Incentivized online reviews inflate product ratings, sales, even when disclosed

New research examining thousands of Amazon reviews reveals that when consumers receive complimentary items in exchange for feedback, their ratings are notably inflated and <a href="https://shoppixy.com/how-to-spot-ai-fake-<a href="https://shoppixy.com/a-majority-of-u-s-tiktok-users-are-there-for-product-reviews-and-recommendations/” title=”A majority of U.S. TikTok users are there for product reviews and recommendations”>product-reviews/” title=”How to Spot AI Fake Product Reviews”>product sales increase, even when the reviewer explicitly discloses the gift.

These incentivized reviews, where participants are given free or discounted merchandise, remain prevalent across many online retail platforms. While Amazon has prohibited compensated reviews, the practice continues to thrive on sites such as Overstock, Yelp, and Walmart. Furthermore, influencers on platforms like YouTube and Instagram frequently promote products through paid endorsements. This study suggests that current disclosure requirements fail to shield shoppers from systematically biased ratings, indicating a need for updated policies.

The study, conducted by researchers from the University of South Carolina and the University of Florida, arrives as the Federal Trade Commission investigates the impact of incentivized feedback. Although the FTC recently established guidelines requiring reviewers to disclose any incentives, the study’s authors argue that these measures are insufficient.

“Disclosure is not effective to protect consumers,” said Jinhong Xie, a professor in UF’s Warrington College of Business, who, with her co-authors, shared their findings with the FTC. The article by Xie, UF’s Woochoel Shin and Sungisk Park of the University of South Carolina will be published soon in the journal Management Science.

The researchers analyzed every review for over 5,000 products across various categories, including toys, electronics, appliances, and home goods. By utilizing data from both before and after Amazon discontinued its original review system in 2016, the team was able to conduct a natural experiment to measure the impact of compensated feedback on product performance.

Prior to October 2016, merchants on Amazon collaborated directly with reviewers to provide free products in exchange for feedback. Many of these individuals were highly active, producing hundreds of reviews. Some operated as semi-professionals, securing their future opportunities by posting overwhelmingly positive content to ensure businesses would continue to work with them.

“We see that for exactly the same product, incentivized reviews are systematically more positive than organic reviews,” said Park, a professor of business at South Carolina. Incentivized reviewers rated products nearly 0.5 stars higher on average on a five-star scale. In discussions he had with reviewers, Park found some who believed they were posting their honest opinions, despite receiving free samples and consistently posting five-star ratings.

“This disclaimer does not discipline the reviewers at all,” Park said. “I’m saying I received a free sample, but I’m still giving a five-star rating.”

Following the termination of the program, Amazon began removing existing incentivized reviews. This gradual deletion allowed the researchers to observe how sales and ratings shifted once products no longer benefited from inflated feedback.

“The removal of disclosed incentivized reviews led to a significant sales reduction,” Park said. Customer satisfaction also increased. “Once Amazon deleted these disclosed reviews, then consumers became happier. There was a smaller number of one-star reviews after the policy change.”

Although Amazon ended its direct business-to-reviewer incentive program, it maintained the Vine review system. Through Vine, Amazon acts as an intermediary between companies and reviewers seeking feedback on new products. Because businesses no longer choose their own reviewers, there is less pressure to provide glowing praise for mediocre items. The Vine program remains active today.

The researchers found that these marketplace-managed programs offer enough independence to foster honest feedback, which ultimately serves to protect the consumer.

“If you’re Amazon, you’re not interested in inflating the rating of one specific seller. Amazon has an incentive to keep the marketplace fair, but they also want to provide information to consumers. Reviewers, knowing that the party that hired them does not want to inflate the rating, offer fairer reviews,” said Shin, a UF professor of business. “We showed there is no rating inflation on Vine reviews.”

Other retailers, such as Home Depot, similarly ensure independence by pairing reviewers with products rather than allowing sellers to hand-pick their own reviewers. However, exchanging free products for reviews, or straightforward paid endorsements, remains common on social media channels like Instagram and YouTube.

“Our proposal is to change the system by requiring more independence in reviews,” said Xie. “It’s hard to change the individual behavior of reviewers, consumers, or sellers. But you can change the system to make it fairer for everyone.”