The Risks and Rewards of Online Reputations

December 03, 2012

By Aaron Reese


Kansas City, MO – For several years, the Better Business Bureau has observed online customer review sites such as, Yahoo! Local, Google Maps, and others. These sites can build positive word-of-mouth reputations for businesses by reporting positive customer testimonials. Some of our accredited businesses have expressed a desire to see the BBB fuse our reliability reports with customer review sites. We have heard the case for allowing customer reviews and have been researching the best way to implement a fair system. While there are rewards to the system, we have also found that customer review sites pose great risks to businesses and consumers. The BBB has thus far resisted implementing customer reviews of businesses for two reasons: (1) several companies have manipulated customer review sites to improve their image, going so far as to hire reviewers to speak highly of their products and (2) customers can post unfair and even slanderous reviews of companies.

Last year, The Daily Background exposed a Belkin representative for hiring commenters to post positive reviews on Amazon about Belkin products [1]. He told people to "write as if you own the product and are using it." In an unrelated civil case that gained international attention, cosmetic surgery company Lifestyle Lifts was sued by the State of New York for forcing employees to write "glowing reviews" of the company [2]. Lifestyle Lifts ended up paying $300 thousand in penalties and costs to the state. It is difficult to subvert this type of unscrupulous behavior. When websites like Yelp do their best to eliminate it from their sites, for their troubles, they are sued for favoring advertisers over non-advertisers [3].

The Better Business Bureau hasn't been the only group paying attention to fake reviews. On December 1, 2009, the FTC implemented new regulations forbidding employees or owners of companies from pretending to be customers. Hiring people to pose as customers has also been forbidden.

In addition to misleading reviews from businesses, we've seen disgruntled ex-employees, competitors and even relatives of business owners post unjust negative reviews about businesses. One local inn incurred a negative online review by refusing to violate fire code for a customer. The customer claimed to have been refused stay after showing up with a spouse and infant. The inn was not informed of the baby and had no rooms to properly house three tenants. Nonetheless, the next day, a blistering review was posted by the customer.

Mistaken identities have resulted in negative reviews for unsuspecting companies. Precision Pest Control received two scathing reviews meant for Precise Pest Control [4]. After formerly disputing the reviews with Google Maps a year ago the reviews are still posted.

This hasn't stopped consumers from using online reviews to narrow their purchasing choices. According to the Nielsen Company, online customer reviews are the second most trusted form of "advertising," behind only a recommendation from someone the customer knows [5]. For small businesses without online presence, one or two bad reviews can have devastating effects on profits. The review system has placed the credibility of a company primarily in the hands of the consumer and it has actually had some positive effects. It is forcing some less-than-reputable businesses to improve service in order to avoid negative reviews. It has increased trust in companies that continually provide stellar service. Companies with great reviews can focus on maintaining high levels of service rather than diverting resources to advertising because their great service will spawn infinite public testimonials. The downside, of course, comes when the bad businesses bolster their ratings and lower their competitors' by posting bogus reviews.

Companies are getting wise to the power of internet reviews. Some companies welcome the praise and disregard (or don't get) negative feedback. Businesses that oppose customer review sites don't necessarily fear negative reviews. They fear losing control of their reputation [6]. When the negative reviews are posted, some businesses even sue reviewers for libel [7]. Online reps have become such a concern to businesses that marketing experts are inundated with questions about them [8] and even reputation management businesses are beginning to pop up.

The BBB has been taking steps to create a better, more accurate, and fairer customer review system than what exists today. In an effort to expedite entry into this fairer internet world, we recently entered into an information sharing agreement with JD Power and Associates to help them construct Power Circle Ratings. Power Circle Ratings is a customer review rating system based on "unbiased feedback from a representative sample of verified product and service owners." The sample will represent the general buying public and will be comprised of customers who are verified to have used or own the products or services they review. This is just the first step into correcting the underlying problems of customer reviewing. Within the year, we should have more exciting news about actions the BBB has taken to increase fairness in the industry.

Here is additional information that will help businesses properly respond to negative reviews: