Purchasing Power Aug21

Purchasing Power

Have you ever decided on purchasing a product online or going to a new restaurant as a direct result of an anonymous user’s review? As the popularity of various shopping or social platforms rises–such as Amazon or Yelp–so does the importance of online reviews. Studies show that at least 90 percent of people say that online reviews influence their purchase decisions, and at least 88% of people trust online reviews from strangers as much as personal recommendations. A study by the Harvard Business School found that positive reviews have a direct correlation with increased sales. For example, restaurants that boost their Yelp rating by one star see an increase in revenues anywhere between 5 to 9 percent. It is no surprise that businesses around the world are deciding to pour resources into obtaining more reviews for their products in hopes of generating more sales. Businesses increase the incentives for leaving reviews by using tactics such as giving set discount amounts in their customers’ purchase, or even providing credit that can be redeemed on their website for future use. In addition, online review companies such as SharedReviews or RateItAll operate like social networking websites, where users can rate items in various categories such as food, games, movies, and many other things. In return, users will receive a share of the revenue that the online review company earns. However, some studies show that paying users to leave reviews leads to a significant decrease in the number of reviews on their sites. According to a study done about a social shopping platform in China, after introducing a credit reward system in exchange for reviews, the number of reviews on the platform decreased by 30 percent. Why would that be? A possibility could be that customers with large...