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How much should you trust online reviews?

May 26, 2017 Business News No Comments Email Email

Hong Kong is a foodie’s paradise where the dining scene is ever changing. More often than not, diners will log onto sites such as TripAdvisor and OpenRice before exploring a new eatery – but are these review systems to be trusted? Nicos Savva, Associate Professor of Management Science and Operations at London Business School, has identified one way in which the platforms, where people critique everything from clothes and electronic goods to hotels and restaurants, are flawed.

The power of online communities

According to Dr Savva, online platforms create a huge amount of knowledge that should, in principle, allow fellow community members to make better choices. However, his research shows that granting full access to crowdsourced information may sometimes be problematic. He says:

“Technological idealists want the Internet to be a constantly-updated, information-rich environment where opinion and experience are democratised and everyone has their say. Some believe you get more accurate views in these communities when you have many different and varied voices. But this view of crowdsourcing is undermined by the process through which the information is generated.”

The self-reinforcing cycle of positive online reviews 

Take one example. A diner visits a restaurant and posts a review based on their own experience. Imagine that the experience is fairly decent and that the review is favourable. Those using the platform after the review has been posted will be encouraged to visit the establishment and, in turn, write their own favourable critique. In this way the restaurant’s success becomes self-reinforcing.

However, the problem is that this outcome is inefficient for the consumer, because the self-reinforcing nature of the restaurant’s success means that less-explored, but potentially superior, establishments might fail to attract any attention at all. As a result, such establishments have little opportunity, if any, to prove their worth to customers.

Breaking the cycle 

How can we balance the playing field? The answer lies in consciously restricting the flow of information – a ‘less-than-fully-informative’ policy – which is bound to annoy some. However, we show that this approach can provide much greater public benefit by maximising consumer welfare in the long run.

“Our research shows that offering full disclosure is more beneficial to the public than providing no information whatsoever. But while a full-information regime beats a no-information model, both come second to a carefully designed ‘less-than-fully-informative’ model. This approach sees the platform designed deliberately and carefully to give more vague and nuanced recommendations, for example by featuring more prominently providers that are less explored at the expense of highly-rated providers that are very much explored,” says Dr Savva.

This encourages consumers into exploring lesser-known businesses, giving these enterprises a chance to show their worth to future consumers. The trick is for the platform not to overdo it – recommendations need to be generally informative, so that customers continue to find it desirable and useful to follow them.

Dr Savva believes that crowdsourcing has changed the way services and products are recommended, rated and reviewed. It pools a wealth of individual experiences in travel, hospitality, professional services, consumer goods and healthcare and makes it available to all. But there is a flaw in the crowdsourcing model that needs to be addressed: the information flow needs to be managed responsibly in order to reap the greatest benefit for society.

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