The Digital Word-of-Mouth Effect: How Customer Reviews Impact Purchasing Decisions

In today's digital age, online customer reviews and feedback have become a key factor that influences the purchasing decisions of consumers. This phenomenon, known as "digital word of mouth," has transformed the way people research, evaluate and select products and services. Below, I show its importance and what can be done to take advantage of it.

Key Factors that Determine a Purchase

I encourage the reader to reflect on the last time he or she had to decide to purchase a product or services, what was it that really made the decision? I am sure that a multitude of personal variables are involved, with thoughts such as: "What is the best way to make a decision?

"For the quality it has, it's a good price, and it's on discount!", "They say it's very worthwhile and very good", "It has the features I'm looking for" or "It's going to be an improvement in X aspect for me or my company".

These are phrases that we repeat over and over again when we are convinced that this product or service is the one we want.

As we can see, some of these factors are:

• Brand Confidence, known as reputation
• Experience of other buyers
• Value for moneyincluding whether promotions are available.
• Features of the product or service
• Need
• ...

As a company, the key is to how we can positively influence on these factors for the customer to make these claims. And we see it below.

The Evolution of Customer Persuasion

The idea is always the same, that the customer is self-convinced that the decision is the right one. But the way of self-convincing has changed a lot throughout history.

If we go back to the times before the printing press, traditional word-of-mouth was the main source of recommendations and opinions. The people relied on the experiences and advice of family, friends and close acquaintances to make purchasing decisions. There was little else the entrepreneur could do In this regard, they must ensure that they provide the highest quality of their products and services in order to have good recommendations.

Since the invention of the printing press, until practically the present time, the philosophy has been (and continues to be) to show our product as much as possible to our target market with announcements. Eye-catching images whose purpose is nothing more than to generate in the customer certain sensations that make him want (or even have the need) to purchase the product or service. Taking advantage of psychological vulnerabilities of the human being such as the feeling of scarcity, nostalgia, self-perception...

Marketing departments analyze those customer needs and try to give them visibility. But with the advancement of the internet and social networks there is something that has changed the rules of the game: the enormous ease of knowing thousands of opinions and experiences that people have had with a product or service, better known as digital word of mouth.

How reviews influence people

Nowadays, digital word-of-mouth has exponentially expanded reach and influence of customer reviews. Platforms such as Amazon, TripAdvisor and Googleamong others, have created virtual spaces where millions of consumers can share their experiences, ratings and comments on a wide range of products and services.

The impact of these online reviews on purchasing decisions is undeniable. According to a study conducted by BrightLocal, the 88% of consumers rely on online reviews as well as personal recommendations from friends and family. In addition, the 72% of consumers will not make a purchase decision until they have read the reviews.

But why do customer reviews have so much power in purchasing decisions? There are several key reasons:

1. Credibility and trust: Customer reviews are perceived as honest, unbiased opinions from real people who have experienced the product or service.
2. Accessibility and convenience: Online reviews are available anytime, anywhere, allowing consumers to quickly and conveniently research and compare products from any device.
3. Diversity of opinions: Review platforms offer a wide range of perspectives and experiences from different types of consumers, providing a more complete view of the product or service.
4. Social influence: Positive or negative reviews can create a perception of social acceptance or rejection of a product, which influences consumers' purchasing decisions.
5. Reduction of perceived risk: Reviews help consumers better evaluate the risks and benefits associated with a purchase, which reduces uncertainty and increases confidence in their decision.

The value of reviews - why are they so important?

This is an opportunity that has never been seen before in history. As we have seen, digital word of mouth has many advantages for the customer. But companies can't ignore the impact of these reviews either. With reviews, several things are at stake key aspects of your business. Failure to take care of reviews can lead to loss of reputation, loss of customers, decrease in sales...

This has its positive side: by taking advantage of these reviews we are not only avoiding a catastrophe, but we can exponentially boost our business even more.

Let's think about the great value of reviews:

• They contain the strengths and weaknesses of the product. People highlight what they like and criticize what they don't like. Focusing on this is useful for designing marketing campaigns and also for improving product weaknesses.
• Allows to measure the influence of brand and product changes. In addition to the amount of sales, you can measure the evolution of the ratings of a product over time. In addition, by knowing which aspects are discussed in the rating and the sentiment towards each of them, the evolution of each specific aspect can be measured. ****
• It shows the confidence people have in the brand. People often not only talk about the product but also about the brand in general.
• Allows you to compare with similar products from competitors. Even compare reputation with that of major competitors. With advances in Artificial Intelligence, thousands and millions of people's opinions can be analyzed, along with other variables, to measure reputation.

How to make the most of reviews?

At this point it is logical to ask how it is possible capitalize on to the reviews without dedicating countless hours of manual labor to classify, label and generally analyze them.

At GAMCO we have developed advanced capabilities for extract valuable items (insights) of the reviews customer data on e-commerce platforms. Through the use of Natural Language Processing (NPL) and machine learninglarge volumes of reviews and commentaries can be analyzed for identify patterns, trends and opportunities to drive marketing and sales.

One of the main benefits of this solution is its ability to understanding sentiment and opinions of customers at a deep level. GAMCO's algorithms can analyze the tone and the language used in the reviews to determine whether the comments are positive, negative or neutral, and which aspects are specific to the product or service are generating these reactions.

In addition, these developed tools can identify the themes and attributes key that are mentioned with more often in reviews, providing insight into the features and benefits most valued by customers. This information can guide new product development, optimization of product descriptions and marketing campaigns focused on the aspects most relevant to the target audience.

While the analysis of customer reviews is not a new concept, GAMCO's ability to do so is not a new concept. a scale and with an unprecedented level of depth thanks to AI is what makes the difference. By harnessing the power of machine learning and NPL, companies can gain a more complete understanding of their customers' needs, preferences and sentiments, enabling them to make more informed and effective marketing and sales decisions.In a highly competitive business environment, where customer satisfaction is key, GAMCO's solutions for extracting insights from reviews are becoming a indispensable tool for any company that seeks to stay ahead of the curve and outperform its competitors.