North Country Leader

We have all heard of consumer reviews, and many of us have contributed our own. Whether it be a comment card left in a restaurant, or a Yelp review published online, consumers have been making their feelings felt one way or the other. In a twist, however, platforms such as Airbnb and Uber employ two-sided reputation systems in which consumers are being rated for their behavior while using the platform. This represents a major departure from the traditional view of “the customer is always right,” which has far-reaching implications. The Black Mirror episode streaming on Netflix titled “Nosedive” provides a dystopian perspective of what happens if the nascent practice of reviewing individuals becomes the norm. This is the first empirical study to examine this precedent setting phenomenon. 

Laura Schrier Rifkin, assistant professor of marketing in the Murray Koppelman School of Business, recently co-authored an article that appeared in the Journal of Consumer Research: “A Turn of the Tables: Psychological Contracts and Word of Mouth about Sharing Economy Platforms When Consumers Get Reviewed.” Rifkin, who has been teaching marketing at Brooklyn College for 3 1/2 years, talked about why this new shift is important and the good and bad associated with it.

How and why did two-sided reputation systems come about?

In the sharing economy, a platform will act as an intermediary to bring together  providers who have a product or service to offer with individuals who are seeking them.  The term sharing is a bit of a misnomer, but refers to a temporary exchange rather than transfer of ownership. Homestay and ride-sharing are the largest sectors of the sharing economy, but there are many examples such as boats, cars, books, swimming pools, money lending, and dog sitting.  

Since firsthand knowledge is unlikely between providers and consumers, many sharing economy platforms have instituted two-sided reputation systems to instill trust among peers. In particular, since there is no transfer of ownership, the provider also bears some risk if a consumer is found to be untrustworthy (e.g., has a house party, behaves in a drunk and disorderly manner). Therefore, providers have the opportunity to rate the consumer to distinguish those that can be trusted from those who can’t.  

What are the main findings of the study?

While most reviews between peers tend to be positive, it is not uncommon for consumers to receive a negative review that they believe is unjustified. In fact, we find that consumers consider most negative reviews to be unjustified. Even though the review is written and controlled by the provider, we find that consumers will engage in negative word-of-mouth about the platform. The study illustrates that consumers form psychological contracts that include implicit promises concerning how they believe they should be treated when using the platform. An unjustified negative review is a breach of the consumers’ psychological contract and leads to feelings of betrayal and negative word-of-mouth.

What is both the good and the bad associated with consumer reviews?

Some have referred to two-side reputation systems as the lifeblood of the sharing economy. However, reviews can be subject to bias and idiosyncrasies of individual providers. A negative review may be a result of any number of reasons and any consumer is subject to the whims of the provider. For example, asking for a second key when renting a house from Airbnb, accidentally closing a door too hard, talking on your cell phone, or not chatting with the driver can elicit a negative review from a host or driver. Vulnerable populations are even more at risk. Negative reviews can create obstacles of market access as well as impact feelings of esteem and status. 

What do you think the future holds for consumers being reviewed?  Does it really matter?

Currently, the practice of reviewing consumers is fairly self-contained within the sharing economy. Consumers for the most part have the opportunity to choose alternatives (e.g., hotels, taxis, car rentals). However, efforts are underway to facilitate, for example, an Airbnb rating to be displayed on one’s Uber profile. For example, the Data Transfer Project is a collaboration among such industry titans as Google, Meta, Microsoft, and Apple to allow a seamless transition allowing individuals to easily use ratings on one platform to establish reputation on another. 

Digital reputations may become a key social asset akin to a credit score. Even now, Uber ratings are popping up on dating profiles as indicators of trustworthiness well as an indicator of ones’ character. 

Consider a decade or so ago when companies such as Yelp and Tripadvisor began—reviews  of businesses played a much smaller role. Now, consumer purchase decisions are strongly influenced by reviews for virtually everything from cradle to grave (e.g., hospitals, preschools, cemeteries). At the same time, the validity of reviews with such things as fraudulent or manipulative reviews create major challenges.  

One question we leave readers with is, akin to a credit score, what role will the practice of two-sided reviewing play in consumers’ lives in the future? Will we become like China where a social credit score will determine access to virtually every aspect of one’s life? While consumers may benefit from positive ratings, we find the prospect or reality of negative ratings can not only impact consumers’ well-being, but also drive their reactions to the platforms on which they are rated. 

Does the research in this article make its way into your classrooms? If so, how?

There are a number of ways that this article is applied to classroom material.  First, the study itself serves as a useful case to discuss emerging business models, disruption, and consumer behavior.  

Second, psychological contract theory has been applied to organizational behavior, but has only been recently considered in a marketing context and never before in the sharing economy. Psychological contracts include unspoken agreements entailing what an individual implicitly believes they are entitled to in exchange for their own contributions in a relationship. Oftentimes companies and marketing scholars are looking for brand loyalty, love, and even evangelism from their consumers. We believe that while those are desirable outcomes, psychological contract theory provides a realistic perspective of how consumers view their relationships with the companies they do business with. Therefore, psychological contract theory is a powerful lens in which to understand relationships between consumers and marketers who are seeking their business. Equally importantly for marketers is a failure to understand that the contracts consumers form will result in consumers feeling betrayed when a company unwittingly breaches their psychological contracts. Particularly in a world where negative word-of-mouth can be so easily transmitted, organizations may pay a high price if their consumers’ psychological contracts are breached.  

Who did you co-author this article with?

I was extremely privileged to work with my co-authors Colleen P. Kirk, associate professor of marketing at New York Institute of Technology, and Canan Corus, associate professor of marketing at Pace University.  

Original source can be found here.