Global Product Ratings Study: Companies Being Pushed toward Increased Customer-Centricity

Globally, 54% of companies consider product ratings to be very important
to their business. For another 29%, they are somewhat important, while
17% think ratings are not important at all or that they don’t play any
role yet. U.S. results closely align with these global findings, at 52%,
31% and 17% respectively. 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.

Despite the impact product ratings have on sales volumes, price
potential, and brand building, only 15% (14% in U.S.) of the
participating companies reported having a strategy to facilitate the
rating process, and only 16% (15% in U.S.) report having a strategy to
improve ratings. A further 28% (29% in U.S.) have a strategy in place
but recognize it needs to be improved. 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,” according to Dr.
Georg Tacke, CEO of Simon-Kucher & Partners. “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 ratings strategy
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, none of these four groups are linked to specific
industries; companies from all sectors can be found in each group.
However, frontrunners tend to be larger companies (in terms of annual
revenue), have the highest share of online sales (37% conduct more than
50% of their sales through online channels compared to 26% overall), and
have the highest average EBITDA margin (15.9% vs. 13.8% overall).

Ratings impact brand building, sales volumes, 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%), lead
generation (74%), and conversion (73%). These companies are particularly
right about the importance of brand building, as 33 percent of consumers
have already switched brands after reading ratings, as revealed in the consumer
portion of the Trend Radar Study conducted earlier this year.
However, the greatest driver for companies to take ratings seriously is
their impact on sales volume and prices. 82% of participants report that
good ratings increase sales volume and 68% 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 roles 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 manage 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.

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