How does the Customer rating works?

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Anybody that has purchased something can review it.
It doesn’t matter if it is a product or a service, depending on the website’s rules, anyone can gives his (her) opinion on what is being offered, and depending on the scale provided you give the oportunity to your customers to give a feedback of the product, service or delivery related.

So how does it work:

Well it depends. Some sites will ask the person to give specific information to verify if the product/service being rated comes specifically from them, other sites like, TopTenREVIEWS or YELP will allow customers to review any product without verifying. What happens after is basically pure mathematics, and algorithm is used  to filter out any reviews that they suspect are false or automatically generated. The remaining ones are posted on the website.

But is it a good idea? isn’t it too dangerous?

Well it depends on how the site manages both good and bad reviews.
In any case it is a good idea. It can benefit and boost the sales of a E-commerce company. It has been proved that 61% of customers read online reviews before making a purchase decision and 63% of customers are more likely to make a purchase from a site that has user reviews (http://www.econsultancy.com).
A positive rating is almost as important as the price. It can work as a decision maker. Customers always trust other customers, even more than certifications and advertising.

But what about the negative reviews?

A review that might seem negative to one person, can be a positive one in another person’s view.
“Take for example a review of a hotel that describes it as ‘not child friendly’. A couple looking for a romantic weekend getaway would not see this as a deterrent for booking, and would most likely welcome this fact” (http://www.digitalvisitor.com).
It also depends on how the company takes care of this. If the customer service department is aware of the negative reviews, and does everything in their power to give a reponse to the customer, it will give the impression that the company is serious and that they take care of their buyers.

So how do I encourage customers to review their purchases?

Easy, you just have to make it approachable and easy to do. Always remind them of the option to give their opinion.
Make it as easy as possible. Too much form filling may put off some customers.
Put the reviews where people can see them. If the product has a review, then show it!
Always publish good and bad reviews. It makes everything a lot more trustworthy.
Use reviews to deliver a more relevant user-experience. You can recommend other products in the future.

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