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22 Mar 2016

TripAdvisor: How Companies React to Negative Ratings

The world wide web has revolutionized the hotel, restaurant and other travel-related industries. From online bookings to customer ratings, companies have to learn how to operate in this new environment. While an organization's market identity used to be primarily influenced by expert ratings and certifications, websites such as TripAdvisor have given consumers the power to impact a company's image. This latest study examines how companies can respond to online complaints.

This article from Tao Wang is the subject of the 23rd GEM LAB Executive Summaries.

The authors of the study analyzed more than 200,000 ratings for 600 London Hotels on TripAdvisor. The ratings were dated between 2002 and 2012, a ten year period that highlighted the important growth of websites like TripAdvisor. The researchers specifically looked at how hotels respond to negative ratings, or in other words, consumer ratings that are lower than the expert ratings they receive.

Stronger criticism begets a stronger response

From the article

Protecting Market Identity: When and How Do Organizations Respond to Consumers' Devaluations
Academy of Management Journal
DOI : 10.5465/amj.2014.0205

Tao Wang, Filippo Carlo Wezel, Bernard Forgues 2015

The study found that more than 60,000 ratings were negative. In addition, the authors discovered that the more negative a rating, the more likely a hotel would respond and the more engaged and in depth the hotel's response would be. The reason for this is simple: Online rating websites have made it possible for customer complaints to have a much greater impact on potential customers.

As a result, a negative rating threatens a company's market identity. Hotels used to have fairly stable control of their market identity, which is how external stakeholders perceive them. Their primary concerns were expert ratings and organizations that award certifications. However, the rise of the internet and a customer's power to influence potential customers means hotels have to defend their market identity every day. The researchers add that companies in general who are faced with consumer evaluations find themselves in the same situation as the hotels in this study.

The risks of a public response

The authors of this latest study underline that while a negative rating may impact a company, the company's choice to respond publicly can also have a negative impact. It is essential to remember that a public response will be read by potential customers. This makes it essential to avoid being petty or argumentative. The researchers advise companies to take a fact-oriented approach that demonstrates sincerity and real concern for the customer.

The authors of this latest study highlight three key questions to consider before responding publicly to online ratings: 1) Do the risks outweigh the benefits? 2) Are you or your team properly trained and ready to craft a meaningful response? 3) Have you considered a long term strategy?

Once you start, do not stop

Once companies start responding, they cannot simply stop without negatively impacting their image. Therefore it is essential to create a strategy that will help choose which ratings deserve a response. By examining the words used in a customer review, the researchers demonstrate that it is possible to read between the lines: Certain customers may simply wish to be insulting while others sincerely want to encourage change. Taking the time to thoroughly read and understand a complaint provides companies with the opportunity to demonstrate their commitment to customer relations.

Key points

  • Websites such as TripAdvisor have greatly increased the influence of customer complaints on potential customers.
  • If companies decide to respond publicly to negative ratings, they should give a fact-oriented response that is sincere and meaningful.
  • The balance has shifted between traditional evaluation methods (stars, certifications and expert ratings) and online ratings. Companies must implement strategies to manage the increasing influence of online ratings.
Contacts
Mara Saviotti