Monday, December 12, 2016

The Double-Edged Sword of Crowd Sourced Reviews

This holiday season many of us are taking vacations on small remote islands or even upstate just for a weekend in a quaint and undiscovered town. Wherever you end up in the world this month, you are bound to run into a local business owner selling you beautiful handmade souvenirs, delicious cocktails, or an authentic meal and they’re all going to plead that you write them a review. Whether it’s TripAdvisor or Yelp, small business owners are increasingly relying on this new ‘word of mouth’ to earn a good reputation and build a following in this digital age. While we still occasionally rely on the acclaimed critic’s write-up of a restaurant or merchandise, crowd sourced reviews are fast becoming more and more relied upon as a source of information for various goods and services. They are often the first stop for recommendations on everything from restaurants and bars to drycleaners and pet sitters. Sure, crowd sourced reviews might just be an ad populum fallacy but hey, how bad can the fried chicken place be if 2,163 other people gave it a 4-star rating, right?

In 2009, took crowd-sourced reviews to the next level by covering far more restaurants in Seattle than any local publication, including Seattle Times. That year about 70% of all restaurants were listed on Yelp versus a mere 5% by Seattle Times. Unfortunately, this growth of crowd sourced reviews also means that some businesses’ reputations, whether deserving or not, can get easily tarnished with just a click of a button. So before you make vacation plans based on crowd sourced reviews of local bed and breakfasts or restaurants, or in turn write some reviews on your travels, here are some things you should keep in mind about the impacts these reviews have on small, local businesses:
Why Crowd Sourced Reviews May Be Good 

1. Fills information gaps for consumers
Crowd sourcing necessarily means more people providing input. Theoretically, this means gaps in information can more easily be filled by the hundreds and thousands of people who have entered a store, or purchased a product. This might be especially useful for small businesses that have less capability in attracting major media outlets to write thorough reviews of their products and services – so really, it’s free content marketing for them. Of course, the underlying assumption here is that the reviews businesses get are positive and, more importantly, truthful.

2. Good Yelp reviews bring in more business 

Thanks to the ad populum fallacy, positive crowd sourced reviews rake in business. In a recent study by Michael Luca of the Harvard Business School, reviews from the website was combined with public restaurant data to determine whether online consumer reviews really did influence the way that reputation was formed. Indeed the study found that each ratings star added on a Yelp review translated to anywhere between a 5% to 9% effect on revenues of an independent restaurant’s revenue. A report from the Boston Consulting Group also concluded that small businesses that use Yelp saw annual revenue increase by $8,000, based on a survey of 4,800 business owners.

Why Crowd Sourced Reviews may be bad

1. Complex algorithms 

A common criticism of crowd-sourced reviews is the sites’ automatic filtering systems. While arguably these filters hide suspicious reviews, there are also potentially good reviews that get buried as a result and this lowers a businesses’ rating given that hidden reviews do not count toward overall ratings.

2. Gaming or non representative reviews

More recently, business owners have been voicing concerns over other businesses ‘gaming’ the system by unfairly getting friends and family to leave perhaps slightly biased reviews. As a result of this, real customers doing research online may fall prey to the popularity contest and pick these ‘gaming’ businesses to patron over others.

Non representative reviews that are a result of vengeance, although less common, are also becoming a major concern among business owners. One simple yet bad review can negatively affect small businesses especially when it has overall few reviews to begin with. In fact, marketing firm Cone Communications found that 80 percent of customers changed their mind about purchasing a product after reading negative information online.

Worse still, in either scenarios, businesses are unable to remove these false reviews resulting in overall unreliable product information. The best thing that businesses can do when met with bad false reviews, is to flag or report it to Yelp using a simple form, or work harder at increasing the total number of reviews with at least decent ones. While Yelp has taken some steps in holding users accountable for their reviews, other crowd source review sites like TripAdvisor are still very easily abused by the public.

3. Leveling playing field for small businesses spells trouble for big boys

Unfortunately, bigger and national chain eateries with multiple locations and common menu items are not benefitting as much from crowd sourced review sites. Research suggests that smaller, local eateries are starting to get better shares of customers because these crowd sourced review sites are essentially leveling the playing field by allowing customers to learn as much about local restaurants as they know about the chains. The competitive edge that these large chain eateries had in being safe bets for diners in terms of quality, menu offerings, and price points no longer applies when local eateries also have this type of information available online on crowd sourced review sites.

Whether businesses like it or not, crowd sourced review sites are fast becoming substitutes for traditional ‘word-of-mouth’ and are also closing the information divide as go-to information platforms for customers doing research—from where to go on vacation and where to stay to who makes the best mojito in all of the city. So wherever you end up this holiday season, and whatever you end up doing, remember to leave a truthful review for the business owner and at the same time one that provides a potential customer with useful product and service information.

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