Who hasn’t spent time weighing customer reviews when shopping around for that must-have device or exciting new product? But a new academic study shows our trust in these online reviews is misplaced.
“User ratings provide very little insight about objective product performance,” said Bart de Langhe, author of the study performed by researchers at University of Colorado Boulder’s Leeds School of Business.
Researchers analyzed online consumer ratings for 1,272 products across 120 product categories on Amazon.com, comparing everyday items like sunblock, smoke alarms and bicycle helmets.
What the study found was that there is little correlation between better online user ratings and the quality of a product.
“The likelihood that an item with a higher user rating performs objectively better than an item with a lower user rating is only 57 percent,” de Langhe said.
Considering that a correspondence of 50 percent would be random, the study’s findings show buying based on these reviews is basically the same as making a decision based on a coin toss.
Yet consumers heavily rely on these reviews regardless of whether the average rating is based on a small or a large sample of consumers. Millennials in particular habitually consult online reviews and make purchasing decisions based upon them.
De Langhe calls this mindset a “mistake,” saying that many times there are not enough reviews or too much disagreement between customer opinions to make the average rating statistically significant. (It's also worth noting that the proliferation of fake online reviews is a big problem, and that Amazon has been suing companies that accept payment for reviews to crack down on fraud.)
The CU-Boulder study also found that customer reviews are not a good forecast of potential resale value for products. You would think products with higher ratings would retain more of their value over time and therefore have a higher resale value. But in reality, that doesn’t always happen.
“The fact that they don’t casts more doubt on the validity of user ratings,” de Langhe said.