A Positive Step

Maybe this isn’t new and I’ve just never noticed it before (see suggestions below), but I thought this was a positive step towards fixing the problems with eBay’s DSR’s.  Perhaps eBay felt obligated to include this note because they couldn’t explain why the average S&H DSR for sellers that exclusively offer free shipping is less than 5.0.

Suggestions for Improving the DSR System

Now that eBay has a little momentum towards fixing the DSR problem, might I offer a couple of suggestions for continued improvement?

1. Make the little free shipping reminder turn red when the buyer’s mouse hovers over any star in the S&H evaluation block other than the “5″ star.  Better yet — If the seller offers free shipping, make it so they automatically get “5″ stars for that particular metric.  The only way the seller could do better would be to send the buyer money for the priveledge of shipping the item!
2. Put up the same kind of note in the shipping time DSR if the buyer opted for Media Mail shipping (or the seller was forced to only offer Media Mail due to eBay’s ridiculous $4.00 shipping fee cap in the books category).  Make that notice turn red if the mouse hovers over any star except the “5″ star.

Assuming we are stuck with them, what changes would you suggest to the DSR system?

Value is defined as the difference between what a customer paid and the perceived worth of what a customer receives.  I paid for Media Mail shipping and received Priority Mail service, so, for me, the value of the book increased substantially.  Now, the book I ordered was a 1500 page text, and pretty hefty, so it might not have been a significant difference between the cost to mail it Media or Flat-rate priority.  But that’s not what I focused on…

…My focus was diverted to the value I received by a clever note written by the seller on the packing slip:

Click to Enlarge Image

The seller reminded me that I paid for Media Mail by circling that point on the packing slip and let me know that I had received a free upgrade.  In return, the seller asked me to leave feedback.  Since the seller over-delivered in the transaction and exceeded my expectations, I almost tripped over myself in eagerness to leave a positive feedback for them.  I actually spent sometime thinking about the feedback wording as well – something I haven’t done in quite a while. 

The seller was also fairly new – with a low feedback rating (about 250) relative to the large number of books they were selling on Half.com.  This could be a short-term tactic designed to rapidly build up their feedback ratings.  If so, I would vouch for the effectiveness of it.  Since economists have shown that higher eBay feedback results in higher revenue, it could be worth the investment. 

Stoning

Stoning refers to the phenomenon that buyers are more apt to give another negative to a seller who has just received an unfavorable rating.

This could occur for one of two reasons.  First, buyers may be willing to forgive a single bad behavior but wat to punish sellers who exhibit a pattern of bad behavior.  Second, a buyer may interpret what happened in his own transaction differently differently depending on suspicions raised by the seller’s previous feedback.  For example, if an item appears to be damaged in shipment, a previous negative feedback suggests that the damage was more likely to have been the sellers fault.

 Self-Selection

“The seller may stop listing items entirely.”  The study suggests that sellers who receive a negative feedback are more likely than other sellers to stop selling entirely.  They refer to this as “self-selection” out of the market.

Salvaging

This is where the seller works harder, offers discounts, faster shipping, better packaging, etc. This is in order to earn a bunch of positive feedback and get that negative pushed off that first page of feedback comments in order to mitigate the feedback’s detrimental impact on sales.

Slacking

Some sellers’ service actually declines in quality after receipt of a negative feedback.  This is kind of a “Why bother?” attitude.  “Slacking could occur for psychological reasons, if the sellers get angry or discouraged after receiving a negative feedback.”

Khopkar, Li and Resnick,  “Self-Selection, Slipping, Salvaging, Slacking, and Stoning:  the Impacts of Negative Feedback on eBay,” EC ‘05, June 5-8, 2005, Vancouver, British Columbia, Canada.

This was done in attempt to fix the retaliatory feedback problem.  Retaliatory feedback, or the threat of it has crippled eBay’s feedback system.  Many eBay sellers are very upset about this change.  Quite vocally upset.

Given the controversy, it might be useful to remember the purpose of the eBay feedback system.  According to a paper* published by researchers at the University of Michigan, “reputation systems like the Feedback Forum can improve the efficiency of marketplaces in three ways:”

Signals.  A seller’s feedback history can serve as a signal to buyers of how risky it is to purchase from that seller.  This allows each buyer to choose sellers, and how much to bid, based on the buyer’s level of risk aversion.

Sanctions.  Sellers will strive to avoid negative feedback, in order to avoid adverse future impacts on their sales.

Selection Efforts.  Because buyers will be better able to distinguish high quality from low quality, high quality sellers will not leave the market.  Indeed, the low quality and fraudulent sellers may be driven from the market, leaving a higher overall quality level and less risk even for those buyers who do not carefully monitor the signals about trustworthiness of individual [sellers].

I’ve posted a couple of times before, about how bidders are willing to spend more money if we reduce uncertainty and present less risk.  They face uncertainty (and risk) in two main factors:

• The quality of the product
• The quality of the seller

I pointed to several studies that showed how much additional pictures are worth (as indicated by increased final sale prices) to bidders because they reduce risk associated with the quality of the product.  How much more would a quality feedback system be worth to bidders in final sales prices?  If adding additional pictures to your listing increases final bid prices, it follows that a feedback system that effectively reduces the bidder’s uncertainty about your quality as a seller should do the same for you.

The three factors of an efficient reputation system – signals, sanctions, selection efforts –  are certainly something that every reputable seller would desire.  However, they are only going to be effective if the feedback system works. 

It doesn’t work in its present state.  How many sellers refuse to leave feedback first?  This tactic has become quite common these days.  Sellers who do this justify that it is to protect themselves against unwarranted negative feedback left by buyers.  At best, this practice is a simple form of intimidation.

Sellers need to accept the fact that they are not going to have a perfect feedback score anymore.  For the feedback system to work, we need a system in which a 98.6% feedback score is not indicative of a lousy seller.  All sellers are going to subject to the new system, and the good sellers will naturally rise to the top.  It will be easier for bidders to distinguish those sellers that give the rest of a bad name.  Who should be nervous?  If you are a quality seller, you shouldn’t have to worry. 

I think the change means more money for quality sellers.

* Khopkar, Li and Resnick,  “Self-Selection, Slipping, Salvaging, Slacking, and Stoning:  the Impacts of Negative Feedback on eBay,” EC ‘05, June 5-8, 2005, Vancouver, British Columbia, Canada.