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Amazon: Turning Consumer Opinions into Gold


The Web giant's cache of consumer-generated reviews lures ever-more shoppers, who increasingly research products before buying

When Amazon.com (AMZN) first began letting customers post reviews of products in 1995, many people thought the Internet retailer had lost its marbles. Letting consumers rant about products in public was a recipe for retail suicide, critics thought. Now, almost 15 years later, customer reviews are as common as hyperlinks, and a retail Web site that does not have feedback loops is considered passé or irrelevant. In fact, more than 5 million consumers have posted tens of millions of reviews on Amazon.com, says the Seattle company.

Amazon's review program reflects a new reality for the way consumers shop in the Digital Age: The Internet has become the world's greatest research tool, and consumers hardly buy anything anymore without first getting the skinny online. Some 70% of Americans say they consult product reviews or consumer ratings before making a purchase, according to an October 2008 survey by Penn, Schoen & Berland Associates, a research and consulting firm. Amazon has played a central role in the change in consumer behavior by being the first successful Web retailer to embrace consumers' views. "What we try to spend our time on is harnessing customer passion," says Russell Dicker, Amazon.com's senior manager of community.

TAPPING THE COMMUNITY

Besides its review program, Amazon.com has created scores of community-based features on its Web site that help drive sales. In 1999 it unveiled Wish Lists, allowing people to share their favorite products. Hundreds of thousands of people have publicized millions of items on their lists. In 2005, Amazon.com launched customer discussion areas for specific products. And in 2006 the company created discussion hubs that allow consumers to gab about a wider range of topics, such as video production, Harry Potter, or yoga. All told, Amazon rolls out 50 community features on its site every year. "We spend a lot of time looking at what customers are doing and seeing what they are saying," says Dicker.

Executives at Amazon currently are focused on increasing the relevance of customer-generated content through software enhancements. One effort is aimed at offering more localized information. So if you are shopping for a TV, a listing for nearby TV installation services might pop up. Another effort is geared to improving the relevance of consumer opinions. One example launched in September: a feature that highlights the ratings of specific product attributes. A review of a digital camera, for example, will now include ratings of key features such as battery life or picture quality. Click on the attribute, and it serves up all the reviews addressing that feature. "We want to make it more and more convenient for people to find the right products," says Dicker.

For Amazon.com, community is not just a way to tap into consumer desires. It also provides a competitive advantage. By amassing one of the world's largest collections of consumer opinions, the site has become a leading source of product reviews. And those reviews are a valuable magnet that lures more consumers to its Web site. "You increasingly look at Amazon for reviews," says Sebastian Thomas, head of U.S. Technology Research at RCM Capital Management, an investment firm with a stake in the company. "It will be hard for someone else to build that scale."

Retail experts say one of the most profound changes in consumer behavior over the past few years is the emergence of such information-based shoppers. Typically, they are educated workers with broadband connections who are strapped for time and suspicious of TV ads. So they increasingly shop online. "The biggest change is the amount of research consumers are doing before they leave their houses," says Paul Ryder, Amazon.com vice-president of consumer electronics. The surge in online research was originally driven a few years ago by high gas prices. But Ryder says information shopping now has more to do with the convenience and value offered by the Web as frugal shoppers hunt for the best bargains. Another recent shift, Ryder says, is that consumers are doing more research for commodity products, such as cleaning solutions, instead of just big-ticket items such as a car or home.

A JOKE GOES VIRAL

One example of the power of online feedback popped up on Amazon.com in November 2008 when Brian Govern posted a satirical review of a T-shirt emblazoned with three wolves. "This item has wolves on it, which makes it intrinsically sweet and worth five stars by itself, but once I tried it on, that's when the magic happened," he wrote. "After checking to ensure that the shirt would properly cover my girth, I walked from my trailer to Wal-Mart with the shirt on and was immediately approached by women."

No one paid much attention to the review until it appeared on collegehumor.com on May 4, 2009. Then it went viral. To date, there are nearly 1,500 reviews on the Mountain Men's Three Wolf Moon Short Sleeve Tee, and more than 15,000 people have voted Govern's original review as "helpful." Although there were instances in the past where products received thousands of comical reviews, Amazon.com says this was the first time in which the jokes catapulted the item to best-seller status. For several weeks in June and July, the T-shirt was the No. 1 apparel item in the store. "The breadth and depth of reviews are very important to customers," says Ryder. "We are using them more than what salespeople or our friends tell us."

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Ante is an associate editor for BusinessWeek.

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