Reference no: EM131241768

TURNING NEGATIVE REVIEWS INTO POSITIVE SALES

On Petco.com you can buy a soft-sided travel carrier for your cat for only $19.99. You might think twice, though, after seeing that customers gave it only two "paws" out of five overall for pet satisfaction, appearance, and quality. The reviews reveal more serious reasons to hesitate before adding the product to your cart. A customer with the screen name "Disgruntled Bunny" reports: "The mesh on the sides was such poor quality that my cat was able to rip it to shreds and escape in a matter of seconds!" Another customer recommends buying a carrier with stronger sides, adding, "It costs more but is safer for your pet, so it's worth it." Products have long been rated on sites like Amazon.com and those that exist entirely for customer reviews, but Petco was one of the first mainstream retailers to create a forum on its own Web site for criticism. The risk was obvious: Customers could pan products and send buyers running. But Petco reports that business is booming, even with bad reviews like Disgruntled Bunny's. New research is proving what Petco already learned: Peer reviews work. Shoppers are turning to everyday people for product advice. The 2007 Edelman Trust Barometer reports that over half of Americans said they trust "a person like me" for information about a company or product. David Brain, CEO of Edelman, urges companies to stop relying on "top-down communications delivered to an elite audience and move to peer-to-peer dialogue." Making customer reviews public has an immediate impact on sales and brand loyalty. Data from ForeSee Results in 2007 revealed that 40 percent of online shoppers said peer ratings on Web sites influenced their purchasing decisions. Furthermore, this group was 21 percent more satisfied with its purchases than other buyers and was 18 percent more likely to buy from the same site again. According to Petco executive John Lazarchic, most users who search for products by customer ratings shop longer, buy more, and return less: "The savings in returns alone pays for all the technology involved in the review and ratings feature." And if one product gets too many bad reviews, it usually prompts customers to buy higher-rated, more expensive merchandise instead. Other advantages? Reviews build camaraderie with an online community where shoppers can connect. They can boost a site's ratings on search sites. And they establish credibility. As long as the reviews aren't overwhelmingly negative, positive reviews have been shown to outweigh the negatives in shoppers' minds. For example, a four-paw review on Petco.com would outnumber one-paw ratings by seven to one. Lazarchic insists that reviews provide valuable feedback. Critical comments are shared within the company and can instigate changes. In fact, they're finding that the risk is not in receiving too many negative comments on a product, but too few. When no one is responding, it looks like no one is buying it. Or, if they are, they don't care enough about it to talk about it. Petco had that problem at first. In the beginning, when the company posted a small link for users to click and write a review, the silence was deafening. So they added promotional banners to the site and advertised drawings in which lucky reviewers would receive cash prizes. Within a couple of weeks, they'd gotten 4,500 new comments. Analysts warn that to maintain credibility, reviews shouldn't be edited unless necessary. Petco removes the names of rival brands, URLs, and personal information, but less than 10 percent of the reviews they receive are deleted. Now they're experimenting with the idea of using customer comments as marketing tools in print catalogs, offline ads, e-mail messages, and point-of-purchase displays. In print circulars, for example, Petco highlights its five-paw rated products. Many of their customers' e-mail addresses are collected through a loyalty program in Petco stores, which means those shoppers may not have visited the Web site. By including customer comments in e-mail ads, it expands the reach of the review program and boosts sales of products those shoppers may not have considered in the store. According to a Nielsen BuzzMetrics study, the customers most likely to write reviews on Web sites are empty nesters and "young transitionals" without children. Petco found that on their site, reviewers tend to be women with higher levels of education and income who are passionate about their pets. It is generally someone who wants to be helpful, share her opinion, and feel important. Someone, perhaps, like Disgruntled Bunny, who wants to warn others of the dangers of defective travel carriers before another cat escapes.35 Source: Joan Voight, "Getting a Handle on Customer Reviews," Adweek, June 25, 2007; "Online Shoppers Give Thumbs Up to Customer Product Reviews," Business Wire, January 9, 2007; Ken Magill, "Petco Tests Product Reviews," Direct, March 1, 2006; www.petco.com

Questions

1. A customer-centric company builds long-lasting relationships by focusing on what satisfies and retains valuable customers. Discuss how Petco follows this customer-centric philosophy.

2. Go to petco.com and read some of the customer reviews for various types of products. Do the one- and two-paw ratings tend to outnumber those with four and five paws, or the other way around? Can you find a customer review that Petco could use to market a product in a company circular or e-mail ad?

3. Now that Petco has identified the type of customer most likely to write reviews of their products, discuss the kinds of promotions that might encourage continued loyalty and response online from them in the future. What could they do to appeal to these customers?

4. Many mainstream retailers are still hesitant to post customer reviews on their Web sites. If you were consulting with one of these companies, what arguments would you use to convince management to try them?