How Online Reviews
Influence Sales\ Evidence of the Power of Online Reviews to Shape Customer Behavior

Data-Driven Insights on How Retailers Can Maximize the Value of
Their Engagement With Consumers Through Online Reviews

\ Executive Summary

Insights into How Online Reviews Affect
Purchase Decisions
QUESTIONS WE ADDRESSWith nearly 95% of shoppers reading online
reviews before making a purchase, reviews
have transformed the way consumers makepurchase decisions.* But reviews are morethan just a way for shoppers to gather
information. Reviews are a powerful form of
consumer engagement.

In this research, we set out to answer
two main questions:Northwestern University’s Spiegel ResearchCenter has been at the forefront of answering
questions about how consumers engage withbrands and how that engagement shapes
customer value since 2011.

We have found that online reviews havea significant and quantifiable impact onpurchase decisions – but the degree of that
impact depends on a number of factors,
such as star ratings, the nature of the review
content, the number of reviews, the priceof the item, and the source of the review.
These findings have powerful implications
for retailers and their suppliers as they
think about how to collect, manage, andpromote online reviews of their products
and services.

As part of Spiegel’s ongoing, multi-faceted
exploration of consumer engagement,
we have spearheaded research into thefinancial impact of consumer engagement
via online reviews.

*PowerReviews Internal Data•

Do online reviews affect sales?

•If so, in what ways, by how much,and under what circumstances?

In this report, we examine Spiegel’s
groundbreaking research and provide
recommendations for how retailers canuse online reviews to drive increased
customer value.

2 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu• What is the upside impact of online reviewson sales? What’s the downside impact?
• A re higher ratings always better predictorsof increases in sales?
• D oes familiarity with the product category
alter the influence of reviews?
• Is there an optimal number of reviews?
If so, how many?
• S hould brands prompt purchasers
to submit reviews?
• D
 o reviews from verified buyers havegreater impact on sales than those fromanonymous sources?

\ Executive Summary

About the Research
The Spiegel research team partnered with PowerReviews to analyze
millions of customer experiences from two online retailers featuring
primarily lower-priced product categories and a third online retailerof high-priced gifts. We looked at how customers’ exposure to andinteraction with online reviews affected their purchase behavior for
up to a year.
• L ower-priced consumer products: Spiegel analyzed ratings andreviews data in the consumer packaged goods industry from two
online retailers; the research covered 22 product categories witha total of 111,460 SKUs.
• H
 igh-end gift retailer: Spiegel analyzed approximately 15.5
million page views for 1,800 unique products from 7.8 million
users over the course of one year, tracking the number of pageviews and sales as each product accumulated reviews.
• P rompted vs. unprompted reviews: Spiegel analyzed 57,000
reviews from anonymous consumers and 65,000 reviews fromverified buyers for about 13,500 unique products in a numberof categories, including health and beauty, electronics, andhome and garden.

3 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

ABOUT POWER REVIEWS
PowerReviews works with global brands and retailers
to collect and display customer ratings. PowerReviews
partners with more than 1,000 global brands andretailers to increase conversion and improve products
and the customer experience with ratings and reviews
and Q&A software.

\ Executive Summary

What we found:This research found that not only are reviews extremely valuable in influencing purchase decisions,but a number of circumstances factor into when and how reviews shape customer value.

How star ratings, number of reviews, and price influence purchase behavior!
Online Reviews
Matter — A Lot ...

$... Especially forMore Expensive... and “Risker” Items

How the source of the reviewer matters

Verified Buyers
Give
Higher Ratings

Anonymous Reviews
Are Shaped
by Selection Bias

4 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

Verified Buyers
Are Perceived
as More Credible

Perfect Ratings
Raise Questions

More is Not
Always Better\ Impact on Conversion Behavior

How Ratings, Number of Reviews,
and Price Influence Purchase
and Conversion Behavior
Spiegel’s analysis of ratings and review data from multiple
e-commerce sites found that online reviews have the power
to dramatically influence purchase decisions. But the degreeof this influence depends on many factors, including:•Price of the product•

