Pehr Luedtke is the CEO of PowerReviews, a leading customer reviews and social commerce solutions provider. We invited Mr. Luedtke to submit a guest column for AuctionBytes Update to share his insights on how customer reviews can boost the bottom line for small and medium size businesses, using real examples from existing clients.
Five Ways to Leverage Customer Reviews to Drive More Sales
By Pehr Luedtke
Product reviews are a critical step in the decision-making process of the savvy consumer, both online and offline, as shoppers have come to expect online reviews on retailers' sites. The latest Nielsen Global Online Consumer Survey revealed that 90% of respondents say that they trust recommendations from people they know, while 70% admit to trusting consumer opinions found online. A study centered on small business by online reputation management company RatePoint found that customer reviews are six times more likely to impact a small business positively than negatively.
How can small to medium-sized businesses boost conversions through the use of customer reviews? I'll focus on five critical objectives that should guide SMB (small and medium size businesses) marketers and retailers in leveraging customer reviews to drive sales.
1) Boost customer review volume by inviting customers to write reviews
While our First Annual Social Media & Community Study revealed that retailers and brands feel that customer reviews are the number-one social tool seen to drive sales and customer engagement, usability testing on our consumer product research site, Buzzillions.com, strongly indicated that the number of reviews drives the credibility and feeling of "research completeness" for consumers, solidifying their confidence in their purchase decisions. Thus, boosting review volume remains a key priority for retailers.
Inviting your customers back to write a review after a purchase by sending them an email (commonly called a post-transaction follow-up email), is the proven method to generate the most reviews on your site from a very credible source - your own customer community. One of our clients was able to increase their review volume by 26 times their average review collection rate by implementing the follow-up email.
Our recommendation is that clients send the follow-up email to all past purchasers from the previous 6 months prior to launching reviews on their product pages. Within the first month, 20% of all total SKUs should have at least 1 review, with 100% review coverage for top sellers.
A study conducted on Netshops (now known as Hayneedle) reveals that the number of reviews per product drives sales uplift, with 4-7 reviews per product being enough for 75% of shoppers to "have sufficient confidence to judge the product" (etailing group study of 1200 typical internet shoppers).
2) Create a better customer experience
Reviews can uncover concerns about products and services that will help retailers focus their efforts on providing a better customer experience with each interaction of their product or service. Smaller-sized businesses have the distinct advantage of agility, particularly in shortening the time it takes to identify a customer issue and deliver a solution. Reviews can uncover challenges customers might have with a particular feature of a product, providing critical opportunities for retailers to create customer-focused experiences that bring them closer to the minds of their customers, giving them the competitive advantage.
PowerReviews client Karmaloop, an urban wear retailer that emphasizes the importance of community among their customers, shares how customer reviews have helped the company stand apart from big business competitors. The retailer uses customer reviews to identify customer needs that oftentimes result in significant gains:
"We were skeptical about reviews at first because 80 percent of our SKU base has a shelf life of six to eight weeks," says Anand Shah, COO of Karmaloop, "and it can take time for reviews to come in. But we quickly saw how effective the reviews are for gathering information; it's a social media channel on our site that lets us interact with customers. It helps us understand what people think of a brand and effectively alerts us to issues. For example, we can't size every product in every brand, but when we learn from customers through reviews that a specific product is running big, we add that information to the product description so customers know to size down. That reduces returns and customer service workload and increases customer satisfaction."
3) Demonstrate the value of a unique product in a niche market
A common challenge that many smaller ecommerce retailers face is being able to clearly demonstrate the value of a unique or unfamiliar product. However, if a consumer writes a review that details exactly why she thinks a specific offering is the most helpful for her intended use, and how she has found more ways than one to use the product for even greater success, then this story will prove to be compelling for other consumers, oftentimes serving as the tipping point that drives consumers to buy.
PowerReviews client Michael Moran, founder of CurrySimple, a supplier of ready-to-heat Thai sauces, built his business to fill a need that was commonly expressed by his customers in the restaurant he was working for at the time. Patrons frequently complained that there existed no product that allowed them to prepare and enjoy restaurant-quality Thai food at home.
"We have a unique product that people are not accustomed to buying or having," Moran said. "Reviews bridge the information gap to reveal the honest opinions of customers as they share their recipe ideas or specific uses of a particular product. Customer reviews play a huge part in sharing information with other customers about how they prepare certain dishes." Within three months of adding reviews to their site, CurrySimple experienced a 25% lift in traffic and a steady conversion rate uplift of 40-50%.
4) Use negative reviews to your advantage
And, of course, there is the negative review. A report by Forrester research entitled "How Damaging are Negative Customer Reviews" states that negative reviews are perceived by consumers to be helpful.
While many retailers might fear "negative" reviews, it is this type of specific feedback that has oftentimes uncovered invaluable opportunities for many of our clients. It was through the power of customer reviews that branded retailer Wine Enthusiast was able to uncover a huge unmet need in wine storage: multi-purpose shelving and dual temperature. The retailer developed what ultimately became their most successful product line to date - the NFINITY line of wine cellars.
Glenn Edelman, VP of Marketing at Wine Enthusiast said, "Negative reviews are just as important as positive reviews. You don't realize how valuable reviews are as a retailer until you put them on your site and it touches every aspect of your company. From product development of our own branded product, to copywriting/marketing about unique customer uses, to customer service with more focused outreach."
5) Identify brand advocates
According to the U.S. Small Business Administration, small businesses represent 99.7% of all employer firms in the U.S., creating jobs for over half of all private sector companies, and making them critical to the U.S. economy. What sets thriving small businesses apart from the ones that fail? Arguably, small businesses are powered not only by the ability to recognize valuable opportunities and having the flexibility to adapt to changing times and growing trends, but also by their inherent drive and commitment to personal service, customer satisfaction, and deep customer relationships.
Reviews can help a small business spotlight and broadcast the exceptional personal service commitment that helped to build its brand, as customers are oftentimes more than willing to share their experiences about their positive interactions with products and services. Media storage company Discgear experienced a conversion uplift of 74% within five months of adding reviews to their site, while in the process, helping them to identify customers who were eager to spread the word about their products and services: "User generated comments and reviews are second only to word of mouth as a purchase driver for all web users,...as the number of comments climb, so do our sales," said Michael Brown, IT Director, Discgear. "We're building trust and enthusiasm in our brand."
The success of our clients demonstrates the power of the customer voice in helping small business earn customer loyalty, deepen levels of customer engagement, and cultivate deeper customer relationships with and among their customer communities. When combined, these benefits can drive dramatic growth and boost sales. If you haven't already embraced customer reviews, 2010 is the year to get started - and experience the impact social commerce can have on your small business.
Pehr Luedtke is CEO of PowerReviews. He previously ran the Epinions and Advertising Sales teams at Shopping.com, and before that, helped launch the Levi Strauss Signature brand into the mass retail channel at Levi Strauss and Company where he held several senior strategy and sales positions. You can learn more about PowerReviews' solution for smaller merchants, which starts at $80/month and provides custom integration for Yahoo, Infopia and ProStores platforms, by visiting PowerReviewsExpress.com.