UGC, CGC: the hot new buzz words both online and off: ‘Reviewing’ purchase decisions

NATIONWIDE RT REPORT—The booming influx of discussion forums, blogs, social networking sites and review portals on the Internet is creating an increase in consumer reliance on User Generated Content in making product and service purchase decisions.

Consumers always have sought out opinions and insights on products and services, but their resources were limited. Now, the Internet provides a seemingly endless supply of information. Consumers can go online to tap into the collective experiences of hundreds, even thousands, of people who are just like them through UGC.

According to a recent study conducted by Leo J. Shapiro & Associates, nearly half (48%) of all Americans have searched online for information or advice before purchasing a product or service in the past year, and rate UGC three times more influential than TV advertising.

“Consumers feel a high level of trust when consulting UGC because each review reflects a real person relating a real experience with the product,” says Owen Shapiro, vp of LJS. “They’re looking to other consumers to help weigh their options.”

But UGC is more than just a tool; consumers are developing a research system that guides them through the entire buying process. Initially used to narrow choices in a given category, consumers may visit a retail Web site that posts reviews to see which brands or models are reviewed positively and also meet their criteria for price, quality, size, etc. Then, UGC is used to research each product individually: Is it a good value for the money? Will it last? Are there any surprises? Consumers are looking for reasons to keep or desert each product on their lists.

For big-ticket items, consumers also may visit a retail location to experience the product. A great deal can be learned from the Internet, but people want to see, hear, touch and, in some cases, even smell a product, themselves.

Regardless of the perceived confidence in a product choice, there always is some level of insecurity in that decision. For many consumers, UGC provides that final litmus test to feeling that they made the right choice or avoided the wrong one. At the end of the buying process, consumers are seeking out the extreme comments, both positive and negative. Negative comments carry a lot of weight, and as little as a single negative comment can cause the consumer to sway and move on to another product.

The study also discovered that the most attractive group of consumers are seeking UGC the most often: educated, affluent consumers within the high-consumption age group (35-54). Having access to this group can help reveal fresh insights behind why they choose to buy or not buy.

Technology is evolving and it is allowing companies to mine and analyze this natural, unsolicited data. But in some cases, the data is delivering an unexpected outcome that helps identify emerging issues, and these issues may be the very reason consumers are not becoming customers. Take, for instance, a company whose product was packaged in a box that became damaged during the shipping process and caused customers to have concerns regarding the condition of the product inside.

Even though the product was completely unharmed, those customers posted reviews detailing their concerns. The company was quickly alerted to the situation through UGC data and in return was able to address the concern immediately by replacing the shipping material, saving the company considerable revenue.

Companies must understand the gap between what they believe their brand is providing and what consumers say the brand is providing. UGC is bridging that gap, but it also is altering the buying process and causing the pendulum to swing. A brand is no longer owned by a company—it is owned by customer perceptions.