Degree of uncertainty or risk involved in the purchase•

Average star rating•

Presence of negative reviews•

Number of reviews

5 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

WHAT WE FOUND:
1. Displaying reviews can increase
conversion by 270%
2. R
 eviews impact sales more forhigher-priced items …
3. … and for higher-consideration items
4. 5 stars is “too good to be true”
5. Initial reviews have the greatest impact

\ Variable: Presence of Reviews

1. Displaying Reviews Can
Increase Conversion by 270%

Based on data from the high-end gift retailer, we foundthat as products begin displaying reviews, conversion rates
escalate rapidly. The purchase likelihood for a product withfive reviews is 270% greater than the purchase likelihoodof a product with no reviews.

Conversion Increase

It may seem intuitive that the availability of reviews will
make a consumer more likely to purchase a product. But
the magnitude of that impact may surprise many people.

THE FINANCIAL IMPACT OFDISPLAYING REVIEWS

0

5

10

15

Number of Reviews

Our research found that as products begin displaying reviews,
conversion rates escalate. Having five reviews causes purchaselikelihood to increase by a factor of nearly 4x.

Askalidis, Y., and Malthouse, E. C. (2016). “The Value of Online Customer Reviews.”
RecSys 2016 - Proceedings of the 10th ACM Conference on Recommender Systems,
155-158. Association for Computing Machinery, Inc.

6 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

20\ Variables: Presence of Reviews and Price

2. Reviews Have a Greater Conversion
Impact for Higher-Priced Products
To better understand the conversion impact of reviews in various circumstances, we looked at the impact of displaying reviews on higher-priced
versus lower-priced products. We found that reviews had a greater impact
on purchase likelihood for higher-priced items than cheaper ones.
The data from the high-end gift retailer showed that this was true whencomparing high-priced vs. low-priced categories. And the research fromthe lower-priced consumer products retailer showed that this was also
true when looking at high-priced vs. low-priced options within categories(e.g., regular cereal vs. organic cereal).
When the price is higher, there is more risk involved in the consumer’s
decision. Having more information via reviews helps mitigate that risk.

HIGHER-PRICED PRODUCTS, HIGHERCONVERSION IMPACTCONVERSION INCREASE FROM THE
INCLUSION OF REVIEWS
400%
300%
200%
100%
0%
¢ Low-Priced Category¢ High-Priced Category

Based on data from the gift retailer, when reviews
were displayed for a lower-priced product, the. However, forconversion rate increaseda higher-priced product, the conversion rate.
increased

190%

380%

Askalidis, Y. and Malthouse, E.C.. “The Value of Online Customer Reviews.” RecSys ‘16 Proceedings ofthe 10th ACM Conference on Recommender Systems, 2016.
Malthouse, E.C., Maslowska, E., and Viswanathan, V. “Do Customer Reviews Drive Purchase Decisions?
The Moderating Roles of Review Exposure and Price.” Decision Support Systems, 2017.

7 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

\ Variables: Ratings, Price, and Risk

3. Reviews Have a Greater
Conversion Impact For
Higher-Consideration Items
Our research showed that reviews have a greater impact onpurchase likelihood for high-consideration products than for
low-consideration products.
Price is one of the primary factors that determines how“risky” a purchase is, but it is not the only factor. Other
factors that might cause a consumer to spend moreenergy evaluating a purchase decision—and hence rely
more heavily on reviews—include:•

How much the product affects health and safety• ow much the product reflects the consumer’sHpersonal identity••

 hether the product is a recurring or habitualWpurchase for the consumer
Whether it is a recently introduced product or brand

8 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

THE ENHANCED ROLE OF REVIEWS FORHIGHER-CONSIDERATION PRODUCTS:
Cheap Slope

Expensive Slope

Baby Food

Most Likely
to Purchase

Least Likely
to Purchase
1

2

3

4

5

4

5

Average Star Rating

Weight Loss

Most Likely
to Purchase

Least Likely
to Purchase
1

2

3

Average Star Rating

Star ratings have a stronger influence on purchase likelihoodfor expensive items than cheaper items in the same category.
For both baby food and weight loss products, the slope of thepurchase likelihood line was significantly steeper for expensive
options than for cheaper options.

