Examining the impact and perception of paying for opinions on products

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You loved the ____________ (fill in the blank). You go online to tell other customers how much you love the ___________. They read your review and they buy the __________.

So simple, so effective -- and yet so frustrating to companies. Because you can be unreliable. You don't always bother to post a review, even when you really love something. You got busy. The dog got out. It's not your job to help with their marketing.

Or even if you do a review, you are in a hurry and keep it short.

As digital technology works its way through the nation's shopping habits, online reviews are becoming a vital part of driving sales. A recent survey by Chicago marketing firm Ryan Partnership found 36 percent of 8,000 shoppers polled used online reviews and recommendations this year, up from 12 percent two years ago.

Another report came out this week predicting that by 2014, up to 10 to 15 percent of social media ratings and reviews will be produced by people being paid by the companies involved. Gartner Inc., based in Stamford, Conn., even went so far as to predict such "fake" reviews will get two Fortune 500 brands into trouble with the Federal Trade Commission in the next two years.

But Andrew T. Stephen, an assistant professor of business administration at the University of Pittsburgh's Katz Graduate School of Business, said there's more to think about here than just condemning the idea of rewarding people for posting opinions.

He and several academic colleagues have, for the past couple of years, been examining the issue of the impact of rewards on online reviews and on the perception of those reviews. Specifically, he said they were interested in the FTC's move in 2009 to ensure that bloggers and other "word-of-mouth" marketers disclose if they've been given cash or an in-kind payment to review a product.

Similar efforts to require full disclosure have been undertaken in other countries, Mr. Stephen said.

He and the other researchers first tried to determine the impact of paying people a nominal amount, in their case it was $1, to review a product. Eighty-six members of an online U.S. panel participated, with some receiving the cash incentive and others getting nothing.

It turned out that being paid improved the quality of the reviews of an Internet video game, as rated by a panel of subjects who were not told about the pay. "It's almost like they're doing a job," he said.

But when the pay was disclosed, it didn't just make people discount the value of the review. Worse, they thought badly of the brand and the product.

"It all sort of boils down to doubt getting planted into the consumer's mind," said Mr. Stephen.

Further research found the doubt doesn't even disappear once the consumer sampled the product firsthand. "Even with having your own experience, this doubt carries over," Mr. Stephen said.

Ideally, companies should bide their time and wait for products to build their own track records, he said.

But the need to get buzz going when a product is fresh is a marketing imperative. "It looks bad if there are no reviews," noted Mr. Stephen. "They need to get the ball rolling."

The old-fashioned way is to rely on networking. On restaurant review sites like Yelp, the first few reviews might be worth taking with a grain of salt. "Chances are they are friends or family of the owners," he said.

Businesses like eateries and hotels are also very aware of the problem of competitors posting negative reviews.

Yet Mr. Stephen is not willing to give up on the finding that people who are rewarded in some way devote more effort to creating a review that offers useful information, and he's worried government rules will slow the flow of information rather than help shoppers achieve transparency.

Future research, he said, will consider potential solutions to help companies achieve their marketing goals, while not making consumers feel scammed. That could include making clear up front on a website how the system works, a move that might pre-empt the inclination to believe the worst.

Sites such as Angie's List started out trying to address that by banning anonymous reviews and by requiring commentators to be members. Travel site Expedia also touts its system of only allowing reviews by people who have actually stayed at a hotel.

In the report that Mr. Stephen and his co-authors released in August summarizing the four studies they've done so far, they suggested if companies are going to provide incentives to generate reviews, they might want to consider offering prize drawings or points redeemable for future benefits. And explain that those moves are meant to compensate people for their time, not to influence the reviews.

Change is likely coming to help customers who want to use online reviews. Companies such as Amazon are looking ways to address the credibility issue, Mr. Stephen said. "This is a problem that the big players in the industry are trying to fix."

For the full report: http://phd.insead.edu/students/profiles/794609/Stephen_Bart_DuPlessis_Goncalves_August2012.pdf

businessnews - interact - yourbiz

Teresa F. Lindeman: tlindeman@post-gazette.com.


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