NEWS

Research Exposes Role of Pricing on User Ratings

Published

4 years ago

January 6, 2021

effect of price on ratings 5ff570c715020

A new study from the Harvard Business School proposes that price increases may have a negative effect on consumer ratings. This effect is seen in both high end and lower end of the market. This suggests that price can affect consumer perception of reputation on consumer rating platforms.

About the Study

A caveat to this study is that it’s a working paper. That means it is currently in draft form and not finalized. Nevertheless, the findings add to our understanding of pricing strategy and creating a positive reputation with consumers.

This research was conducted on restaurants on the Yelp Transactions Platform in the cities of New York City, Los Angeles, and Houston. They also used data from 2013 through January 2019.

Price and Ratings Effect is Across the Board

The researchers discovered that the average star ratings for high end restaurants were similar to the average ratings of low end restaurants. High end restaurants received an average score of 3.6 while restaurants at the cheapest levels received an average score of 3.4.

One would normally thing that high end restaurants would receive higher ratings in general than cheaper restaurants because of the perception of higher quality. But that doesn’t seem to be the case.

The researchers suggest:

“We interpret this as suggestive evidence that ratings area function of both quality and price.”

That means that a cheaper restaurant that has a four star rating isn’t necessarily better than a high end restaurant with a three star rating.

The rating is a reflection of the perceived quality for the price paid.

The Takeaway:

What this may mean to businesses is that there may be a relationship between the perception of value a customer receives for the price paid and that the value will be reflected in higher ratings if the ratio of value and price are favorable.

Price Increases May Affect Ratings

According to the research, it was discovered that price increases led to decreases in ratings.

This is how they described the effect:

“…we find that increases in prices lead to lower ratings. A 1% increase in price leads to a 0.05-0.14 decrease in rating on a scale of 1 to 3 (the scale used for delivery
purchases), which is approximately 2.5%-5% decrease for the average feedback.

This effect becomes increasingly important when considering that the average price change is about 3%-9%.”

The researchers stressed that the rating changes were not small changes but were significant to the point that they could have an effect on a businesses reputation.

According to the research:

“These results are consistent with the cross-sectional evidence, and suggest that higher prices are in fact affecting a restaurant’s reputation, and that these effects are both statistically and economically significant.”

Why Ratings May Be Affected by Price

The research reviewed the data by splitting the consumer ratings between first-time buyers and longtime patrons.

What was discovered is that consumers who have not previously purchased from the restaurant tended to be affected by higher prices than consumers who had purchased there before.

This implied that new consumers who don’t already have an opinion will more likely factor the higher price as part of their rating than a return customer who has eaten there before.

An additional insight is that, because return customers don’t lower their ratings because of price increases, it could mean that lower ratings are not given as “punishment” for raising the prices, since the ratings aren’t affected to the same degree as the ratings of new customers.

The researchers wrote:

“We argue that ratings are negatively affected by price-level because consumers adjust their feedback based on prices.

We find that the effect is larger and generally more statistically significant for users who are ordering from a restaurant for the first time relative to people who have ordered before.

This suggests that consumers indeed respond to price levels rather than use low ratings as punishment for raising prices.

This finding also supports the notion that prices are, to some extent, used as a reference point or a signal to set users expectations for quality, as users who have not previously ordered from that business are likely to have the least prior knowledge of quality.”

The Trap of High Prices and Low Ratings

For businesses, the researchers suggest that price increases can carry a negative effect. The increased price can impact sales volume and affect the business reputation through lower ratings.

For consumers, the researchers argue that this may cause a lower user experience since the company’s ratings may not accurately reflect their reputation with consumers, it may simply reflect their reputation with new consumers.

Or, the high ratings may reflect their historic popularity with customers that was gained at a lower price point.

The researchers also suggest that this information might be useful for sites that display user generated ratings, that it may be useful to device a way to show different ratings based on whether they were given by a new or repeat customer.

Presumably the rating of a repeat customer might more accurately reflect the true reputation of a company.

Here’s what the research paper says:

“Our results suggest a trade-off to increasing prices—in addition to reducing immediate sales, price increases harm firm reputation.

…If consumers are unable to unpack the impact of historic prices on rating, then this puts a wedge between true quality and firm’s reputation.”

Trade-off of Introductory Prices and Long Term Ratings

The researchers warned that unscrupulous sellers might try to game their ratings by initially offering low prices.

