Spend enough time talking to online marketers or digitally savvy traditional advertisers and you'll hear lots of conversation—and consternation—about the power of online reviews. According to these marketers, the comments and critiques on review sites such as TripAdvisor and Yelp are key to either their company's success or failure.
But according to a fascinating new article in this month's Harvard Business Review, titled “What Marketers Misunderstand About Online Reviews,” the most important factor in determining the significance online reviews play in a consumer's propensity to purchase is not necessarily the quality of the reviews but the type of product the client is looking for and the way the consumers determine what to buy.
According to the authors, consumer purchase decisions are affected by three different factors: “…Prior preferences, beliefs, and experiences” (P), “information from marketers” (advertising, packaging, and other marketing tools) identified as M, and “input from other people and information services” (O). The authors say these factors create a zero-sum game where “…when the impact of O on a purchase decision about a food processor goes up,” for example, “the influence of M or P, or both, goes down.”
What's even more interesting is that the authors have found that the importance of the various factors – P, M, or O – on purchases is less determined by the customers' demographics and more by the type of product they're buying. Low-involvement purchases that are mostly a matter of habit, a gallon of milk, say, or laundry detergent generally are not influenced by others' opinions. P, or previous experience, is the most important factor in these decision-making processes.
At the far other end of the spectrum, luxury goods such as designer handbags, expensive watches and upscale automobiles, are also O-independent. That's because these products appeal to buyers' emotions instead of their utility.
Chain restaurants are also mostly O-independent because consumers know exactly what to expect from a Subway or McDonald's and have no need to learn what anyone else thinks. But the uncertainty of independent restaurants makes them O-dependent and explains the success of review sites such as Yelp. Non-luxury cars, too, are O-dependent, with customers conducting extensive research and putting significant faith in the cars' brand. (Brand value itself can be O-dependent but it can also be increased substantially by savvy M.)
Finally, digital products such as consumer electronics are very O-dependent with buyers looking to early adopters and more educated users for input and recommendations. But interestingly enough, during sale periods such as Black Friday, the marketers' influence (M) – such as packaging and in-store promos – becomes more and more important as buyers do not have the time to do the research they'd otherwise conduct.
The authors close the article by pointing out that emerging technology continues to change both sources of O and the way consumers can access that information. They conclude by writing that “as the influence mix evolves, success will come to companies that can closely track the sources of information their customers turn to and find the combination of marketing channels and tools best suited to the way those consumers decide.” Very good advice.
But what the authors don't point out is that there are things marketers can do immediately to reduce the influence of O and increase their sales. First, a strategically planned move to the luxury end of the consumer spectrum—where emotion overrides intellect—will allow marketers to sell more and more product regardless of available information. Next, marketers can strive to build an emotional connection between their consumer and their brand. In this scenario, the functionality of the product (an attribute ironically never mentioned by the authors) becomes less and less pronounced while what the product does for the user becomes of primary importance.
In other words, building brand value (coincidentally the title of my last book) is one technique retailers and marketers can use to both sell more product and reduce the effect of other's posted opinions on those sales. Like the door slamming or tire-kicking that yesterday's car buyer might have done to determine quality, brand value becomes the shorthand that encourages today's consumers to purchase.