floor. Even so, the effect has been stronger than expected. "I was a little surprised at how important they [product reviews] are in filling the gap between online and offline sales," Freed says. "With the increasing popularity of customer reviews, another in-store feature has been successfully replicated online." The gap that customer product reviews fill is leading to another gap, one between sites that provide them and ones that don't. According to ForeSee, the 49 percent of people who bought from one of the top 40 sites in the two weeks prior to the 2006 holidays rated the ones with review content an average of 5 percent higher in a number of factors. Satisfaction with the site and the retailer as a whole, the customer's image of the retailer, likelihood to purchase online, and likelihood to purchase from them next holiday season were all 5 percent better for sites where customer product reviews were available. Likelihood to recommend was 6 percent higher, while likelihood to purchase from that site next time was 4 percent higher. Overall, the 49-percent group's satisfaction score was 21 percent above the average score of all survey respondents (91 versus 75). Furthermore, purchasers who cited reviews as the primary purchase influencer are 18 percent more likely to buy from that retailer the next time they buy similar merchandise (92 versus 74). Customer product reviews benefit the retailer all the way to the bottom line. Not surprisingly, Internet pure play retailers are in the lead when it comes to customer review content. Online holiday shoppers recalled seeing reviews at 72 percent of the top 40 Internet-only companies, compared to 42 percent of the top multichannel sites. Freed says multichannel retailers will have to play catch-up, because customer product reviews are rapidly becoming a must-have component. This is especially prevalent among manufacturer direct channels. "Manufacturer direct companies face a unique risk in offering--or not offering--product reviews," Freed says. While they may be hesitant to give customers a place where negative reviews could be more visible, Freed says the greater risk is lost sales from not providing reviews. "Shoppers that want reviews will go to a site that has them, and may very likely buy the product from that site, rather than returning to the manufacturer's site." Related articles: Let's Review: A New Web Marketing Tool

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