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Consumers read and trust online reviews for local businesses

July 15, 2014

Through a special arrangement, presented here for discussion is a summary of a current article from MarketingCharts, a Watershed Publishing publication providing up-to-to-minute data and research to marketers.

More than ever, consumers in the U.S. and Canada are reading online customer reviews to determine whether a local business is a good one, according to results from the latest annual BrightLocal survey examining consumer attitudes to reviews for local businesses. This year, 88 percent of respondents claimed to regularly (39 percent) or occasionally (49 percent) read online reviews to determine the quality of a local business, up from 85 percent last year and 71 percent in 2011. More than seven in 10 also said that positive reviews make them trust a business more.

Meanwhile, asked if they trust online customer reviews as much as personal recommendations, respondents answered as follows:

  • Thirty-two percent (up from 25 percent last year) indicated that they do, if there are multiple customer reviews to read;
  • Thirty percent (flat from last year) indicated that they do, if they believe the reviews are authentic;
  • Twenty-six percent (up from 24 percent last year) indicated that they do, for some types of business, no for others; and
  • Just 13 percent (down from 21 percent last year) indicated that they do not.

With the most common answer being that they do trust online reviews as much as personal recommendations if there are multiple customer reviews to read, it's interesting to note that two-thirds of respondents need to read up to six reviews before they feel that they can trust the business.

Also of note: 92 percent of respondents will use a local business if it has a four-star rating; 72 percent if it has a three-star rating; but just 27 percent if it has a two-star rating.

Turning to business types, the survey of 2,104 consumers (90 percent in the U.S.; 10 percent in Canada) reveals that:

  • Restaurants and cafes are the business type that have been searched for by the largest proportion (58 percent) of respondents during the past 12 months, followed by doctors/dentists (38 percent), general shops (36 percent) and clothes shops (34 percent);
  • The largest share (56 percent) of respondents have read online customer reviews for restaurants and cafes, with hotels and B&Bs (35 percent) and doctors and dentists (35 percent) next; and
  • Reputation matters the most for doctors and dentists (47 percent) and for restaurants and cafes (46 percent).

In terms of reputation, the study indicates that the most important of seven identified traits when selecting a local business to use is reliability (27 percent), with expertise (21 percent) and professionalism (18 percent) next-most important.

Finally, some 61 percent have recommended a local business to people they know via word-of-mouth, with Facebook (38 percent) the next-most popular recommendation method.

Discussion Questions:

How do you see online reviews affecting the consumer's path to purchase? Do you see online reviews becoming an even bigger purchase driver component in the years ahead?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you see online reviews becoming a bigger or smaller purchase driver in the years ahead?

Comments:

Consumers would rather trust strangers than paid advertising. The belief is that if someone takes the time to write a review, they probably have a valid opinion. If review sites can keep the reviews honest, consumer faith in them will continue to grow.

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Max Goldberg, President, Max Goldberg & Associates

Online reviews are the digital equivalent of the backyard fence over which our grandmothers shared stories (good and bad) relative to product, service, retailer, etc. The key is that consumers trust "non-paid" comments more that marketer-sponsored communications, namely advertising.

Online reviews will become even more important purchase-driving tools as mobile devices and apps become more utilized shopping tools.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

I think most of us take online reviews seriously. Of course there is opportunity for untrustworthy practices, however reviews are now driving the path to purchase for most every consumer product, regardless of price. I am still a bit amazed to find a hundred reviews for a $3 product.

I think the importance of reviews will only grow in the near future.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

With distrust and spin rising rapidly in most quarters of our society, people are responding to online reviews as being a more trusted path to purchase. The avenue will continue to be used in the future since it will be both more personal and our public officials keep skipping rope with truth.

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Gene Hoffman, President/CEO, Corporate Strategies International

Online reviews are a huge gift to consumers. I manage dinner discussion events all over the country, and it's very helpful to consult Yelp and other sites to learn more about what the dining experience is like. Now, if we could just have a similar site so women could compare notes on the mystery sizes of online apparel ...

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Cathy Hotka, Principal, Cathy Hotka & Associates

A quick poll of my household indicates reviews have an ever-increasing importance in the purchasing process. We based our selection of excursions on an upcoming vacation primarily on the reviews listed, and selected a washer and dryer the same way. One other point is affinity; reading reviews online and then validating them with reviews by professionals, or vice-versa. We bought our last TV because of positive reviews online and a ringing review in Consumer Reports.

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Ron Margulis, Managing Director, RAM Communications

The survey results in the article are in line with what I would expect as we see review sites like Yelp spread to larger swaths of businesses. And as my recent RetailWire article pointed out, Amazon is vying for a position in the space. So clearly product/business reviews have taken on more meaning, hand-in-hand with the shift to consumer power that social media has delivered.

The problem however, is that there are many bogus reviews and, to-date, not much has been done to eliminate them. So even groupings of six or more reviews are questionable, since in most every place that provides reviews, faking them is relatively easy. A smart business will take steps to encourage reviews and to put validation tools in place so that as the focus on reviews grows, they have credibility—a likely crucial differentiating factor in years to come.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

Online reviews are important. But according to a recent report by LoyaltyOne, "Four Ways to Win for Independent Retailers," 89 percent of those surveyed said personal recognition is the top area in which independent merchants outperform their competitors. That outweighs the leading competitive features of large chains (one-stop shopping, at 83 percent) and e-retailers (a mobile-friendly e-store, 68 percent).

