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Ratings platforms and customer commentary

Online review platforms allow customers to make informed choices but what does this mean for your SME? Bruce Billson and Dr Michael Schaper discuss.
BRUCE BILLSON: One aspect of a fair and healthy competitive environment is consumers armed with reliable and accurate information. Things are changing in the digital world. That information is available from a range of sources, and good consumers are accessing the advice and assessment of others, ratings websites, even commentary on the experience that they’ve had. This is changing the game for many SMEs. We’re going to talk to Dr. Michael Schaper. He’s the deputy chairman of the ACCC, the Competition and Consumer Regulator in Australia. This is part of that competitive environment.
How do we make sure an SME is engaging fairly and making the best of these new digital tools as it seeks to communicate with its consumers in an environment much richer and with far more information available to help guide choices about goods and services? Let’s see what Michael’s got to say. Welcome, soon to be retired deputy commissioner of the ACCC, Australia’s Competition and Consumer Affairs Regulator. Dr. Michael Schaper, thank you for joining us today.
MICHAEL SCHAPER: Bruce, a real pleasure.
BRUCE BILLSON: The digital environment’s created a lot of new information– helpful information– for customers about goods and services that are available. SMEs really need to be engaged in that space. What’s your advice to an SME about these ratings platforms and commentary sites on goods and services?
MICHAEL SCHAPER: Look, I think you’re quite right, Bruce, that online platforms and online trading are a real opportunity for SMEs to go global, to get a bigger market share. But they also do pose a couple of challenges. Take rating platforms. Most consumers today, we know, when they go online, will look at review platforms, will look at other ways of getting information before they make a final purchasing decision. So for small businesses, you clearly want to think about what you’re going to put up there, what reviews you’re going to get. But you’ve also got to be careful, first of all, that you don’t mislead or deceive customers. And unfortunately, we have seen examples about that.
And we’ve also seen examples where businesses also try to game the system in comparison to their competitors in terms of– well, not only what they say about their own products and services, but also what they say about their competitor’s. So we need to be careful about those. The rules here in cyberspace and online are exactly the same as they are in the real physical world. If you tell a customer something about a product, it’s got to be true. If you make a claim about a price, it’s got to be accurate. And if you are comparing your products or your services to what another business does, then you’ve really got to be comparing oranges with oranges and not oranges with apples.
BRUCE BILLSON: You can see that a conversation about things– whether this washing machine was something that delighted a customer or not might be one part of it. The experience that a customer has with a small business, that can be deeply personal, and might not always be to the delight of the small business owner. What’s your advice about how to engage with that kind of commentary that might not be what you hope for?
MICHAEL SCHAPER: Well, look, when you get commentary back, of course it does go live. And it does go to a much bigger audience. And there’s a real challenge here for most business operators. I think the very first thing is that you are going to get told things sometimes that you don’t like. But on the other side of the coin, that is a real opportunity to actually take on a stock, and say, am I doing this right, is what I’m offering the right sort of mix. And sometimes, whilst customers can be annoyed, sometimes the opportunity to correct that, to make good on it, can actually give you a distinct advantage if you face up to it rather than not.
So I think that’s a really important starting point. The second one is try not to muzzle honest criticism. People see through it. It gets found out very quickly, or it gets distributed through other channels. And in fact, muzzling a critical comment can also, interestingly enough, be sometimes a breach of the Competition and Consumer Act in regards to the rules about misleading and deceptive conduct.
BRUCE BILLSON: So be responsive, but also understand that how you respond is also being viewed by a much broader audience?
MICHAEL SCHAPER: That’s exactly the case. Let me turn to the issue about online platforms and what you put up there, because I think that’s a really important one as well. So it’s not only about how you respond to customers. It’s also what you say in the first place.
While most businesses are honest and genuine, we’ve seen situations sometimes where individual firms have done things such as sometimes put up blatantly false information, sometimes cut and paste from someone else’s review, sometimes put up fake testimonials, or encourage their staff or franchisees, if it’s a franchise system, to try and game the system. So all of those run into the potential of breach in the Competition and Consumer Act’s provisions about misleading conduct. And over the years, the ACCC, for example, has prosecuted a number of businesses for it. We’ve also had numerous complaints from small businesses about other businesses. So it works both ways. In my experience, you will see customers are aware about how platforms work.
