CASE ASSIGNMENT: PETCO.COM Turning Negative Reviews into Positive Sales On Petco

Question

CASE ASSIGNMENT: PETCO.COM

Turning Negative Reviews into Positive Sales

On Petco.com, you can buy a soft-sided travel carrier for your cat for only $29.99. You might think twice, though, after seeing that customers gave it only two “paws” out of five overall for pet satisfaction, appearance, and quality. The reviews reveal more serious reasons to hesitate before adding the product to your cart. A customer with the screen name “Disgruntled Bunny” reports: “The mesh on the sides was such poor quality that my cat was able to rip it to shreds and escape in a matter of seconds!” Another customer recommends buying a carrier with stronger sides, adding, “It costs more but is safer for your pet, so it’s worth it.”

Products have long been rated on sites like Amazon.ca and on those that exist entirely for reviews, but Petco was one of the first mainstream retailers to create a forum on its own website for criticism. The risk was obvious: customers could pan products and send buyers running. But Petco reports that business is booming, even with bad reviews like Disgruntled Bunny’s.

New research is proving what Petco had already learned: peer reviews work. Shoppers are turning to everyday people for product advice. The 2007 Edelman Trust Barometer reports that over half of Americans said they trust “a person like me” for information about a company or product. David Brain, CEO of Edelman, urges companies to stop relying on “top-down communications delivered to an elite audience and move to peer-to-peer dialogue.”

Making customer reviews public has an immediate impact on sales and brand loyalty. Data from ForeSee Results in 2007 revealed that 40 percent of online shoppers said peer ratings on websites influenced their purchasing decisions. Furthermore, this group was 21 percent more satisfied with its purchases than other buyers and was 18 percent more likely to buy from the same site again. According to Petco executive John Lazarchic, most users who search for products by customer ratings shop longer, buy more, and return less: “The savings in returns alone pays for all the technology involved in the review and ratings feature.” And if a product gets too many bad reviews, it usually prompts customers to buy higher-rated, more expensive merchandise instead.

Other advantages? Reviews build camaraderie with an online community where shoppers can connect. They can boost a site’s ratings on search sites. And they establish credibility. As long as the reviews aren’t overwhelmingly negative, positive reviews have been shown to outweigh the negatives in shoppers’ minds. For example, one four-paw review on Petco.com is more influential than seven one-paw ratings.

Lazarchic insists that reviews provide valuable feedback. Critical comments are shared within the company and can instigate changes. In fact, Petco is finding that the risk is not in receiving too many negative comments on a product but too few. When no one is responding, it looks like no one is buying it. Or, if they are, they don’t care enough about it to talk about it. Petco had that problem at first. In the beginning, when the company posted a small link for users to click and write a review, the silence was deafening. So they added promotional banners to the site and advertised drawings in which lucky reviewers would receive cash prizes. Within a couple of weeks, they had 4500 new reviews.

Analysts warn that to maintain credibility, reviews shouldn’t be edited unless necessary. Petco removes the names of rival brands, URLs, and personal information, but less than 10 percent of the reviews are deleted. Now Petco is experimenting with using customer comments as marketing tools in print catalogues, offline ads, email messages, and point-of-purchase displays. In print circulars, for example, Petco highlights its five-paw-rated products.

Many of Petco’s customers’ email addresses are collected through a loyalty program in Petco stores, which means those shoppers may not have visited the website. Including customer comments in email ads expands the reach of the review program and boosts sales of products those shoppers may not have considered in the store.

According to a Nielsen BuzzMetrics study, the customers most likely to write reviews on websites are empty nesters and “young transitionals” without children. Petco found that on its site, reviewers tend to be women with higher levels of education and income who are passionate about their pets. It is generally someone who wants to be helpful, share her opinion, and feel important. Someone, perhaps, like Disgruntled Bunny, who wants to warn others of the dangers of defective travel carriers before another cat escapes.

Q1) A customer-centric company builds long-lasting relationships by focusing on what satisfies and retains valuable customers. Discuss how Petco follows this customer-centric philosophy.

Q2) Go to Petco.com and read some of the customer reviews for various types of products. Do the one- and two-paw ratings tend to outnumber those with four and five paws, or the other way around? Can you find a customer review that Petco could use to market a product in a company circular or email ad?

Q3) Now that Petco has identified the type of customer most likely to write reviews of its products, discuss the kinds of promotions that might encourage continued loyalty and response online from them in the future. What could they do to appeal to these customers?

Q5) Many mainstream retailers are still hesitant to post customer reviews on their websites. If you were consulting with one of these companies, what arguments would you use to convince management to try them?

Explanation / Answer

They follow customer centric philosophy in the following ways:-

1. They have created a review forum on their website. They value the customer reviews. They don't edit the reviews. They don't remove negative reviews. Negative reviews are discussed within the organization. If some improvements can be done, they are done.

2. Unlike other competitors, they don't rely on the reviews provided on the plain review sites.

Ans. 2. No, the 4 or 5 paw reviews outnumber the 1 and 2 paw ratings. They could use the following review to market their product

"Spent MAJOR amounts of money on prescription food till we FINALLY found this food. 2 out of our 4 dogs have sensitive stomachs and this suits ALL OF THEM. Teeth, Coats and even their Eyes look better. Their weight is ALL PERFECT NOW. They are ALL SATISFIED and lined up waiting to eat everyday at 6pm on the nose. Their #2 has never been so NORMAL before. We also give them the treats from this brand. Price is NOT an issue when our BABIES LOOK SO BEAUTIFUL & SHINY AND ARE THIS HAPPY. I will NEVER BUY ANY OTHER DOG FOOD. Look at the ingredients and compare your food. That's what we did. SO HAPPY WE FOUND THIS BRAND!!"

OR

"

I absolutely love this product. I was introduced to it about 10 years ago when working with a cat rescue. Like all of us cat lovers with big hearts, I always seemed to say yes to just one more sad story. At the time I only had a small two bedroom apartment, and was working with five cats. All in all they did good together, but inevitably some were stressed. I made sure there was one litter box per cat, clean quality litter, and only organic, no grain food. I kid you not, when I brought the Feliway plug ins home, I woke up the next morning and there was four cats curled up and sleeping together underneath the Feliway plug in. I took a picture, and gave it to the store where I bought the product, so they could show others.

Today, I have four rescued kitties, aged 16-2. I adopted the 16 year old with her older brother, when they were 11 and 12. Sadly I had to put her brother to sleep this summer after trying to treat his hyperthyroidism (treating it caused his kidneys to fail, and he was having strokes and his lungs filled up). This poor sister kitty begin to eliminate, both urine and bowel, outside of the box. I had her thoroughly checked by the vet and she's ok. I again got the Feliway plug in and they worked like a charm. I'm writing this review tonight as I ran out just over a month ago and I thought things would be ok. Nope. I'm buying some tomorrow along with the spray."

The reviews are copied from the petco website.

Ans. 3. They might arrange contests for best reviews. The reviews could be negative as well but fact based. The customers could be given couple of products free of charge for good reviews.

Ans.4 (Wrongly numbered in the question). I would suggest customer reviews would be very beneficial in improving the product or service. Positive reviews would create sticky customers and negative reviews would lead to self introspection. Petco would be a good example to showcase. Initially they had more negative reviews than positive ones. Later on as the customers came to know that Petco encourages reviews (without editing), the number of positive reviews increased. It is, overall, a good way to increase the revenues of a company.

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