Customer endorsement in the form of reviews, likes and other forms of support (or criticism) is important for sales. This is true for all organisations. However, the effect of customer endorsement on consumption varies widely, depending on the type of company and the type of product.
Research by Kyunghee Lee, Byungtae Lee and Wonseok Oh found that reviews are more likely to influence the purchase of services than products. Reviews are also more likely to influence buying intentions for independent retailers than for chains.
Likewise, Eran Manes and Anat Tchetchik found that customer endorsement was more likely to influence demand for cheap hotels than expensive ones; and for unbranded providers than for branded ones.
However, it’s not all good news. Mengzhou Zhuang, Geng Cui and Ling Peng found that customers are also more likely to suspect that positive reviews have been faked in the case of unknown, independent brands, than in the case of well-known ones.
That is, if you are a new, independent brand, selling a service – for instance, a new restaurant or hotel – you desperately need those positive reviews. But, be careful, as very positive reviews may backfire, if prospective customers think they are not genuine.
One thought on “Customer reviews are a double-edged sword for new, independent service brands”
Double edge sword indeed! Would be interesting to get some light as to the rational of why customers might think it the way those econometric model hypothesis.