Reputation Management Goes Digital
Today’s companies need to take steps to proactively manage their online reputation. Here’s how to get started.
IN 2013, THE GENERAL MANAGER OF L’HÔTEL QUÉBEC filed a lawsuit against a guest who had posted a review on Tripadvisor, stating that he had encountered bedbugs while staying there. The hotel did not dispute that there were bedbugs, but argued that the incident was a one-off and claimed $95,000 for reputation damage and lost profits.
Concerned about the reputational damage caused by negative reviews, a group of hoteliers in the UK discussed bringing legal action against Tripadvisor for what they regarded as unfair and incorrect reviews. Service providers often suspect that such reviews have been written by rivals or disgruntled ex-employees. Indeed, an executive with the France-based hotel chain Accor admitted to posting five-star reviews for Accor properties and negative reviews about rival hotels.
The reputational stakes are enormous — and not just for hotels. It has been said that ‘everyone’s a critic’, but this phrase has assumed heightened meaning today as digital technologies make it easy for people to publicly review every aspect of a company. From ‘best of ’ lists on magazine websites to employer reviews on Glassdoor, product reviews on Amazon, and service reviews on Yelp and Tripadvisor, companies are continually being judged, and those assessments are easily accessible to everyone, everywhere.
In this article, we will discuss two types of online reputational ratings — curated and uncurated — and describe the impact they can have on organizations. We will also provide some guidelines for how managers can begin to use these ratings to their advantage.
Curated Reputational Ratings
Curated ratings are produced by a third party (often a media outlet) that is considered neutral because it’s not involved in transactions as either a buyer or a seller. Some are intended to rank entire organizations against their peers. Fortune magazine, for example, publishes an annual list of ‘The World’s Most Admired Companies’ and ‘The 100 Best Companies to Work For’; Newsweek lists the ‘Top Green Companies in the World’; and the Times publishes annual ‘World University Rankings’. Other curated ratings are intended to provide comparisons among products or services. CNET, for example, provides reviews of technology products; Wine Spectator publishes wine ratings; and Bloomberg Businessweek ranks MBA programs.
Curated ratings are transparent in that they are based on
pre-determined criteria: Companies know ahead of time how they will be judged, and changes to the rating algorithm tend to involve consultation and are widely circulated in advance. Data collection is done uniformly across companies, with new ratings appearing at set intervals, usually annually.
A high score on a curated rating is beneficial because of the perception that a neutral third party has attested to a company’s worthiness, and it can position a business publicly among the very best in its industry. This can lead to the company becoming more attractive to investors, customers, suppliers and employees, resulting in price, cost and selection benefits that persist over time. Such a cycle of cumulating benefits can be described as one in which ‘the rich get richer’.
On the other hand, curated ratings can be damaging when a company compares unfavourably to its peers or to its own past performance. Of course, to be compared, a company must first make the list. The ‘World’s Best Banks’ list by Global Finance includes only the best bank from each country. In other words, the very top is visible, but all other banks are not, so this list provides little reputational threat. Thus, although it is advantageous to be listed, it’s not necessarily damaging to be left off, because so many banks in each country aren’t included.
However, if most of your peer organizations are rated or ranked, there will be a reputational loss if you are left out. Not surprisingly, relative placement in the ratings also matters. For example, the World University Rankings by Times Higher Education provides a ranked list of 800 universities. Differences in scores are obvious, and even more potentially damaging, yearto-year decreases are evident. The end result: Low or declining scores can lead to the best students and professors choosing to go elsewhere. In this case, ‘the poor get poorer’.
Uncurated Reputation Ratings
Uncurated ratings are posted by anonymous members of the general public on digital platforms such as Tripadvisor, Yelp and Ratemymd. The individuals posting the ratings are people who use the platform to communicate the quality of their direct experience with an organization, so products and service encounters tend to be rated. An organization’s online reputation as determined by its uncurated ratings is therefore determined by the feedback of many people, rather than by a single curator.
Typically, the content of an uncurated reputation rating is only partly structured. The structured portion tends to be numeric (for example, a scale of one to five stars), and these numbers are averaged across raters to provide an aggregate score. Because the scores are continually updated, this type of reputation rating is always in flux. In the unstructured portion, the raters write comments, which are rarely aggregated. Previous comments can get pushed to the bottom of the list and become less visible as new comments are added, sometimes leaving only the most recent comments to garner the bulk of attention.