Further, specialty retailers capture more than three times the consumer spending that online retailers do. 27 percent of the Canadian shoppers' dollar is spent with specialty stores, compared with eight percent at e-retailers.

Yet the specialty shop, even with frequent visits, lags sharply behind its large competitors. About two-thirds of Canadian shopping, 65 percent, takes place at major chains. The reason: price. Almost half of the survey respondents identified money value as the reason for choosing large merchants.

But mom-and-pop shops would make a mistake to compete on price—and it could be a critical one.

What shoppers say they like about specialty merchants is personalization and the recognition that comes with one-to-one interactions. This is not something that a price tag can cover. Independent merchants have this edge over their large competitors, but there are several other areas in which they can improve if they want to capture big-box customers.

Download the full (free) report here.

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Bryan Pearson, President and CEO, LoyaltyOne

Social proof is at the very top of most consumers' decision trees. In most cases, knowing that "people like me" have already made this purchase and were happy with their decision, is now more important/persuasive than brand.

So ratings and reviews, questions and answers, and other forms of user-generated content are here to stay and are only going to get more important. Of course it's even better if you can filter that social proof to show me reviews from people I actually know, or who are most like me.

On top of all that, local reviews (of stores and websites) are a critical ranking factor for Google's search engine optimization. Showing up in Google and Yelp are now the primary drivers for a large and growing segment of a retailer's traffic. So retailers need reviews to earn traffic and they need further social proof to convert that traffic.

These are mission-critical features for any online or physical retailer. Best practitioners now have strategies around cultivating reviews, and budgeting that goodwill between product reviews, site reviews, location reviews and off-site reviews.

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Jason Goldberg, VP Commerce Strategy, Razorfish

Who are you gonna believe? Advertising or online reviews? 'nuff said.

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Gene Detroyer, Professor, Independent

Perhaps it is a misguided attempt for the average shopper to separate themselves from their true beliefs and practices. The real deal is that anyone can, and often will, submit any information through the internet for a private purpose with truth and validity only as a secondary consideration.

The result is not only misinformation, but those that put their blind faith in a site or blog are many times the embarrassed owners of regrets. Here lies the support for not needing to look to consumer surveys that are designed to demonstrate the faith that the average user puts in the information they receive over proof of content. Retailers all own this problem and need to submit support for themselves and the vendor, if it can be substantiated, against the misinformation, or a list of changes planned or made to correct the issues. As for businesses and the product and services that don't hold to their end of the bargain, they too should own regrets through disclosure and the truth.

'gjarnoldjr'

As so often happens in the local space, we err when we paint all SMBs with the same brush. This study reminds us how much consumer behavior varies by category.

Restaurants and cafe reviews are the most commonly read by a large margin (21-plus points) for the second year in a row. These establishments are also ranked first after doctors/dentists when reputation matters.

This may seem obvious, but it's not. Take a look at realtors. They have among the lowest read reviews and reputation is considered far less important.

But this is hard to believe. Consider the importance of a home purchase and the diversity in skill and service between realtors as opposed to, say, baristas.

Is it because consumers care more about reading a review before they buy a cup of coffee than they do before they buy a home? Or because consumers believe cafe reviews are more believable than realtor reviews? Or because coffee is a far more frequent purchase?

These are just a couple of examples. We have a lot to learn about the differences between SMB verticals.

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Dan Frechtling, Vice President, Global Product Management, hibu, PLC

Local reviews are having a greater affect as they are now readily available from a variety of sources. Businesses of all sizes need to monitor social properties and review sites to be aware of reviews, good and bad, and take appropriate action to defend, apologize, or explain bad reviews and to promote and encourage positive reviews. Peer reviews will continue to gain clout and be even more important in the consumers' path to purchase in the future.

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Larry Negrich, Vice President, Marketing, nGage Labs

We take these reviews with a grain of salt as we read them. But more often than not, we are going to believe our fellow shopper before we believe an advertisement. Restaurant reviews are the ones I take more seriously. Movie reviews...I read them and if they are not the greatest, I go see the movies anyway if I want and usually enjoy them.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Online reviews can provide patterns of responses that are helpful to consumers. For that reason they are often found to be useful. However, as more news reports talk about companies paying for reviews, consumers may become more skeptical of the reviews. In that case, reviews that mention specific items or actions may become more persuasive. They will continue to be important.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Just as the survey said, it depends on the product/service category and shopping channel. Consumers rely heavily on the reviews of others, especially to avoid being sold a poor quality product/service or having a bad experience. As e-tail requires trust (since you can't see, touch or feel the product), customers have become reliant on other methods to mitigate their risk and inconvenience (i.e., personal recommendations, online reviews, etc.). Amazon is heavily reliant on online reviews to help move along the path to purchase—and it works!

I fully expect online reviews to continue to grow in popularity and usage for years to come, and for new ways to summarize, curate or filter the content to become available.

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Alexander Rink, CEO, 360pi

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