Your competitors will be aware about how they work. And don’t forget, also your staff will be aware of that. And that is another area where people often come to us, if they think the rules are being distorted or gamed.
BRUCE BILLSON: So if you’ve got a competitor that might be up to mischief, posting malicious reports, what are the options a small business owner can consider?
MICHAEL SCHAPER: Well, look, it is hard when someone puts something that’s blatantly false up. On one hand, we don’t want to get caught in costly, lengthy legal battles, because small businesses rarely win out of that. So obviously, the protocol sometimes is to confront the business directly. If that’s not going to work though, then there are other options, such as coming to some of the regulators about it. And indeed, some of our cases have been based on exactly those situations. You do also have a third option– a right of private legal action. Although the other reality is that legal action like that can be time-consuming and expensive for businesses.
And I guess your fourth one is making sure that you’ve got the means to communicate with your own customers so that if you think the story is unbalanced that you can get your story, your conversation, out to them directly and immediately.
BRUCE BILLSON: So if the decision is made to come to a competition and consumer agency like the ACCC, what’s the toolkit that’s available to you? And how would the commission ordinarily respond to what appears to be a legitimate basis of concern?
MICHAEL SCHAPER: Well, look, when people come to us, we get about 2 to 300,000 inquiries a year. Out of those, about 15,000 of them are small business-related ones. Most of our actions had to go through the court system. We get funding for about 35 court actions a year. So we do have to think very carefully about the ones that we take. We can issue infringement notices against a business, a bit like a speeding fine. If they pay it, that’s the end of the matter. If not, then we may still take it to court. We can take it to court right from the get go.
And the penalties there can be up to in excess of $1 million for a corporation or $100,000 dollars for individuals. So they’re still hefty amounts. As I said before, we are conscious that for many small businesses, formal regulatory action, just like legal action, can be time-consuming and expensive. It will take up a lot of their resources. So sometimes, what’s also worth thinking about is mediation, for example, through a small business commissioner– another viable option. We look at all of the components that come in. We look at ones especially that affect a whole group of businesses, because they are the ones that we are most likely to focus on.
But we do need businesses, when they come to us, to provide us with as much information. Because there’s only a limited capacity to investigate all those conflicting claims and work out which ones we’re going to prioritise.
BRUCE BILLSON: Some really good insights there from Dr. Michael Schaper– worth reflecting on. The way technology is permeating all of our lives and the business environment means we’re not only more exposed to a greater range of choice in terms of the purchase of goods and services, but also how people may have felt about their consumer decisions. This means that if you’re not part of these conversations, you may well not be part of an important aspect of our economy, where consumers are increasingly active in making decisions about what they buy. So it is an option for people not to participate in this space.
But that really means an SME has decided not to be part of a vibrant and growing aspect of commerce, where the bulk of customers and prospective customers actually are. Clearly, if this digital world is where the customers are, isn’t that where an SME wants to be?
The information available to customers about goods and services choices has been significantly enhanced by new digital platforms – but what does this mean for your SME?
Ratings platforms and feedback/commentary pages attached to business websites provide customers with another potentially valuable window into your business and the experience others have had in dealing with you. These can be very powerful with research showing that strong ratings have a positive influence on prospective customers.
Equally, less-favourable accounts can quickly cause a prospective customer to move on to another business. How your SME responds to negative commentary or reviews can also influence a person’s preparedness to become your customer.
This influence on customer behaviour means that businesses are inclined to encourage satisfied customers communicating their experience through review mechanisms and to discourage less-favourable experiences appearing in online feedback.
Examples also exist where rivals have sought to ‘game’ online reviews to their advantage. However, this comparatively new area of consumer information and its competitive impact does not operate outside the disciplines of modern fair competition and consumer protection laws.

Your task

In the video Dr Schaper spoke about the protections available to SMEs. What are some of those protections and how might knowledge of those protections influence your own behaviour when confronted by negative commentary or other SME owners ‘gaming’ the system?
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