Study on Product Ratings: Companies Are Being Pushed Toward More Customer-centricity

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A global, cross-sector study on customer ratings shows that only 15 percent of companies have a comprehensive and effective strategy to deal with ratings. However, as ratings affect sales volumes, price potential, and brand building, developing a sound approach is becoming more and more important.

Bonn – 54 percent of companies consider product ratings to be very important to them, and for another 29 percent, they are somewhat important. Meanwhile, 17 percent think ratings are not important at all or that they don’t play any role yet. These are the results of the company survey conducted as part of the Trend Radar 2019 – The Rating Economy* study by the global strategy and marketing consultancy Simon-Kucher & Partners.

While stating the importance of ratings is easy, acting on this trend is much harder: Only 15 percent of the participating companies say they have a strategy to facilitate the rating process, and 16 percent report they have a strategy to improve ratings. A further 28 percent have a strategy in place but recognize improvements still need to be made. “The consumer part of the Trend Radar Study conducted earlier this year showed us clearly that product ratings are a highly important decision criterion for consumers in the purchasing process”, Dr. Georg Tacke, CEO of Simon-Kucher & Partners, says. “Companies are also starting to realize the importance of product ratings but are still at an early stage in terms of implementing relevant measures. A lot of companies don’t really know where to begin, which reminds me of the uncertainty many companies felt a few years ago about the trend toward digitalization: Everybody was aware there was a need for action, but very few knew which kind.”

Four stages of rating maturity

Looking closer into the survey results, four groups of companies emerged based on the maturity of their dealings with ratings:

1. Laggards (17%): Companies for which ratings are not yet an important trend

2. Activists (47%): Companies that consider ratings important and have started taking action but say they don’t have a strategy in place

3. Talkers (19%): Companies that say they have a strategy to deal with ratings but don’t actually follow it

4. Frontrunners (17%): Companies that “walk the talk” – they have a rating strategy and follow through on it
 

Interestingly, these four groups are not linked to specific industries; companies from all sectors can be found in each group. However, the frontrunners tend to be larger companies then the others (in terms of annual revenue), have the highest share of online sales (37 percent conduct more than 50 percent of their sales through online channels compared to 26 percent overall), and have the highest average EBITDA margin (15.9 percent vs. 13.8 percent overall).

Ratings affect brand building, sales volumes, and pricing

Why do companies pay attention to ratings? According to the survey, the vast majority of the participating companies agree or strongly agree about the importance of ratings for brand building (81 percent), lead generation (74 percent), and conversion (73 percent). These companies are particularly right about brand building, as 33 percent of consumers have already switched brands after reading ratings, the consumer part of the Trend Radar Study revealed earlier this year. However, the biggest driver for companies to take ratings seriously is their impact on sales volume and prices. 82 percent of participants report that good ratings increase sales volume and 68 percent say they make higher prices possible. “But most companies have understood they need to be careful. Poor ratings, on the other hand, can contribute to a decrease in sales volumes and/or put pressure on prices,” warns Tacke.

Vital elements of rating strategies: From product development to pricing strategy

According to the survey, many companies are already putting their approaches into action in several important ways, such as:

  • Increasing their marketing spend to deal with a higher number of ratings (46% overall, 65% of frontrunners)
  • Monitoring ratings and using them as KPIs for most or all of their products (68% overall, 100% of frontrunners)
  • Replacing poorly rated products with better versions (41% overall, 96% of frontrunners)
  • Incorporating customer ratings into product development to optimize their new products for most or all of their product portfolio (65% overall, 91% of frontrunners)

“Almost two thirds of the companies in our survey – and 94 percent of the frontrunners – say they integrate insights gained from ratings into their pricing strategy, such as by changing prices in accordance with high or low ratings,” notes Tacke. “Looking ahead, we expect many more companies to reach this level and follow through on their rating strategies to the benefit of both companies and consumers. Customers will get better value for their money and will be able to influence product offers more directly, while companies with well-rated products will profit financially and strengthen their brands.”
 

*About the study: The Trend Radar is a two-part study conducted by Simon-Kucher & Partners for the first time in 2019 (March/April). Focusing on the topic “Rating Economy 2019,” in part one of the Trend Radar study (the consumer survey), approximately 6,400 consumers in 23 countries worldwide answered questions about their rating behavior, and more than 1,600 companies across all industries were asked in part two (the company survey) about their rating strategy.

Simon-Kucher & Partners, strategy & marketing consultants: Simon-Kucher & Partners is a global consulting firm specializing in TopLine Power® with around 1,300 professionals in 38 offices worldwide. Founded in 1985, the company has more than 30 years of experience providing strategy and marketing consulting and is regarded as the world’s leading pricing advisor.