\ Variables: Average Star Ratings

4. Five Stars is“Too Good to be True”

FINDING THE SWEET SPOT
The optimal star rating varied across product categories. But what is mostinteresting to note is that in no category was the optimal rating 5.0.

Star Ratings’ Impact on Purchase Probability
Light Bulbs

0.6

Natural Hair Care Products

0More stars equals more sales, right? It seems fairly intuitivethat higher ratings would lead to higher sales. Our researchfound that this is true—but only up to a point.

0.4

Across product categories, we found that purchase likelihood
typically peaks at ratings in the 4.0 - 4.7 range, and thenbegins to decrease as ratings approach 5.0. Put differently,
products with an average star rating in the 4.7 - 5.0 range areless likely to be purchased than those in the 4.2 - 4.7 range.

-0.2

2

1.0

This suggests that shoppers see ratings at the far end of thespectrum as “too good to be true.”

0

0.5

-2

0.0

-1

0.2

-2

0.0
-3
1

2

3

4

5

1

2

3

Star Rating

Women’s Athletic Shoes

Herbal Vitamins

-1.0
1

2

3

4

5

1

2

Star Rating

3

Star Rating

High-end Gifts
0.2
0.0
-0.2

9 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

5

-0.5

-4

Maslowska, E., Malthouse, E.C., and Bernritter, S. (2017), “Too Good to be True:
The Role of Online Reviews’ Features in Probability to Buy.” International Journal ofAdvertising, 36(1) 142-163.

4

Star Rating

-0.4
0

1

2

3

Star Rating

4

5

4

5

\ Variable: Presence of Negative Reviews

Negative Reviews Establish Credibility
Previous PowerReviews research found that 82% of shoppers
specifically seek out negative reviews. This is consistent with
our theory that near-perfect ratings undermine the credibilityof the review.1 Readers are skeptical of reviews that are too
positive and, in many cases, a negative online review is seen
as more credible.
Additional research by social commerce specialist Revoo
indicates that consumers spend four times as long on asite when they interact with negative reviews, with a 67%
increase in conversion rate.2

1
2

PowerReviews (2014): The Proven Power of Reviews
RevooBlog, “Bad Reviews Are Good For Business”

Maslowska, E., Malthouse, E.C., and Bernritter, S. (2017), “Too Good to be True:
The Role of Online Reviews’ Features in Probability to Buy, International Journal ofAdvertising.” 36(1) 142-163.

10 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

WHY NEGATIVE REVIEWS MATTER:• S
 hoppers are skeptical ofoverly positive reviews• M ost shoppers actively seekout negative reviews• T he presence of negative reviews brings
authenticity to a site’s review content

\ Variable: Number of Reviews

5. Initial Reviews Havethe Greatest Impact

Based on our research of the gift retailer’s website, we foundthat nearly all of the increase in purchase likelihood occurs
within the first 10 reviews, and the first five reviews drive thebulk of this increase.

Conversion Increase

It’s easy to assume that having more and more reviews willcontinue to help drive sales. Our research found that morereviews help, but only to a point — and that point is much
lower than many might assume.

DIMINISHING MARGINAL RETURNS

Low Price
High Price

0

5

10

15

20

Number of Reviews

For both low- and high-priced products, the marginal value of additional reviews rapidly decreases. But the point at which the impact
plateaus varies depending on price point. Higher-priced items needat least five reviews to see the greatest conversion impact, whereas
lower-priced items only need 2-4 reviews to see a significant impact.

Askalidis, Y. and Malthouse, E. C. (2016). “The Value of Online Customer
Reviews.” RecSys 2016 - Proceedings of the 10 th ACM Conference on
Recommender Systems, 155-158. Association for Computing Machinery, Inc.

11 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

\ Putting Conversion Insights to Work

5

What This Means for Brands

FOCUS ON FIRST FIVE
The first five reviews for a product havethe biggest conversion impact. Focus oncollecting a baseline number of reviews,
especially for higher-priced products.

