Question

Are Rating Schemes applicable if a quantitative or qualitative analysis will be conducted? How are the results of Rating Schemes used?

Answer 1

Ratings schemes helps consumers in simplifying complex information about the various products and services available in the market. These schemes help them in better understanding the characteristics of a particular product or service, thereby enhancing the decision making process of the consumers. Examples of rating schemes are Energy rating schemes, Credit rating schemes, Service rating schemes etc.

Rating schemes helps consumers in choosing the right product or service by providing an option for comparing various alternatives available in the market. These schemes basically address the information asymmetry problem, often faced by the consumers when they are on a look out for a new product or service provider. They address the consumer pain points and provide a mechanism for an easier, efficient and an informed decision making process for procuring products/services.

These schemes are applicable if both quantitative and qualitative analysis will be conducted. For example in case of Energy rating schemes, the “energy use” is quantitatively measured as a characteristic of the electrical appliances such as a refrigerator or an air conditioner. The products are given a rating on a scale of 1 to 5 stars, with 5 being the most efficient in terms of energy usage. In case of airline service providers or hotel accommodation services, ratings are provided based on the qualitative characteristics such as the cleanliness of the hotel, hospitality of the airline staff etc. The airline/hotel services can also include quantitative characteristics for providing their ratings.

The results of these ratings are used by consumers to make easier and quicker decisions about a specific product or service. These ratings are also used by the organizations to better understand their product/services and the better tailor their services based on the customers’ needs. The characteristics that are used for rating a product or service will be taken up on priority by the organization’s management. Thus, these rating schemes help organizations to improve their product or service quality that directly translates to higher profits and enhanced customer satisfaction.