Positive customer reviews raise customer expectations. Sometimes to an extent where the actual product can only be a disappointment- and thus be returned. The more positive online reviews a product gets may actually lead to a net negative profit for the retailer. That is the conclusion of new research by a team of marketing experts from a Dutch and a German university published in the September 2016 issue of the Journal of Retailing.
In the study titled "To Keep or Not to Keep: Effects of Online Customer Reviews on Product Returns," researchers of the universities of Groningen and Münster have analyzed more than two years of sales data from a major European online retailer, equaling close to 9 million page views and 631,063 purchase transactions for 2164 different products.
More sales, more returns
For retailers, one of the downsides of online selling is the high return rate - an estimated 30 percent. The research suggests that many positive reviews about a product can raise customers' expectations and trigger them to make a purchase. Once they receive the product, it might disappoint them to an extent that they do not want to keep the good. An abstract of the article reads: "OCRs help to form product expectations at the moment of purchase. Therefore, the purchase probability increases but the high expectations due to overly positive reviews may not be met, which results in negative expectation disconfirmation and consequently increases return probability as well." The scholars also concluded that a lot of positive reviews can increase sales. This increase does, however, not offset the negative effect on returns.
Returns often related to disappointment
This effect is stronger for inexperienced customers and cheaper products. The result is a higher total return cost - offsetting the gain in sales - and thus lower profits. One of the reasons for this is that most products are not returned because of product defects but customers’ disappointment, the research finds. In the electronics category, only five percent of the returns are related to defective products.
How to deal with it
"Our findings encourage retailers to get a large review base that adequately reflects the performances of the product," the researchers conclude. "Retailers thus should actively stimulate customers to write a review after purchase..." However, they emphasize that for the retailer's own good, the reviews should fairly represent customers' experience of the product, negative as well as positive.