The calculations behind uncurated ratings tend not to be disclosed, and changes are usually made without consultation or transparency. Yelp, for example, takes into account the total number of reviews received by an establishment, which reviewer provided a particular submission, and whether that review has been voted as ‘helpful,’ but the company doesn’t reveal exactly what formula it then uses. Given the different algorithms and the lack of transparency, the impact of a one-star review (or a five-star review) on an overall restaurant rating is likely to be different across different platforms such as Yelp, Tripadvisor and Opentable.
Positive uncurated ratings are beneficial because people tend to believe — and may be correct in believing — in the ‘wisdom of crowds’. In other words, better judgments are generally formed with more people participating, and digital platforms make the online ratings of hundreds and thousands of people instantly available on mobile phones, so what once might have been a difficult decision (for instance, choosing which new car to purchase) with limited information and a long search time has now become a much quicker choice supported by voluminous data. This can, however, result in herd behaviour, with people blindly following the decisions of earlier adopters. Indeed, evidence suggests that the number of online ratings is as important a reputation signal as their average score.
Although most uncurated ratings are actually quite positive, they can be threatening to an organization when negative ratings and reviews are visible. In particular, fraudulent reviews, perhaps submitted by competitors, can be especially damaging because there might not be any basis in reality to respond. Because uncurated ratings are continually updated, an isolated bad review will not be as persistently noticeable as it might be in a curated platform, which generally changes only at pre-set intervals. Over time (perhaps within days or even hours), isolated
Online ratings can provide detailed information about your rivals’ strategies.
negative feedback will be eclipsed by more recent reviews, and a high volume of ratings is likely to smooth out extreme variations that are not reflective of most people’s experience with a given product or service.
Three Facts About Reputation Ratings
Positive ratings — both curated and uncurated — can help companies gain and retain customers, partners, employees and suppliers. In contrast, negative ratings can render developing and maintaining such relationships more difficult or costly, with serious performance consequences. That said, although the link between rating outcomes and benefits might seem direct and obvious, there are a few nuances.
WHEN EVERYTHING IS POSITIVE, THE SEARCH SHIFTS TO DISTINGUISHING
In order to distinguish among many fiveAMONG THOSE RATINGS. star reviews, consumers actually have to read the reviews. Imagine a restaurant receives a negative review. If it has many positive ratings, one negative review will not affect its overall level of stars, but if people read the reviews to figure out the differences among five-star ratings, they might see that negative feedback. In fact, a negative review might be the first review they see.
Research on ordering effects suggests that the most visible, first-read review has an inordinately large impact on individual choice, particularly when the product being searched for is relatively inexpensive — like a meal or a movie. For more costly products, such a review may be only one of many that people will read. Thus, it is not simply the rating itself, but also the order of reviewer comments and the type of product or service that matters.
When a comONCE THEY REACH THE TOP, RATINGS TEND TO DECLINE. pany achieves a five-star rating, it starts to attract a wide variety of customers who follow five-star ratings — regardless of what is being rated. The problem is, these customers may not be a good fit for the firm, and may be more likely to have unrealistic expectations, which can translate into negative experiences and, thus, negative reviews.
A recent study showed that award-winning authors saw their ratings go down after winning important prizes, not because the quality of the book had changed, but because winning the prize brought in new readers who otherwise wouldn’t have read the book. Those readers then rated it poorly because they were ‘bad fits’ — not because of anything to do with the book’s quality.
New customers RATINGS MATTER MUCH LESS TO REPEAT CUSTOMERS. may be apt to choose a particular firm based on its rating, but will repeat customers continually check to see if that business retains its five stars? Once customers gain experiences with a company, those experiences are more likely to have a greater influence on loyalty than are the ratings or reviews of strangers. An important caveat, however, is that repeat customers do care about ongoing ratings for status goods or services, such as luxury designer brands or college degrees from elite universities.
Using Ratings as a Learning Tool
In addition to the above stakeholder effects, companies should consider the following broader impacts of online reputation ratings.
1. RATINGS PROVIDE VALUABLE INFORMATION ABOUT COMPETITORS Most companies collect intelligence about their competitors, but online reputation ratings can provide much more detailed information about a larger set of rivals. Curated ratings are often calculated on the basis of information supplied by each firm, which might otherwise not be disclosed, especially for privately held businesses. Because curated ratings stack companies up against one another based on predetermined criteria, it’s obvious which firms score better or worse than a particular company on, for example, customer-satisfaction indicators or investment in facilities. Although these generally are broad indicators without any nuances, the numbers can nevertheless provide useful data for an ongoing competitive analysis.
