6 CFO tips for finding gold in online ratings

From CFO Dive:

  • Businesses aiming to increase sales and customer satisfaction should consider shifting more investment and staff toward improving the online ratings and reviews of their products, a McKinsey study found.
  • Amid pandemic-induced growth in e-commerce, the volume of online ratings and reviews surged 87% from Dec. 2019 until Dec. 2020, McKinsey said. While online customer “feedback has been available for years, the boost in e-commerce has taken its volume to new heights, giving it greater weight and credibility.”
  • “Insights mined from online reviews are more critical than ever,” McKinsey said, adding “the same information that gives consumers the power to make better choices also gives companies the power to pinpoint ways to improve products.”
Dive Insight:

U.S. e-commerce soared during the first quarter of 2020, equaling its growth during the previous 10 years, McKinsey said.

The pace of growth has slowed with the end of lockdowns in many areas but still remains robust. E-commerce increased 9.1% during the second quarter of this year compared with the same period in 2020, accounting for 13.3% of total retail sales, according to the U.S. Census Bureau.

Positive on-line reviews and ratings can significantly spur e-commerce sales, according to McKinsey research. Over a two-year period, star ratings correlated with strong sales among 55 of 70 product categories featured on a major on-line platform.

“Even a small rise in score, such as an increase from 4.2 to 4.4 stars, often produced a meaningful improvement in sales,” McKinsey said.

Still, some CFOs and their C-suite colleagues overlook the value of online reviews and ratings.

Many businesses “do not fully understand the value of analyzing review text and thus hesitate to invest heavily in an area that seems speculative or unproven,” McKinsey said. “Others are holding back because of the complexities involved, especially since the pandemic is forcing them to focus on more immediate, pressing issues.”

Businesses should consider improving consumer ratings and reviews, McKinsey said, by:

  • shifting staff and capital from marketing and promotions to direct investment in a product, such as design, engineering and prototyping;
  • ensuring the accuracy of product claims and improving the customer experience by clarifying instructions for the assembly or use of a product;
  • upgrading the “digital presence” of a product by encouraging feedback, providing vivid photos and videos, and conducting A/B tests to determine how algorithms used by retail sites rank search-engine results;
  • mining insights on products from web reviews — and from social media, YouTube and other sources — by using software tools such as natural language processing;
  • eliminating silos and creating cross-functional teams of, for example, engineers and marketers that focus on improving a product’s appeal;
  • spreading the insights from ratings and reviews throughout the company by prioritizing the biggest potential gains across a product line and then, from the bottom up, improving the design and functionality of select products.

“While companies cannot control online reviews, they can manage and learn from them,” McKinsey said. “If product teams track star ratings and mine review text for insights, they could create better offerings that reverse market-share erosion, increase the willingness to pay or even unlock new product categories.”

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