EMBRACE NEGATIVE REVIEWS

The power of online reviews to influencesales means that retailers have powerfulincentives to develop effective strategies
for collecting, displaying, and monitoring
reviews on their websites. Reviews that are
viewed as representative and credible canbe a significant competitive advantage.

Allowing negative reviews on your site helps build
credibility with shoppers. Rather than trying to eliminate
negative reviews, monitor them and respond to them.

FOLLOW-UP BY EMAIL

80%

Prior research from PowerReviews shows that up
to 80% of reviews originate from follow-up emails
urging shoppers to review their purchases.*

PRODUCT SAMPLE NEW ITEMSIn addition to email prompts, product sampling can be
an effective way to generate initial reviews, particularly
for new products among first-time purchasers.

STREAMLINE PLATFORMS*PowerReviews Internal Data

12 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

 ake the process of posting a review asMsimple as possible by allowing shoppers to
submit reviews with just a few clicks. Also,
make it easy for shoppers to read and post
reviews across all devices and platforms.

\ Prompted vs. Unprompted Reviews

How the Source of the Reviews
Impacts Ratings, Credibility, andPurchase Likelihood

WHAT WE FOUND:
1. Verified buyers give higher ratings

Are all reviews created equal? To answer this question, we looked at data related
to reviews submitted by the two primary types of reviewers: verified buyers(i.e., prompted reviews) and anonymous reviewers (i.e., unprompted reviews).
In analyzing this data, we explored three key questions:
1. Do star ratings vary depending on the source of the reviewer?
2. If so, what causes the ratings to vary between the groups?
 oes one type of review have a greater impact on shoppers’
3. D
purchase behavior?
Verified buyer (i.e., prompted reviewer): For this study, verified buyers are
considered consumers who make a purchase online and receive a post-purchaseemail asking them to review their purchase.
Anonymous reviewer (i.e., unprompted reviewer): Anonymous reviewers are those
whose purchase cannot be confirmed through an online sales transaction linked
to a review prompt.

13 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

2. Selection bias and social influencebias shape how people write reviews
3. Reviews from verified buyers areperceived as more credible and havea greater impact on sales

\ Prompted vs. Unprompted Reviews

1. Reviews from Verified Buyers
Have Higher Ratings

AVERAGE STAR RATING:
VERIFIED BUYERS VS. ANONYMOUS REVIEWERS

70

We found that reviews from verified buyers are substantiallymore positive than reviews written by anonymous sources.

These findings are consistent with the theory that people whoare self-motivated to write a review have more extreme, andoften more negative reviews. We explore this selection bias inmore detail later in the report.

Verified Buyer

60
50

Percentage

The average star rating for reviews from verified buyers is
4.34, compared to an average star rating of 3.89 for reviews
written by anonymous reviewers. In addition, reviews fromverified buyers contain a higher percentage of 5-star ratings,
while reviews from anonymous reviewers have a larger
percentage of 1-star ratings.

Anonymous Consumer

40
30
20
10

0

1

2

3

4

5

RatingVerified buyers are more likely to give four- or five-star ratings
than anonymous reviewers are. Conversely, anonymous buyers
are significantly more likely to give one- and two-star reviews.

Askalidis, Y., Kim, S.J., and Malthouse E.C. (2017), “Understanding andOvercoming Biases in Customer Reviews.” Decision Support Systems. 97(May 2017), 23-30.

14 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

\ Prompted vs. Unprompted Reviews

2. Selection Bias and Social Influence Bias
Shape How People Write Reviews
The finding that anonymous reviewers typically give lower ratings is consistent with our theory that “friction” causes selection bias when it comesto reviews. When responding to an email prompt, verified buyers typically
only have to make a few clicks to submit a review. Anonymous reviewers,
on the other hand, must go to the review site and create an account before
they can submit a review. Thus, we hypothesize that customers who arevery unhappy with their purchase are much more likely to go to the effort
to post an unprompted review.
We also found that ratings from anonymous reviewers tend to decline overtime while ratings from verified buyers remained steady, which suggests
some degree of social influence bias is at work. Verified buyers are asked
to fill out a review via email and are taken to a page where they don’t
see any other reviews. Anonymous reviewers, on the other hand, havevisibility to average star ratings and others’ reviews. Thus, anonymous
reviewers may be influenced by the product’s average star rating or thevolume or tone of review comments.

