I generally enjoy my friends, but sometimes they appall me. Recently, I had a movie night with about a dozen of my comrades. We watched a slapstick comedy, but what I learned about my friends that night was no laughing matter: I discovered I was the only one of the group to consistently rate my transactions on Amazon.
To be fair, one friend admitted that he writes adverse reviews when transactions go poorly, but I was the only one of the group who had ever written a positive review on Amazon or Yelp or any other site for that matter. My friend group is not the anomaly; only around 10 percent of Amazon buyers leave feedback. Those leaving feedback are also much more likely to be motivated by a bad experience. Despite its intuitive usefulness, few consumers leave feedback about their economic transactions.
Why do so few consumers leave feedback? The answer partially lies in the nature of reviews. Reviews are a public good. Public goods benefit everyone in society. No one person can exclude another from using the good, nor does one person’s consumption of the good destroy another’s opportunity to use it. Popular examples are national defense and public parks. The catch? The government distributes the vast majority of public goods. Since individuals do not keep all the benefit from producing public goods, society under-produces them. To fill the void, the government steps in.
Transaction reviews are public goods. Anyone can look at reviews on Amazon – they are not excludable. Also, me reading a review does not prevent you from reading the same review. But there is little benefit to the review writer, thus few people take the time to write reviews.
Further, the more reviews that are written, the less incentive there is to write a review. If 10,000 people have given Adele’s new album 5 stars, will the 10,001st reviewer really affect anything? The value of a review decreases the more reviews there are, thus reviews have a negative feedback loop limiting their production.
Consumers perhaps also feel exempt from having to write a review if they continue shopping. If the experience was good, consumers will continue shopping with certain producers – is that not the best feedback one can give?
The paradox in reviews is that while they are under-produced, they are very important. In today’s ecommerce world, reviews are expected. One quarter of consumers consult reviews for every purchase they make. Yelp, an app that allows users to rate local businesses from burger joints to dentists, has 142 million unique users every month. Of those, 90 percent use the app for customer reviews. One study suggests that for every additional star rating on Yelp, revenue increases between five and nine percent. Amazon seller ratings dictate trust and consumer confidence, directly affecting sales. While some holdouts disagree, the evidence demonstrates that reviews are very important to good business.
The question then becomes how to incentivize buyers to leave feedback. Governments often swoop in to provide public goods, but that is impossible in this case. This public good is left to the market. One suggestion is to renovate incentives by offering buyers who leave feedback free shipping, coupons or other goodies which will hypothetically increase review rates. However, this perhaps creates a moral hazard. With incentives to leave feedback, customers might inflate reviews, especially if incentives are only distributed for reviews over a certain threshold. However, as discussed earlier, customers already adversely select because people are more likely to leave feedback after a negative experience. Incentives would perhaps even the scale.
In his work, Amartya Sen, a Nobel Laureate economist, argues that people are not only motivated by economic factors like free shipping. Emotions also play a key role. A top reviewer at Amazon echoes this idea, suggesting that sellers, via surveys and other emotional devices, could increase reviews rates.
A final tactic to increase the percentage of buyers leaving reviews is what I hope this article turns out to be. I want to give an exhortation to readers to leave reviews! Your voice matters. When you have a negative experience, let others know so they can protect themselves. And when you have a great experience, for goodness sake, give credit where credit is due. Praise excellence! Do your civil duty and leave buyer feedback.
