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With web 2.0 tools and social software applications, retailers and marketers are using customer feedback to improver products and services.

Retail Revolution - Fortune by Oliver Ryan.

"EVER SINCE the first book review was written on in 1995, online shoppers have relied on one another for product intelligence. Whether it's a flat-screen TV or a Crock-Pot, someone somewhere has reviewed it, often in frightening detail. But despite Amazon's success, few other retailers have embraced reviews on their sites."

"Every year it came up, and every year we nixed it," says PETCO's vice president of e-commerce, John Lazarchic. The problem? "We had no knowledge of what the return on investment would be." Retailers of all stripes have been scared off by the cost of managing an online review community, not to mention the prospect of negative reviews and unforeseen legal liabilities.

"Harnessing the seemingly inexhaustible spirit of volunteerism that has powered MySpace and Wikipedia, the budding industry has the promise to affect inventory management, marketing, and consumer service."

Last year, I wrote about Amazon and their social network system here

"One of the startups charges as much as $8,000 a month to handle everything from designing the review area on a retail's site to moderating discussions and analyzing user comments.

CompUSA, reports that reviews which show up on search engine result pages drew 20,000 additional visitors to its site in December. What's more, those visitors were 50% more likely to buy. PETCO has found another benefit: using customer product reviews in its advertising copy. Increased traffic is nice, but the big opportunity for retailers is to mine this new customer feedback."

A focus group can cost $5,000 to $10,000 for 20 people, but a social network system to support thousands of customers can cost under 10k in many cases.