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***** Rating? Well Done You! But do Product Reviews really pay?

One undisputed advantage of Social Media is the invigorated voice it has given to the lowly consumer who, only a few years ago, had a mere handful of stones in their slingshot, to help them face down the hulking Goliaths of big business. Now, customer product reviews, both negative and positive, coupled with the myriad new real-time channels via which customers can now communicate with each other, have forced big business to sit up and listen.

Those who don’t adapt to this new climate of transparency and accountability risk doing incalculable damage to their brands – as we saw earlier this year with the saga of the Twitter hashtag spamming intern at @HabitatUK. For Media140, our resident e-commerce guru, Benjamin Dyer, takes a look at how companies are approaching both the opportunity, and the danger afforded by the potent combination of on-line reviews, blog mentions and Twitter endorsements.

When you work in e-commerce as I do, you spend an inordinate amount of time thinking about the process people go through before they buy goods or services. Now, with the advent of social networking, listening to customers has become an absolutely essential part of any business.

Only five years ago, consumers had fairly limited channels for feeding back to a business; virtually all the power lay with the business. Social networking and user generated content has turned this on its head; now your customers can freely interact with other customers. Scary isn’t it!

If you’re in business, you simply have to realize that you can no longer control these conversations. But, if you can’t stop them, why not join them? If you’re selling on-line, then providing the capability for your customers to feedback on the product or service they receive from you is not just a nice gimmick – it shows that you care.

So how do product reviews impact the decision-making process for consumers?

One of the UK’s largest electrical retailers has recently revealed that customer reviews have increased conversion rates by up to 14 per cent. During a five month trial, the retailer selected three products and randomly served site visitors a page, either with or without reviews. The results were conclusive: the products with reviews experienced a significantly higher conversion rate.

In a study recently conducted by Jupiter research, a staggering 97 per cent of UK consumers indicated their willingness to trust reviews. Two thirds of those asked agreed that reviews played a significant part in selecting a product or supplier online.

However, customer reviews take many forms. The most basic is a comment and rating system, such as on Amazon and e-Bay. More sophisticated approaches involve sponsored blog posts or Tweets and even fake product blogs or “flogs”.

The blog index site, Technorati, estimates there are approximately 100,000 bloggers using their sites to indirectly generate income. Companies such as Chitika.com and PayPerPost.com are supporting the growth in “blogging as a business” by connecting bloggers with companies willing to pay for reviews.

While the companies do stress that this is NOT about providing fictitious reviews, there is subtle pressure on the blogger to provide a compelling endorsement of the product or service. After all, this is in the interests of their wallets.

Sadly, it gets even more nefarious. You may recall back in January a scheme by Belkin employee, Mike Bayard, was discovered. Bayard was recruiting people to provide positive reviews of a Belkin product using Amazon’s Mechanical Turk, a site designed to hire workers for on-line tasks that just cannot be automated. The price of a positive review was a staggering 65 cents. Bayard even went so far as to ask reviewers to down-rate any existing negative reviews.

This sadly increasingly common practice is known as Astroturfing and continues to generate controversy and hot disputes, some of which are now under legal scrutiny.

The Belkin case illustrates that online reviews, Twitter endorsements and influential blog entries have become simultaneously important AND dangerous for companies selling across the web.

The facts are clear: the most effective endorsement comes from the people that have actually bought a product or service. The Amazon/Belkin case may throw a Bezos shaped spanner in the works. Nevertheless, comments managed by an independent third party (such as FeeFo) generally provide the gold standard – as buyers have confidence that the reviews cannot be doctored. Sadly, social networks are simply not mature enough to provide an accurate review service; there is too much scope for interference.

In summary, it is clear that reviews are becoming increasingly important. Consumers’ best course of action is to spend time looking at multiple sources and to check on the independence of the information supplied. For merchants, it is absolutely critical to be transparent. The Belkin example demonstrated the danger of deceit. It may be tempting to spend time and money in an attempt to influence or coerce, but my advice is: keep it simple and keep it honest. Do reviews pay? Absolutely, provided you are providing a good and fair service.