Assignment:
Stars Is Average: The Internet's Grade-Inflation Problem
TOPICS: Consumer Behavior, Marketing
SUMMARY: E-commerce and online services solicit customer feedback via the use of star ratings with 5-star as the best possible score. The ratings system presents challenges for both businesses and consumers because ratings are overwhelmingly positive. One study found the average was about 4.3 stars out of 5. Ratings may help week d out bad products or services, but it can be hard to extract useful information from them. For example, Yelp says that 46% of ratings we give local business are five-star. Using apps to evaluate workers as occurs for Uber has the same problem. Another problem is fake reviews. Airbnb, Amazon and Netflix are aware of the issue and they are trying to create a simple to use system that offers enough detail to make a rating useful.
CLASSROOM APPLICATION: Ratings are part of everyday life online as we use services, visit businesses or make online purchases. The problem is that consumers are too nice and average ratings overall are 4.3 out of 5. This can make it difficult to use ratings to make a decision because ratings are hard to interpret. Rankings are another option. Yelp creates rankings based on the number of reviews, the distance from the business and how recent the reviews are. Replacing the star system presents its own challenges because consumers are used to this method. Attempts to use other scales usually are abandoned. Netflix is trying a new system with fewer decision points. The company will combine thumbs up or down ratings with data it collects on viewing behavior. Not every company has access to that type of data. Ratings get better when companies track us, but that presents a tradeoff with privacy.
QUESTIONS:
1. Are you a tough or easy star rater? Explain... Why do you think so many star ratings are positive?
2. How do you use these ratings (or do you use them...)in your online shopping and why is having good information important?
3. How does Yelp create ratings and what additional data does it use?
4. Explain the new Netflix system for providing recommendations and list its advantages.
5. Discuss how Airbnb increased ratings accuracy. Why do you think this strategy worked?