Although it might seem like only good can come from shoppers writing glowing online reviews of your products, their kind words can end up hurting your bottom line in the long run, new research in the Journal of Retailing finds.
The study revealed that positive product reviews hurt an online business's profit because of the high hopes they give consumers. While the positive reviews often lead to an initial purchase, more often than not it also leads to a return because the item didn't meet the customer's lofty expectations.
"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 study's authors wrote.
For the study, researchers analyzed more than two years of sales data from a major European online retailer. The data included nearly 9 million page views and 631,063 purchase transactions for 2,164 different electronic and furniture products. [See Related Story: Hold Your Fire: When to Respond to Online Reviews]
The information allowed the study's authors to look specifically at the number of reviews available when shoppers made their purchases and whether they were positive or negative, as well as how many customers ended up returning items.
The researchers discovered that a lot of positive reviews did result in increased sales. However, when there weren't more negative reviews to balance them out, more shoppers were disappointed in what they received. The disappointment often resulted in a return of the item, which costs retailers between $6 and $18 per return, according to the study.
The researchers said those higher return costs offset the initial gains in sales and end up lowering overall profits.
The study's authors said not being happy with the product, as opposed to something being defective with it, is the reason for most returns.
"Negative post-purchase product evaluations often arise due to the customers' limited ability to evaluate and test products before purchasing them," the study's authors wrote. "This limited ability creates uncertainty about product performance prior to purchase, which then increases the likelihood that a product will fail to meet customers’ expectations. These unmet customer expectations result in dissatisfaction with the product and a higher return likelihood."
The study's authors said the research shows how critical it is for online businesses to provide information that sets the right expectations for consumers.
"Given our results, it is important that the reviews reflect all buyers’ opinions regarding the product," the study's authors wrote.
The researchers suggest that online retailers should not only encourage shoppers to write reviews after making a purchase, but they should also emphasize to shoppers that it is important that the reviews fairly represent their opinions, even if it's a negative one.
The study, "To Keep or Not to Keep: Effects of Online Customer Reviews on Product Returns," is scheduled to appear in the September issue of the Journal of Retailing. It was authored by professor Tammo H.A. Bijmolt and doctoral candidate Alec Minnema of the University of Groningen in the Netherlands, and professors Sonja Gensler and Thorsten Wiesel of the University of Münster in Germany.