More Evidence of Reviews’ Importance

Adding to the mounting evidence that online reviews are now critical for both consumers and businesses, comScore and the Kelsey Group released online survey data (n=2,090) last week showing that 24% of consumer-respondents used online reviews in the context of looking for a local service business (during the preceding three-months). Of that group (n=508):

  • More than 3/4 of review users believe reviews were very influential in their purchase decision
  • Consumers generally valued other consumers’ reviews more than professional reviews
  • Purchasers reported a willingness to pay at least 20% more for a service rated “Exceptional – 5 star” vs. a “4 star” rating
  • 30% to 40% of review driven purchasers said they would NOT purchase from a service business with a 1 star rating
  • 62% of consumers said they write reviews to help other consumers
  • 24% said that they wrote reviews to “get back” at a provider after a poor experience
  • 30% wrote reviews because they were asked to do so
  • 19% wrote reviews because of some financial incentive (money, coffee cards, other)

PQ Media issued a new report that estimated “word-of-mouth marketing” has become a $981 billion business. In addition, the report says that among consumers surveyed, 80% rely on friends and family for recommendations. This phenomenon is now moving quickly online.

In contrast to the 24% figure in the comScore survey (those consulting online reviews), earlier online survey data from WebVisible and Nielsen found that just over 75% of respondents (n=1,971) consulted product and service reviews. (The comScore data speaks only about service-business reviews.)

The comScore research found that just over 11% of users wrote online reviews. In response to the question “Have you ever posted a review of a local business on the Internet?,” the WebVisible-Nielsen survey found that about twice as many (22.7%) had done so. The term “ever” may be a key distinction in comparing the results of the two surveys.

In terms of the motivations of the review writers in the WebVisible survey, the following were respondents’ motivations for writing online reviews:

  • Had a negative experience: 45%
  • Had a positive experience: 39.5%
  • Mixed experience: 15.5%

According to the comScore survey the most referenced reviews categories were:

  1. Restaurants
  2. Hotels
  3. Travel
  4. Automotive services
  5. Home services
  6. Medical
  7. Legal services

This is generally similar to top usage categories for online yellow pages, according to 2005 survey data from Knowledge Networks/SRI:

  1. Restaurants
  2. Hotels
  3. Physicians-Surgeons
  4. Automobile Dealers
  5. Florists
  6. Automobile Repairing-Service
  7. Automobile Parts-Supplies
  8. Schools
  9. Attorneys-Lawyers
  10. Insurance

In 2006 at SES Local, Hitwise argued that review sites were growing faster than traffic to conventional IYPs. Since that time, most IYP sites have beefed up their online reviews organically or through syndication from third parties. And the comScore data confirms that local review sites and communities, which now include the major IYPs, are growing four-times faster than the overall Internet:

comscore

Source: comScore/TKG (2007)

This is clearly because consumers value the information and are seeking it out.

In the recent Opus-AllBusiness small business online survey, roughly 58% of SMB respondents said that at least half their business was being generated from word-of-mouth. And approximately 30% said that “more than 75%” of their business comes to them through referrals. Thus, it makes sense that this is transferring online.

Most SMBs seem to be highly receptive to the growing phenomenon of online reviews. According to the Opus data, among SMBs aware of review sites (64% of the total surveyed), a striking 59% said online reviews “are a good thing and are helping us improve our business.”

Taken together, these data all show how significant online reviews are becoming – as an extension of traditional “word of mouth” – for both consumers and local businesses. As the stakes get higher, which all these data suggest they will, the risk is that there’s more gaming and manipulation of reviews. Note that 30% (of the 24%) in the comScore data wrote reviews because they were asked to do so. (And see my recap of the SMX panel on user review content.)

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8 Responses to “More Evidence of Reviews’ Importance”

  1. Lou Morsberger Says:

    Hi, Greg.

    Awesome summary of recent data and current trends regarding reviews. I think there’s a typo, though (if you’ve not already corrected it), such that one of the first summary findings from the Comscore/Kelsey data should read “30% to 40% of review driven purchasers said they would NOT purchase from a service business with a 1 star rating.” The Comscore presenter at Kelsey’s ILM last week stated it in even stronger terms, to the effect that a 1-star rating disqualifies a business from any consideration whatsoever in the minds of those consumers. The “not” is an important part of the finding, not only because a 1-star rating so dramatically deters consumers, but also because any number of top-quality businesses suffer a 1-star rating at this or that review site where a single dissatisfied customer is the only reviewer. As your piece makes clear, local businesses that don’t actively drive customer reviews to ensure they are fairly portrayed online are increasingly putting their future at risk.

    Of course, that’s the problem ValueStar helps businesses address.

    Cheers.

  2. Greg Sterling Says:

    Thanks Lou. A typo. Will correct.

  3. Online recommendations taking off at Ghost of Midnight Says:

    [...] Greg Sterling writes about online reviews today… lots of good stuff. [...]

  4. earlpearl Says:

    Greg:

    There is another aspect of reviews. Reviews might well influence the rankings of local businesses in both Google Maps and Yahoo Local. Get a lot of reviews and/or reviews with lots of stars and your business, maps/local visibility could go into the top 3 for logical local searches, thereby increasing the visibility of a site.

    Clearly that is all from the business operators perspective. In the meantime it is refreshing to hear how people treat reviews and rely upon them. It is also interesting how often people will write reviews to report bad service. What a motivation. That should get business operators to emphasize service!!!!!!!

  5. TeachStreet | Find Local Teachers. Learn New Things Says:

    [...] came to mind when I was just reading a post about the importance of local reviews in the decision making process for individuals.  The article cited local research from comScore [...]

  6. Of Stars and Local Search « Screenwerk Says:

    [...] Positive user reviews/stars is becoming more critical and even more important in many respects than advertising. See my related post, “More Evidence of Reviews’ Importance.” [...]

  7. Putting the Reviews Debate to Rest « Screenwerk Says:

    [...] Scott pointed out that these are datapoints related to product shopping. Here’s a post that contains a range of data on consumers’ use of reviews in a service business [...]

  8. What have you reviewed for me lately? | TeachStreet Blog Says:

    [...] came to mind when I was just reading a post about the importance of local reviews in the decision making process for individuals.  The article cited local research from comScore [...]

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