Does Presence of Customer Reviews Drive Down Product Returns?

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.

Fox Tale Soup

There is a children’s book called “Fox Tale Soup“. This is the old story of Stone Soup retold with Fox and farm animals. If you have not read the original I recommend reading this version.

The clever Fox is a great influencer. He starts out by asking for food but was denied any help by the farm animals. After being rejected for his initial request the fox starts with a trivial request,

“just some water please, after all I got the stone to make stone soup”

One of the animals yield and bring water. Of course, if only there was some seasoning, some potato, some rutabaga, …

The fox slowly builds on his seemingly trivial request for water to get to all the ingredients for the soup. The farm animals one after the other ends up bringing salt, potato, rutabaga etc. There are multiple influence principles at play here.

The fox started with an outrageous request, asking for food. Since he was a total stranger the animals so the animals were right in rejecting his request.

Then he followed up with a trivial request, water, which is available in plenty. This is  anchoring.

Once the animal agreed and brought water, there eas no turning back. They ended up giving the rest of the ingredients because of the power of commitment and the inherent need in us to act consistent to our past actions (consistency principle).

There was also consensus effect. Since other animals were helping the fox, any animal that had any misgivings about not helping the fox were nudged by the actions of others and were convinced to help.

That is the power of persuasion.

If you want the psychology behind this you should also read, Influence: The Psychology of Persuasion by Robert Cialdini.

Other book I recommend is Nudge by Sunstein and Thaler.