Askalidis, Y., Kim, S.J., and Malthouse E.C. (2017), “Understanding and Overcoming Biases inCustomer Reviews.” Decision Support Systems. 97 (May 2017), 23-30.

15 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

SELECTION BIAS:

Shoppers who have had a negative experience
are more likely to make the effort of going to asite, creating an account, and posting a review.

SOCIAL INFLUENCE BIAS:

Verified buyers typically don’t see average star
ratings when posting their reviews. Anonymous
reviewers, on the other hand, do have thisvisibility, which could influence their ratings.

\ Prompted vs. Unprompted Reviews

3. Reviews from Verified Buyers
Are Perceived as More Credible andHave a Greater Impact on Sales
We examined whether consumers evaluate reviews from verified buyers differently
than reviews from anonymous reviewers. That is to say, do shoppers place moretrust in a review if it’s written by a verified buyer?
We found that displaying reviews written by verified buyers – identified by a “verified
buyer badge” – has a positive impact on sales. This suggests that reviews written by
those with direct experience using a product are considered more credible and trustworthy. The verified buyer badge shows that the reviewer is a real consumer and not
someone who was paid to write a review or someone who has an axe to grind against
the company.
Because verified buyers typically provide more positive reviews than anonymous
reviewers, having more reviews from verified buyers provides the dual benefit ofhigher ratings and increased credibility.

Kim, S.J., Malthouse, E.C., and Maslowska, E. “Understanding the Role of Different Review Features in
Purchase Probability” Submitted to International Journal of Advertising, 2017.

16 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

VALUE OF THE “VERIFIED BUYER BADGE”

Verified Buyer
15%

Purchase likelihood increases
whenconsumers are exposed to reviews written
by a verified buyer vs. an anonymous review.

\ Prompted vs. Unprompted Reviews

ENCOURAGE VERIFIED BUYERS
Implement a post-purchase email plan to collectreviews from verified buyers. Retailers can expect
to see average star ratings increase by prompting
buyers to submit reviews.

What This Means for Brands

OPTIMIZE DEFAULT SETTINGS

Having more reviews from verified buyers
can help improve the value of the reviews
in multiple ways. When developing their
online review strategies, retailers should
consider the various benefits of prompting
reviews from customers.

Offer a “verified buyer only” default setting
on your review platform so readers can view
only those reviews.

OFFER BUYER “BADGES”
In addition to fostering a representative sample
of reviews, retailers can improve the perceived
credibility of their sites by including “verified
buyer badges.”

MITIGATE BIAS
Retailers can play an active role in mitigating selection
bias and social influence bias in the online review
ecosystem by incentivizing reviews from verified buyers.

BE TRANSPARENT

17 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

Be transparent about incentives used to solicit
reviews (e.g. entry into a sweepstakes) or consider
non-prize incentives (e.g. stars or badges forfrequent reviewers).

In Review
Data-Driven Strategies to Leverage the Power of Online Reviews
Based on our extensive research into how online reviews influence purchase decisions, we recommend that retailers follow
these six principles when developing an online review strategy.
Display reviews
and ratings on yourproduct website

Embrace negative
reviews

Prioritize generating
reviews for productswith a low volumeof reviews

Further prioritize
generating reviewsfor higher-price andhigher-consideration
products

Overcome selection
bias to improve thevalue of reviews

Identify reviews
from “verified
buyers”

Displaying reviews
can increase sales
by 270% on average.
Retailers that choose
not to feature ratings
and reviews risk losing
customers to a sitethat does. Hosting
mobile-friendly sitesthat make it easy toview and post reviews
will help retailers
drive sales.