Because consumers take price into consideration of the value they receive, the lower price will positively affect the ratings and result in better ratings and more sales which in turn feeds into additional higher ratings.

The researchers feel that this low price/high ratings feedback loop could be negatively offset in the long run by lower ratings from offering the product at higher prices later on.

This is how they put it:

“…strategic sellers might be tempted to take advantage of misguided consumers by setting low introductory prices. Initial low prices can mechanically boost ratings and allow some firms to eventually take advantage of their good reputation by increasing sales and prices.

More generally, our results point to a trade-off —price increases don’t just reduce present demand, but can potentially harm future demand by decreasing firm reputation.

We expect this negative effect to attenuate as the number of reviews grows larger.”

Explanation are Elusive

The researchers stated that they discovered consistent cause and effect in ratings and price increases. But they admitted that they did not have the data to accurately to explain the role of expectations on ratings.

The research paper concluded:

Lastly, in this setting the mechanism driving the adverse impact of prices on ratings is somewhat unclear.

…Unfortunately, we are unable to fully disentangle these to mechanisms in our setting. We believe that the effect is driven by a mixture of these two forces: On the one hand, we do find that repeating users are affected by price, which implies that deviations from expectations are not the sole mechanism driving the results.

On the other hand, new consumers seem to be more affected, so expectations seem to play some role.”

The research paper, which is a working paper, brings up some interesting information that may be useful to businesses that are considering a pricing strategy and are concerned about user ratings on platforms. This is of particular concern local type businesses but also has implications for businesses whose products are rated by users on sites like Amazon.

Citation

Download the Report: The Impact of Price on Firm Reputation (PDF)

Searchenginejournal.com

NEWS

OpenAI Introduces Fine-Tuning for GPT-4 and Enabling Customized AI Models

Published

2 months ago

August 21, 2024

Max

OpenAI Introduces Fine-Tuning for GPT-4 and Enabling Customized AI Models

OpenAI has today announced the release of fine-tuning capabilities for its flagship GPT-4 large language model, marking a significant milestone in the AI landscape. This new functionality empowers developers to create tailored versions of GPT-4 to suit specialized use cases, enhancing the model’s utility across various industries.

Fine-tuning has long been a desired feature for developers who require more control over AI behavior, and with this update, OpenAI delivers on that demand. The ability to fine-tune GPT-4 allows businesses and developers to refine the model’s responses to better align with specific requirements, whether for customer service, content generation, technical support, or other unique applications.

Why Fine-Tuning Matters

GPT-4 is a very flexible model that can handle many different tasks. However, some businesses and developers need more specialized AI that matches their specific language, style, and needs. Fine-tuning helps with this by letting them adjust GPT-4 using custom data. For example, companies can train a fine-tuned model to keep a consistent brand tone or focus on industry-specific language.

Fine-tuning also offers improvements in areas like response accuracy and context comprehension. For use cases where nuanced understanding or specialized knowledge is crucial, this can be a game-changer. Models can be taught to better grasp intricate details, improving their effectiveness in sectors such as legal analysis, medical advice, or technical writing.

Key Features of GPT-4 Fine-Tuning

The fine-tuning process leverages OpenAI’s established tools, but now it is optimized for GPT-4’s advanced architecture. Notable features include:

Enhanced Customization: Developers can precisely influence the model’s behavior and knowledge base.
Consistency in Output: Fine-tuned models can be made to maintain consistent formatting, tone, or responses, essential for professional applications.
Higher Efficiency: Compared to training models from scratch, fine-tuning GPT-4 allows organizations to deploy sophisticated AI with reduced time and computational cost.

Additionally, OpenAI has emphasized ease of use with this feature. The fine-tuning workflow is designed to be accessible even to teams with limited AI experience, reducing barriers to customization. For more advanced users, OpenAI provides granular control options to achieve highly specialized outputs.

Implications for the Future

The launch of fine-tuning capabilities for GPT-4 signals a broader shift toward more user-centric AI development. As businesses increasingly adopt AI, the demand for models that can cater to specific business needs, without compromising on performance, will continue to grow. OpenAI’s move positions GPT-4 as a flexible and adaptable tool that can be refined to deliver optimal value in any given scenario.

By offering fine-tuning, OpenAI not only enhances GPT-4’s appeal but also reinforces the model’s role as a leading AI solution across diverse sectors. From startups seeking to automate niche tasks to large enterprises looking to scale intelligent systems, GPT-4’s fine-tuning capability provides a powerful resource for driving innovation.

