Taste of Free Lunch: The Impact of Free Product Disclosure on Review Dynamics
Yipu Deng, Xiao Lei, Yimin Yin: When reviews for complimentary products are poor, these reviews can inspire other online users to give more in-depth and genuine feedback. This, in turn, enhances the platform’s overall quality and reliability.
In our digital age, online reviews can be essential for consumers looking to make their buying decisions. To promote the volume and quality of reviews, review sites and platforms will spare no expense in hiring experts or recruiting reviewers to share their thoughts. However, these can be expensive and difficult to implement on a broad scale. Also, merchants often offer discounts, cashbacks and gifts as ways to encourage positive feedback. These incentives can lead to fake reviews that reduce the overall credibility of comments on the same platform.
In the United States, the Federal Trade Commission issued a guide that encourages merchants to disclose the connection they have with reviewers (see Note 1). On Amazon, for example, users are generally banned from writing product reviews if they have received a discount or a free item from the seller (see Note 2). In limited cases, people may be allowed to give feedback on free or discounted products, but must disclose that their review is promotional content (see Note 3).
While these measures can ensure transparency, they also remind consumers to stay vigilant to avoid being scammed by dishonest reviews. In comparison, the world’s largest PC-game platform Steam updated its customer review system in 2016. They added a checkbox that lets gamers disclose that they received a free copy of the game. These reviews are easily identifiable with a “Product Received for Free” label (referred, below, as “free label reviews”) (See Note 4).
Compared to compulsory disclosure policies on other platforms, Steam’s customer review is characterised by:
- It’s Voluntary: Reviewers can choose whether to disclose that they have received the product for free or not. In theory, this is supposed to increase the review’s credibility.
- Indirect Interests: Reviewers may have received the product for free via a lucky draw or been gifted one from friends (See Note 5). Not having a direct interest with the merchant means the reviewer is more likely to remain objective.
- Partial Participation of Professional Reviewers: Some third-party professional reviewers’ comments will be shown as “Free Label Reviews.”
These labels work as a disclaimer – showing potential bias from receiving free products – but could also be a sign for high-quality and professional reviews. In theory, this operation should improve the platform’s transparency and overall information value. In reality, though, is this really the case?
The actual situation is much more complex. The number of “Free Label Reviews” is relatively small, and their direct impact on the overall quality of reviews in the community may be limited. However, the subsequent effects triggered by these reviews can significantly influence the overall effectiveness of the review system. In reality, different platforms have varying policies regarding reviews for free products.
Again on Steam, they rely on a user’s voluntary disclosure. On the other hand, the mobile app, Dianping automatically labels reviews from users participating in its “Free Meal Experience” as “Free Trial Reviews.” Nevertheless, many platforms do not differentiate between reviews written by users who received free products and those who didn’t.
Our research found that Free Label Reviews can significantly increase the number of reviews and the system’s effectiveness. This isn’t because of enhanced transparency from a free-product disclosure policy, but by the online community’s disconfirmation bias.
Our study also revealed an interesting point: low-quality Free Label Reviews can actually result in an increase in online discussions.
Notably, when a Free Label Review appears to be biased, it tends to trigger a correction in the online community by motivating more people to express their views. This means some of the more active reviewers can be motivated to provide a more comprehensive and critical review that counters what is considered biased content. Such corrective action boosts the total volume of reviews and simultaneously raises the quality of subsequent comments. This effectively enhances the review-system’s information value.
Voluntary disclosure policies provide a flexible yet cost-effective management strategy. It is particularly suitable for small businesses that run on a tight budget or are unable to get large quantities of comments on their promotions. This is also true for more stagnant online communities
Note that the voluntary policy is not limited to the gaming industry. It is equally fitting for other service sectors, such as the food and beverage and hotel industries.
Our research has shown that a voluntary disclosure policy can encourage consumers to take the initiative and actively participate in online discussions. This improves the system’s effectiveness while building a fairer and more transparent review ecosystem, which reduces the need to offer more conventional incentives or the reliance on professional reviewers.
Free product disclosures can be interpreted as a “free lunch” for attracting more reviews. However, these can also be a double-edged sword for merchants. If product defects exist, the issues can be easily revealed and amplified through increased discussions. In turn, this could present challenges to merchants and affect their reputation. While free product disclosure policies can help improve platform transparency, they can also push businesses to value consumer feedback and enhance product quality.
This article is based on the “Taste of Free Lunch: The Impact of Free Product Disclosure on Review Dynamics”, a paper recently co-authored by:
Professor Yipu DENG
Assistant Professor in Innovation and Information Management
Professor Xiao LEI
Assistant Professor in Innovation and Information Management
Ms. Yimin YIN
Ph.D. student, HKU Business School
Note 1: https://www.ftc.gov/business-guidance/resources/featuring-online-customer-reviews-guide-platforms
Note 2: https://www.amazon.com/gp/help/customer/display.html?ref_=hp_left_v4_sib&nodeId=G3UA5WC5S5UUKB5G
Note 3: https://www.amazon.com/-/zh/gp/help/customer/display.html?nodeId=GDSRWWGGRA2JXSNZ
Note 4: https://store.steampowered.com/oldnews/21695
Note 5: https://x.com/SteamGamesPC/status/1737442946696306935
Note 6: https://steamcommunity.com/profiles/76561198246234164/recommended/1465460/
This article was also published on 17 October, 2024 on the Financial Times’ Chinese website
