Does presence of customer reviews and the number of reviews drive down returns by customers?
According to Internet Retailer (thanks to Gerardo for the link), that is the case. The article says, reviews has helped Petco considerably
Petco’s approach to gaining more customer reviews has paid off. On average, products with reviews have a 20.4% lower return rate than products without reviews. The return rate continues to decline as a product gains more reviews. Products with more than 50 reviews have a 65% lower return rate than products with no reviews.
Since returns eat into profits, reducing returns goes directly to the bottom line – there is no question here. But can presence of reviews drive down returns? Is there a direct causal relation or is this just incidental correlation.
Commitment and Consistency Bias: If the case of customers who took the time to write reviews I can see that their return rate will be much lower than the return rates among those who did not write one. This is the Commitment and Consistency bias (the book Influence by Robert Cialdini has very good discussion of these biases). When the customer “commits” by writing how good they feel about the product their internal system compels them to act consistently to their previous commitment. So they keep the product.
Reason doesn’t matter: This does not mater whether or not customers wrote the review because of their LOVE for the product or because they were paid in coupons or raffles. This does not apply to negative reviews, but according to one research, most reviews are positive reviews and there is generally high product ratings. On the other hand we could argue that those who returned the products are more likely to write a negative review.
Conformity Bias: Commitment and consistency bias alone cannot explain the drop in returns because this is still a small number of reviews compared to products sold. But another cognitive bias that could be at play is conformity bias. When customers make the purchase based on many reviews by “customers just like them”, they tend to confirm to those peer reviewers. This will compel them to “like” the product and keep it – all those positive reviews cannot all be wrong, if I do not like the product it must be me. Again, Cialdini has chapters describing Conformity bias in his book.
Cognitive Dissonance: Intertwined with conformity bias is our need to assuage cognitive dissonance. People who buy a product by doing the research, reading multiple reviews and evaluating options believe they made a rational decision of buying the best possible product. But after buying the product if it turns out that it did not live up to their expectation they suffer cognitive dissonance – a gulf between how their feelings before and after the purchase. Customers overcome that by convincing themselves that they like the product.
On top of these cognitive biases, it is possible that there exists another common variable that both drives up number of reviews and drive down returns – for example the product experience matches its promise.
There is one way to answer many of these questions and to find out whether or not number of reviews drive down returns. It requires doing two sample test, showing some of the customers the review, suppressing it for others and tracking the respective return rates. If the return rates are statistically significant then we can declare presence of reviews drives down product returns.
Next step, if we do the experiments by showing different number of reviews we can even find the linear causal relation between number of reviews and returns.