OpenAI announced that fine-tuning GPT-4o will cost $25 for every million tokens used during training. After the model is set up, it will cost $3.75 per million input tokens and $15 per million output tokens. To help developers get started, OpenAI is offering 1 million free training tokens per day for GPT-4o and 2 million free tokens per day for GPT-4o mini until September 23. This makes it easier for developers to try out the fine-tuning service.

As AI continues to evolve, OpenAI’s focus on customization and adaptability with GPT-4 represents a critical step in making advanced AI accessible, scalable, and more aligned with real-world applications. This new capability is expected to accelerate the adoption of AI across industries, creating a new wave of AI-driven solutions tailored to specific challenges and opportunities.

GOOGLE

This Week in Search News: Simple and Easy-to-Read Update

Published

3 months ago

June 30, 2024

Entireweb News Bot

This Week in Search News: Simple and Easy-to-Read Update

Here’s what happened in the world of Google and search engines this week:

1. Google’s June 2024 Spam Update

Google finished rolling out its June 2024 spam update over a period of seven days. This update aims to reduce spammy content in search results.

2. Changes to Google Search Interface

Google has removed the continuous scroll feature for search results. Instead, it’s back to the old system of pages.

3. New Features and Tests

Link Cards: Google is testing link cards at the top of AI-generated overviews.
Health Overviews: There are more AI-generated health overviews showing up in search results.
Local Panels: Google is testing AI overviews in local information panels.

4. Search Rankings and Quality

Improving Rankings: Google said it can improve its search ranking system but will only do so on a large scale.
Measuring Quality: Google’s Elizabeth Tucker shared how they measure search quality.

5. Advice for Content Creators

Brand Names in Reviews: Google advises not to avoid mentioning brand names in review content.
Fixing 404 Pages: Google explained when it’s important to fix 404 error pages.

6. New Search Features in Google Chrome

Google Chrome for mobile devices has added several new search features to enhance user experience.

7. New Tests and Features in Google Search

Credit Card Widget: Google is testing a new widget for credit card information in search results.
Sliding Search Results: When making a new search query, the results might slide to the right.

8. Bing’s New Feature

Bing is now using AI to write “People Also Ask” questions in search results.

9. Local Search Ranking Factors

Menu items and popular times might be factors that influence local search rankings on Google.

10. Google Ads Updates

Query Matching and Brand Controls: Google Ads updated its query matching and brand controls, and advertisers are happy with these changes.
Lead Credits: Google will automate lead credits for Local Service Ads. Google says this is a good change, but some advertisers are worried.
tROAS Insights Box: Google Ads is testing a new insights box for tROAS (Target Return on Ad Spend) in Performance Max and Standard Shopping campaigns.
WordPress Tag Code: There is a new conversion code for Google Ads on WordPress sites.

These updates highlight how Google and other search engines are continuously evolving to improve user experience and provide better advertising tools.

FACEBOOK

Facebook Faces Yet Another Outage: Platform Encounters Technical Issues Again

Published

7 months ago

March 20, 2024

Max

Uppdated: It seems that today’s issues with Facebook haven’t affected as many users as the last time. A smaller group of people appears to be impacted this time around, which is a relief compared to the larger incident before. Nevertheless, it’s still frustrating for those affected, and hopefully, the issues will be resolved soon by the Facebook team.

Facebook had another problem today (March 20, 2024). According to Downdetector, a website that shows when other websites are not working, many people had trouble using Facebook.

This isn’t the first time Facebook has had issues. Just a little while ago, there was another problem that stopped people from using the site. Today, when people tried to use Facebook, it didn’t work like it should. People couldn’t see their friends’ posts, and sometimes the website wouldn’t even load.

Downdetector, which watches out for problems on websites, showed that lots of people were having trouble with Facebook. People from all over the world said they couldn’t use the site, and they were not happy about it.

When websites like Facebook have problems, it affects a lot of people. It’s not just about not being able to see posts or chat with friends. It can also impact businesses that use Facebook to reach customers.

Since Facebook owns Messenger and Instagram, the problems with Facebook also meant that people had trouble using these apps. It made the situation even more frustrating for many users, who rely on these apps to stay connected with others.

During this recent problem, one thing is obvious: the internet is always changing, and even big websites like Facebook can have problems. While people wait for Facebook to fix the issue, it shows us how easily things online can go wrong. It’s a good reminder that we should have backup plans for staying connected online, just in case something like this happens again.