Purchase likelihood
typically peaks when
the average star rating
is between 4.2 and4.5 stars and starts todrop as the star rating
approaches a perfect
5.0. While it may
seem counterintuitive,
negative reviews
can have a positive
impact because they
establish credibility
and authenticity.

The first five reviews
have the biggest
impact on purchasedecisions. Rather thantrying to generate
additional reviews for
all products, retailers
should focus theirefforts on making sure
all products have atleast a handfulof reviews.

Reviews are more
impactful for higherpriced and higherconsideration
products. There’s ahigher risk involved
with purchasing an
expensive item, a new
brand, or a product that
affects personal safety.
Retailers can help
consumers overcome
this risk by providing
additional reviews forthese products.

A larger pool ofreviewers is not always
more representative,
particularly if it includes
a large number ofanonymous reviews.
Retailers can maketheir reviews more
representative of thetotal universe of buyers
by encouraging verified
buyers to post reviews
through post-purchaseemail prompts.

Identifying purchasers
with “verified buyer
badges” enhances thecredibility of a review
and improves the odds
of purchase by 15%.
Retailers should betransparent in labelingverified buyers and any
tactics used to solicit
their reviews.

18 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

Review the Research
Branded Apps Research TeamThe research supporting this report was led by thefollowing members of the Spiegel Research Center:
Tom Collinger
Executive Director and Associate Professor

Edward Malthouse
Professor of Integrated Marketing Communications

Ewa Maslowska
Assistant Professor and Research Associate

Rebecca Wang
Assistant Professor and Research Associate

Su Jung Kim
Assistant Professor and Research Associate

Yorgos Askalidis
PhD Data Scientist

19 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu

PUBLISHED RESEARCH ON ONLINE REVIEWS

The results and insights from the Spiegel ResearchCenter’s research into how online reviews influencepurchase decisions have been published in thefollowing journals and textbooks:
JOURNAL PUBLICATIONS*Full papers available upon request
Askalidis, Y., and Malthouse, E. C. (2016). “The Value of Online
Customer Reviews.” RecSys 2016 - Proceedings of the 10th ACM
Conference on Recommender Systems, 155-158. Association for
Computing Machinery, Inc.
Malthouse, E., Maslowska, E., and Viswanathan, V. “Do Customer
Reviews Drive Purchase Decisions? The Moderating Roles ofReview Exposure and Price,” Decision Support Systems, 2017.
Maslowska, E., Malthouse, E.C., and Bernritter, S. (2017), “TooGood to be True: The Role of Online Reviews’ Features in Probability
to Buy, International Journal of Advertising.” 36(1) 142-163.
Kim, S.J., Malthouse, E., and Maslowska, E. “Understanding
the Role of Different Review Features in Purchase Probability.”
Submitted to International Journal of Advertising, 2017.
Askalidis, Y., Kim, S.J., and Malthouse, E.C. (2017), “Understanding and Overcoming Biases in Customer Reviews.” Decision
Support Systems. 97 (May 2017), 23-30.

More Insightsfrom the Spiegel
Research Center
As the digital marketing communications
landscape evolves, we will continue to lookfor innovative ways to measure the impact
of engagement on consumer behavior.

Consumer
Engagement Engine

Social Media
Contests

Online Negative
Word-of-Mouth

Do consumers who engage
in social media contests
buy more?

Do negative posts in asocial media environment
impact purchase behavior?

How do the new waysthat consumers engage
with brands affectcustomer value?

Loyalty Programs

Branded App ROIMulti-PlatformEngagement

Do instant rewards drive
purchase in a loyalty
program?

What is the value ofcustomer engagement via
branded mobile apps?

How does multi-channel
engagement affect purchasebehavior?

To dive deeper into Spiegel’s research into
how engagement via mobile apps and otherchannels influences purchase behavior
and customer value, we invite you to visit
us online.

LEARN MORE about the Spiegel ResearchCenter’s research-driven insights onmarketing communications by visiting:spiegel.medill.northwestern.edu

20 \ How Online Reviews Influence Sales \ spiegel.medill.northwestern.edu