User ratings: What they really mean for a travel business

User ratings: What they really mean for a travel business

"Please give me a 5 star rating"
– my Uber driver tells me as my trip ends.

"Rate us 5 stars on TripAdvisor"
– says the little index card I found on my hotel room table.

"Let's cancel the booking. This place has a very low score. May be dangerous"
– says my fellow traveller

It is clear that service providers recognize the value of a user rating for future business. Those little nuggets of information at the bottom of a listing indeed do have a significant effect on our purchase decisions. V12Data.com quotes research that as much as 97% of customers factor in reviews from fellow customers into their purchase. It is logical to believe that reviews – not just in travel and hospitality, but in any purchase – serve to mitigate risk by assuring you that the product/service has been tried and tested, even by people whom you don't really know or trust!

I had written in a previous blog post about why repeat business might be a better indicator of customer engagement than a review. Fortunately, modern technology and data analytics allows us to capture those metrics and utilize them effectively. To begin with, a customer review/rating stems from a customer's experience which has several elements. This means it must be universally accepted that a single rating which is given by the customer, as opposed to one that is assembled or calculated from scores assigned for different categories, is an approximation of what he/she remembers best or the sole element which is fresh in his/her memory. Although not comprehensive, the below model shows what factors come into play when a customer attempts to distill down the experience into a single number.

According to data reported in the Deloitte Consumer Review, around 42% of customers will talk to peers about a positive experience, while only 33% will speak up about a bad experience. On the other hand, 10% of positive experiences will end up getting published on social media. Northwestern University published a study with some interesting revelations. Generally, it is seen that a rating of 4.2-4.5 stars out of 5 is most favorable in supporting a purchase – even more than a perfect 5 star rating, probably because a perfect score may indicate too small a reviewer base or even lack of authenticity. This is fairly consistent with another research paper presented at the 8th International Strategic Management Conference, which highlights the relationship between a hotel customer's propensity towards writing a review and the number rating for his/her experience among other factors. Apart from a high rating (not extreme), low prices appear to typically encourage a customer to write reviews, while larger room sizes seem to have a negative effect. The authors interpret this as satisfaction, rather than dissatisfaction being the key driver of reviews. On the other hand, the V12Data report also specifies that 92% of customers hesitate to buy anything which has no reviews, while 35% say that even one negative review can put them off.  

To conclude, it is evident that reviews are absolutely necessary for a business, but lack of authenticity will hurt you in the long run more than any benefit gained from the inflated sense of popularity. There are also customer side inconsistencies to account for. Are you late for work? A rash Uber driver may impress you more than a careful one. Low budget leads to high tolerance for low quality hotel rooms. It is therefore important to keep in mind that all customers aren't the same in their preferences. But until the day we are able to distinguish these reviews and ratings based on authenticity and reason, and act upon them in a targeted manner, they will continue to govern the effectiveness of new customer acquisition efforts! 

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Monday, 19 August 2019

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