Jennifer Saranow Schultz recently explored the growing potential of leveraging on our social networks to get product recommendations. The clearest advantage of tapping on our own social network for shopping recommendations and other research information is trust and reliability. Conversely, product recommendations and reviews by strangers are usually unverifiable and possibly unreliable, e.g. consumers with malicious motives giving unfavorable reviews, merchants masquerading as “reviewers” giving over-favorable reviews, consumers recommending products for discounts/coupons, etc. Of course, with friends, there are critical mass issues, since it is unlikely that our relatively-small social circle has all the answers to our multifarious product research queries.

However, consider the possibility of marrying the trust-and-reliability advantage of personal friends and the diversity-and-breadth-of-knowledge advantage of a larger pool of nonetheless like-minded strangers. While information broadcasted to the public by a stranger may be questionable, information shared with or by the personal friends of said stranger is likely to be more trustworthy and reliable. In other words, personal conversations among strangers who know each other in real life hold just as much credibility as our own personal conversations with friends. Any product recommendation system that allows consumers to access their personal friends while still allowing them to view the information shared within the private circles of other strangers is likely to be markedly more useful than either a friends-only or strangers-only platform. This simple new approach solves the respective problems of either of the traditional approaches.

The problem with this system is that it treads on the fine line between respecting and violating user privacy. It is unlikely that, in their ordinary states of mind, people would be willing to share their private conversations with the world, even if it is for “common good.” Consider, however, that social media norms and exhibitionism are becoming more acceptable and even celebrated on the social web. While privacy concerns are nonetheless common, people are generally more open than ever when it comes to sharing their personal life.

Our latest iteration of Zuupy Social Commerce Solution synergizes trust/reliability and breadth of information by not only allowing shoppers to solicit advice from other friends but also view past advice shared within other social circles (i.e. strangers soliciting advice from their own friends). Therefore, any possible dearth of information within our own social network is supplemented by additional trustworthy conversations from outside our social network. While it remains to be seen whether this approach is more effective for both the consumers and the merchants, we believe that social commerce will, in the future, evolve into and somehow be based on a hybrid of friendsourcing and crowdsourcing, and not just a plain amalgamation of the two approaches.

It is often claimed that ratings and reviews are increasingly losing appeal among online retailers in favor of more trendy, state-of-the-art ecommerce applications that tap on the “social graph” to deliver “instant personalization.” Trust is often cited as one of the primary reasons that ratings and reviews are becoming less relevant – there is limited value in anecdotes and numerical ratings from anonymous reviewers, whose authenticity cannot be verified. Furthermore, just like customer testimonials, consumer reviews are almost always cherry-picked to favor positive reviews. Ratings and reviews vendors, such as Bazaarvoice and PowerReviews, allow online retailers to moderate user-generated content as they wish.

However, even if we eliminate the trust issue, they suffer from another important drawback: reliability. At the risk of unduly dwelling into semantics, there is a subtle but important distinction between trust and reliability. The former relates to honesty and integrity (“Do you mean what you say?”), while the latter relates to usefulness and value (“Even if you mean what you say, do you know what you are talking about?”).

Consider the following arguments against the reliability of ratings and reviews:

By design, reviewers are chosen from an unrepresentative sample, resulting in selection bias. Ordinarily, there is no incentive to write reviews; the process is cumbersome, the effort required is onerous, and there is no instant gratification or reward. The only people who would normally write reviews are those motivated by emotional or irrational reactions so extreme that they warrant a public sharing of experiences. Consumers are more motivated to share their opinions on things that they find extremely good or bad, and they avoid broadcasting banal and uninteresting trivia. For a consumer doing purchase planning, however, this polar distribution of reviews is unhelpful because mediocre reviews (which are also important information) are underrepresented. Worst of all, the remaining sample of reviews is often not a product of objectivity, rationality, and good consumer sense.

The typical consumer is not unaffected by the bandwagon effect. Herd instinct is a prevalent, subconscious trait. It gives people a sense of certainty and safety to know that whatever they do or say has some sort of alignment with prevalent practice. Thus, if consumers are given the liberty to view what others have said in their ratings and reviews (which they are), they are likely to be swayed by others, despite originally having divergent views, especially if others are perceived to be more well-reasoned or convincing in their views (i.e. authority bias). This is a common crowdsourcing pitfall: we are heavily influenced by the behavior of the crowd. Even if we usually avoid the majority view, we cannot be sure that we are not subconsciously or deliberately acting against the majority’s behavior in an attempt to artificially differentiate ourselves.

Consumers suffer from choice-supportive bias and post-purchase rationalization. Consumers are prone to justifying purchase decisions even though they may realize that the decisions were poor. This behavior is not surprising, since acknowledging the imprudence or redundancy of a purchase implies that one is an incompetent and/or irrational shopper. Such post-purchase rationalization is further magnified if the purchase was in fact well-researched, expensive, or stubbornly made against the advice of others. People often want to think that sunk cost – especially if it is great – has some sort of benefit or intangible reward. Some examples include pursuing expensive degrees, going on mediocre premium holidays, and buying overpriced clothes.

Reviewers may be in a position of conflict of interest. Online retailers commonly solicit reviews from their customers to help kick-start or encourage content creation on their websites. Keeping in mind the original lack of incentive to write reviews, online retailers remedy the situation by offering discounts, coupons, and special offers to entice participation (a practice adopted from how businesses conduct focus groups perhaps). As a result, reviewers are bestowed with the moral obligation to say favorable things using thesaurus-level, meticulously-manicured language. The resultant artificial form of communication is likely to be abhorred by consumers looking for genuine data points to guide their purchase decision-making process.

At its root, the concept of ratings and reviews has fundamental structural issues, due in part to technological limitations and commercial reasons. Ratings and reviews are an integral, consumerist component of the purchase decision-making process; their purpose is to provide consumers with adequate, trusted, and reliable information. They have not been the perfect solution but have perhaps been the best we have so far. Now, with the prevalence of portable social identities, mobile internet, and broadband internet, perhaps it is timely to adopt a new paradigm, a new strategy that incorporates a more targeted, meaningful “social” element to drive consumerism.

Of course, new social commerce solutions are not foolproof. However, given the vast potential of social commerce, it is ultimately not a poor decision to explore how it can possibly transform consumer experience, multiply sales, and build brand loyalty.

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