Uncurated ratings and reviews can also be useful. Customer feedback could, for example, reveal new information about a rival’s strengths and weaknesses. Or a company could discover that the main threat to its business is coming not from its direct competitors but from firms offering substitute products whose existence is disclosed in online reviews.
2. RATINGS PROVIDE VALUABLE INFORMATION ABOUT CUSTOMERS Although many consumers rely on ratings for making decisions, the anecdotal experiences of friends and family are equally powerful (if not more so). One study suggests that 83 per cent of mothers and 74 per cent of fathers get information about
products and services from social media sites such as Facebook or Pinterest. The sharing people do over these networks — including ideas, useful products and photos of product ‘fails’ — influences how others feel about any particular business. Of course, a company can never collect and analyze all of that information, but even if only a small fraction of these individuals is using uncurated ratings to convey their beliefs, a firm can at least obtain a sense of the overall word of mouth. This is true for many curated ratings, as well. In fact, many curated raters (such as Consumer Reports and Gartner) try to mimic the experience of users when testing products, and some forms of curated ratings (educational rankings, for instance) actually do survey customers.
Uncurated reviews can provide important information that is often not revealed in other ways, and in a timeframe that enables a fast response. When Adobe released a comprehensive update to its Lightroom product, for example, the software had changed how users import pictures into the program. The goal was to make the process more streamlined, but in an onslaught of negative reviews, many people howled about the loss of particular features. As a result, Adobe reverted to the original process in its next update and was able to provide current users with a workaround. If the company had not seen the reviews, it might have continued evolving Lightroom in a way that risked alienating customers.
3. RATINGS CAN PROVIDE CONSUMER-TARGETING INSIGHTS
Online ratings and reviews can supplement internal data about customers to aid in segmentation and targeting decisions. Are the customers who are supplying reviews representative of a company’s customer base? Are the customers who love a product similar to those who hate it? Are the best reviews from customers of a core service or from those using a new service-line extension? Answers to such questions can provide important strategic insights. One Toronto-based painting company noticed that it was receiving a significant number of estimate inquiries from people who had read its reviews on a local rating site but that it seldom landed any of those individuals as clients. The reason? Those potential customers tended to be extremely price-conscious, and the company provided high-end, large-scale services. Armed with this knowledge, the firm changed its vetting process
Many consumers rely on digital ratings for making decisions, but the anecdotal experiences of friends and family are equally powerful.
to avoid providing in-person estimates to those who were not the proper fit.
4. NEGATIVE RATINGS CAN INCREASE TRUST AND AWARENESS Generally speaking, having both positive and negative reviews increases trust, because consumers feel that they are getting a more accurate set of information. Thus, a firm that strives to maintain a perfect five-star rating may in fact be undermining itself. In addition, negative feedback can be valuable, because knowing what doesn’t work can be just as helpful as knowing what does, and research suggests that customer satisfaction increases when quality exceeds expectations, no matter what level of quality was expected. In other words, a mix of negative and positive reviews helps to set appropriate expectations.
5. RATINGS CAN BE INDUSTRY GAME CHANGERS
Research on both curated and uncurated ratings shows that both can change the rules for success in an industry. This occurs when the ratings become important to buyers and when organizations respond by changing their behaviour to improve their ratings.
One important shift occurs when customers start making decisions based on reputation ratings rather than on unmeasured criteria. For example, if institutional investors decide to choose only those firms with five-star corporate governance ratings, publicly-traded firms will have to consider this new dimension of competition. And when customers shift toward focusing on a rating outcome (for example, a Michelin three-star restaurant) rather than on other qualities (the presence of a renowned chef ), the rating organization becomes an important third party in determining winners and losers within that industry.
Eventually, organizations may start to make internal decisions based on the expected impacts of those decisions on the ratings. Research on the curated reputation rankings of law schools, for example, shows that over time, they affect internal job descriptions, admissions criteria, resource allocation, and communications strategy. This is a fundamental shift from how organizations made strategic decisions in the past, and over time, the ratings criteria may become the most important factors for competition in a market, regardless of whether industry participants believe them to be so.