Online ratings can lead to better products
During the Pandemic lockdown, e-commerce had ten years’ growth in Q1 2020 in US. The volume of online ratings and reviews surged, building greater weight and credibility for shoppers that increasingly rely on feedback from "people like them" vs companies and even experts.
New McKinsey research shows even small changes in star ratings can drive explosive growth for products— to the order of 30 to 200% depending on category.
Their data and learning is interesting — quantifying our long known intuition!:
They analyzed reviews and ratings across the 70 highest-selling categories on a major online platform—hundreds of thousands of individual SKUs over a two-year time span.
Higher ratings equal higher sales — with incremental growth from each star. Correlation between star ratings and sales was positive in 55 of the 70 categories. Across all categories, 95% of units sold had 3.5 or more stars. SKUs with 3- or 4-star ratings enjoyed 3X higher sales than those with 1-star ratings.
Improvements in a product’s star rating improve sales, even if small — e.g., from 4.2 to 4.4 stars. Across the 55 categories, growth opportunity was 37% but varied greatly across categories, from 168% for cat food to 17% for coffee makers. Such differences could mean many things, e.g., people buying coffee makers may be more loyal or just rely less on reviews.
The beginning of the “growth horizon” (star rating at which sales begin to rise) differs by product category — For many, such as office desks and workstations, it began at around 3.5 stars, while for infant and car seats for kids around 4.4 stars, most likely as few parents would even consider buying below this rating level, and risks from bad choices are higher.
Incremental gains not the same for each ratings jump — Products with an average review that rose to at least 4 stars—typically considered a good rating— had greatest benefits. E.g., one product grew only 4% when its rating increased from 2 to 3 stars, but by 24% when rating went from 3 stars to 4. The gain in ratings increased both views and conversion rates.
Focusing on Ratings matter - even the most compelling marketing campaign won’t improve sales of a poorly designed product with 1-star rating and scathing critiques from buyers.
While companies cannot control online reviews, they can learn from them to create better offerings to grow market-share, willingness to pay, unlock new product categories and even leapfrog competitors by driving greater organic growth.