A global study on the “rating economy” shows how product ratings have been used by disruptors to such success that ratings have fundamentally changed shopping behaviour and are now challenging brand loyalty as a preeminent consumer force. Customers now rely much less on marketing messages, with the balance of power shifting from companies to consumers. This has been driven and harnessed by disruptors to benefit consumers and small suppliers.
Ratings have become an increasingly important evaluation tool for almost every kind of consumer purchase globally and in the UK according to the new Trend Radar 2019 – The Rating Economy study from pricing specialists Simon-Kucher into thousands of consumers.
The change is so extensive and profound that consumers now see ratings as their third most important criterion when buying, after product features and price, and more significant than the brand.
Disruptor business models
Mark Billige, Managing Partner UK at Simon-Kucher. “There is a lot of focus on disruptors’ technology, algorithms and business models, but their successful incorporation of ratings to rapidly build trust and loyalty has been underappreciated by many commentators even though this key to their success is hiding in plain sight.
“Successful use of ratings has been a driving force allowing Amazon, ebay, Uber, AirBnB, TripAdvisor and many other platforms to harness thousands of smaller suppliers, while building huge levels of satisfaction and trust amongst consumers with minimal marketing spend. The use by businesses of the power of ratings to influence customer behaviour is only going to grow further with time and across more sectors.”
Ratings bring higher customer satisfaction
In total, 38 percent of UK survey participants (51 percent globally) believe they receive more value for money due to product ratings. “Not only do people feel better informed and make fewer bad purchases, they also say the products they receive are of better quality thanks to the availability of ratings,” says James Brown , partner in charge of Simon-Kucher’s Consumer & Retail Practice in the UK.
“The rating economy gives customers more transparency over a product’s value before they buy it. Now consumers are much less reliant on marketing promises and advertising messages, and can also give public payback if they feel let down,” says Brown. “The balance of power is shifting toward the customer.”
The rating economy: Companies need to rethink their traditional marketing strategies
Being able to directly compare products quickly and easily makes customers more likely to switch, with ratings eroding loyalty to product and company brands.
In many cases, customer reviews have overtaken brand in importance as a buying criterion. “Our research found people aged under 40 living in urban areas are now particularly less attached to brands. But it is not just hipsters who find the recommendations of other shoppers more believable than marketing promises when it comes to finding the right product. Sooner or later every provider will have to develop a strategy for product ratings,” added James Brown.
Companies stand to benefit from the rating economy, too, since:
- 17 percent of consumers report they would buy more when products are rated highly
- 12 percent would select more expensive products.
- 15 percent of those surveyed said they are even prepared to pay more for products with higher ratings.
Consumer electronics and tourism lead the way with ratings
“Companies have long been aware of the importance of ratings and rating platforms in travel and hospitality, which have been a driving force behind big disruptors such as Airbnb, Uber and Open Table, who have been able to dominate the industry by incorporating customer ratings at the heart of their business models” says Dimitris Hiotis, Global Head of Leisure, Travel and Transportation.
“By contrast, the rating trend is still in its infancy in many industries, and we fully expect to see other industries being disrupted as new entrants learn to apply ratings to enable new business models.
Overall, the role of product reviews is most significant for travel and hospitality (58 percent of UK consumers refer to ratings before making their purchase decision; 60 percent globally) and consumer electronics (UK: 52 percent; globally: 60 percent).
Product ratings are the new standard
Over 40 percent of those surveyed said they regularly read reviews before making a purchase. Almost a third of participants also usually leave their own ratings of the products they buy, while the majority of consumers (71 percent) have rated a product at least once.
Around 60 percent of customers who are highly dissatisfied with their purchases leave a rating, but it is not just moaners: 71 percent of consumers say they submit ratings when they are particularly satisfied with a product.