reading 6 Flashcards
online reviews as a source of information
the paper explores how online reviews have emerged as an important source of information for consumers. Traditional forms of information (word of mouth, professional reviews, or advertising) are being supplemented or even replaced by online platforms like yelp, where individuals can share their personal experiences. Online reviews reduce information asymmetry (when consumers have less info than sellers), thus empowering customers to make better decisions
Impact of yelp reviews on restaurant revenue
one of the core arguments of the paper is that online reviews, particularly on yelp, significantly impact restaurant revenue. The research presents a statistical analysis showing that a one star increase in a restaurants yelp rating leads to a 5-9 percent increase in revenue. This is a considerable effect, demonstrating the power of user generated content in influencing consumer behavior
Effect on independent vs chain restaurants:
Lucas research finds that independent (non-chain) restaurants benefit more from yelp reviews than chain restaurants. for independent businesses, yelp provides a level playin field by offering them visibility through positive reviews. Chain restaurants, on the other hand, tend to have established reputations and brand recognition, so the effect of yelp reviews on their revenue is smaller
Reasoning: Independent restaurants rely more on word of mouth and customer feedback to attract new customers, and online reviews act as a digital extension of traditional word of mouth marketing. Without the budget for extensive advertising, independent restaurants can harness positive yelp reviews to drive business
conclusion (first paper yelp)
The main takeaway from “reviews, reputation and revenue: the case of yelp.com” is that online reviews have a significant impact on business outcomes, particularly independent restaurants. Positive yelp reviews can boost revenue while negative reviews can deter potential customers. As the role of the internet is shaping consumer decision-making grows, businesses must adapt to this new environment where reputation is more public, immediate and influential than ever before. business owners, especially those in customer facing industries, need to understand that online reputation management is a critical aspect of their overall business strategy. In short, yelp has fundamentally altered the way consumers choose where to dine and how restaurants must compete for business. Online reviews are no longer just a form of customer feedback – they are a key driver of economic sucess in the digital age
Importance of online revies in shaping business reputation
the paper builds on the idea that online reviews, particularly those found on platforms like trip advisor, yelp or expedia, play critical role in consumer decision making. Consuemrs rely heavily on user generated content to assess product quality, especially in service based industries like hospitality. Online reviews have democratized the flow of information, enabling customers to make informed choices without relying on traditional marketing. However, online reviews are not just static, they are dynamic interactions where businesses can engage with consumers, particularly through the management response function available in many review platforms. This research focuses on how businesses, especially hotels, can use responses to shpae their online reputation and influence consumer behavior
Study focus: responses to negative reviews: (before proof)
the paper specifically investigates how management responses to negative reviews affect future consumer reviews and cutsomer behavior. Negative reviews can damage a businesses reputation and deter potential customers, so how managers adress these reviews publicly is critical. By responding to negative feedback, businesses can demonstrate that they care about customer satisfaction, which might alter the perception of future customers reading the reviews
differences in differences approach
The difference-in-differences method is a quasi-experimental approach that compares the changes in outcomes over time between a population enrolled in a program (the treatment group) and a population that is not (the comparison group). It is a useful tool for data analysis.
Reduction in negative reviews post response (findings)
The research finds that when hotel managers respond to negative reviews the volume of future negative reviews significantly decreases. This suggests that potential reviewers are less likely to leave a negative review if they know that management is actively engaged and reading their comments. The mere act of responding can shift consumer behavior, likely due tot he expectation that complaints will be addressed privately rather than needing to be aired publicly
Increase in review scores (findings)
Another key finding is that the average review score increases after management starts responding to reviews. This could be for several reasons:
Potential customers may feel more inclined to give the hotel the benefit of the doubt, knowing that the business is actively managing its reputation
Consumers might hesitate to leave overly critical reviews if they expect management to reply directly
The study emphasizes that management responses are particularly effective at mitigating the impact of negative reviews, leading to an overall improvement in the hotels average rating over time
Influence on future consumer expectations
one of the papers central arguments is that management responses send a signal to future customers that the business is attentive and values customer feedback. This signaling effect alters the expectations of future customers, who may interpret management responses as an indicator of overall service quality. As a result, they may rate their experience more favorably
Managerial strategy (addressing negative feedback)
the paper provides evidence that responding to negative reviews is more impactful than responding to positive ones. Negative reviews can dissuade future customers, but a thoughtful, constructive response can help mitigate their effect. Managers should aim to address specific complaints, offer solutions, express a commitment to customer satisfaction. This engagement can also help recover dissatisfied customers and prevent future damage to the buisness reputation
Managerial strategy: responding quickly and professionally:
the timing and tone of the response also matter. The study shows that prompt, professional, and courteous responses are more effective in improving consumer perceptions than delayed dor defensive replies. Managers should avoid confrontational tones and instead focus on empathizing with the reviewers experience while showing a willingness to resolve issues
Impact on review fraud and bias
another interesting aspect of the study is its discussion on review manipulation or bias. The research notes that some businesses might be tempted to fabricate positive reviews or artificially supress negative ones. However, management responses provide a more legitimate way for businesses to manage their online reputations. By engaging transparently with customers through responses, businesses can build trust and reduce the temptation or necessity to resort to unethical practices like review fraud.
Additionally, the paper highlights that when businesses start responding to reviews, it deters customers from leaving overly exaggerated negative feedback, as the expectation of a response often leads to more balanced and measured reviews. this may reduce the occurrence of emotionally charged or unfairly harsh reviews, contributing to a more accurate representation of the business’s quality
Reputation as an asset:
the paper emphasizes that online reputation is na asset that businesses must actively manage. A business’s public response to reviews are an extension of its brand, and these interactions can shape customer perceptions just as much as traditional marketing campaigns. Repuration management in the digital age requires continuouos monitoring and engagement with customers across multiple review platforms
Long term strategy: management responses can have a long lasting effect on how a business is perceived, influencing both short-term custoemr satisfaction and long term loyalty. Customers who see businesses responding actively to compaints are more likely to view them as professional and trustworthy, increasing the likelihood of repeat business and positive word of mouth
Review manipulation as a marketing st rategy
the core theme of the paper is that businesses, particularly in highly competitive industries, often engage in review manipulation to enhance their online reputation. These promotional reviews are typically fake, written by the businesses themselves or paid reviewers to artificially inflate their ratings. The paper seeks to understand the prevalence of these reviews, who engages in them and the effect they have on consumer decision making
