Most Consumers Read and Rely on Online Reviews; Companies Must Adjust

Large numbers consumers are turning to online reviews - which are having a considerable impact on their purchase decisions, according to a recent survey by Deloitte’s Consumer Products group that found almost two-thirds (62 percent) of consumers read consumer-written product reviews online, reports sister site MarketingCharts.

Below, some findings of the Deloitte study.

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Shortcuts to charts that are referenced in this article:

1. Influence of consumer reviews on purchase decisions
2. Active readers of consumer reviews, by age segment
3. Types of purchases influenced by consumer reviews
4. Factors that influence decisions to purchase a new product/brand
5. Affect of recalls on imported products on users’ use of internet for info

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Of those consumers who read product reviews online, more than eight in 10 (82 percent) say their purchase decisions have been directly influenced by the reviews, either influencing them to buy a different product than the one they had originally been thinking about purchasing or confirming the original purchase intention (see chart: Influence of consumer reviews on purchase decisions).Interestingly, while those percentages were slightly higher for younger generations (at the high end, 68 percent of Gen Y), all age groups are reading and acting on online reviews at significant rates (at the low end, 42 percent of those age 75+). (See chart: Active readers of consumer reviews, by age segment.)Moreover, a broad range of product purchased are being influenced, including high-tech/high-ticket items such as home and personal electronics (45 percent and 39 percent, respectively, of those who act on online reviews). (See chart: Types of purchases influenced by consumer reviews.)In addition, the reach of consumer reviews isn’t limited to the online world: Seven in 10 (69 percent) consumers who read reviews share them with friends, family or colleagues, thus amplifying their impact.

“This increasing market transparency can adversely impact the margins, market share and brand equity of consumer products companies,” said Pat Conroy, vice-chairman and US consumer products group leader at Deloitte & Touche USA LLP. “In the past, clever marketers and advertisers shaped brands, but now consumers are increasingly empowered, everyone has a voice, and information and opinions are instantly dispersed.”

Consumer product companies need to learn to capitalize on this new landscape, else face the consequences, Conroy said.

While the survey found that reputation and word of mouth - both factors that are greatly influenced by online reviews - are the key factors that influence consumers’ decisions to purchase a new product or brand, many other factors also play a significant role (see chart: Factors that influence decisions to purchase a new product/brand):

• “Better for you” ingredients or components, eco-friendly usage, and sourcing were each cited by approximately four in 10 consumers as important factors in making purchase decisions.
• Eco-friendly production and/or packaging was cited by more than one-third (35 percent).

“Information about products, pricing, ingredients and sourcing, as well as corporate practices around labor, environment, healthcare and other issues is now instantaneously available to potential customers - and, increasingly, consumers are making decisions based on this information,” Conroy said.

Recent recalls of imported products are also contributing to this trend (see chart):

• One-third of survey respondents (33 percent) said that as a result of recent recalls they now look for more information on the packaging/product.
• Almost one in five (18 percent) said they now look for more information on the internet or elsewhere.

“As knowledge proliferates, there is a tendency for products to commoditize,” said Conroy. “In order to successfully compete, it’s imperative for consumer brands to build and maintain their images, create differentiation, and enhance loyalty. For example, consumer product companies with exemplary supply chains can achieve differentiation by making their processes more transparent. Embracing higher-than-required quality and safety standards can reassure customers and built trust. And co-opting customers to create value with the company can create not only loyal customers, but also brand emissaries.”

About the study: The survey was commissioned by Deloitte & Touche USA LLP and conducted online by an independent research company between August 28 and September 6, 2007. The survey polled a sample of 3,331 consumers over the age of 16.