Online review sites have been around for about a decade, and they now play a dominant role in consumer buying decisions. However, how online reviews specifically impact business results has been largely a point of speculation - until now.
Marketing and CRM software provider Womply has just released a comprehensive study of more than 200,000 U.S. small businesses across a wide range of industries. The study reveals some interesting truths about how your online business listings, start ratings, negative reviews, and reputation management activities correlate with revenue.
If you think that those generic profiles of your business that are up on Yelp, TripAdvisor, Facebook, and Google are sufficient, you're mistaken.
These platforms will often grab local business information from search results, public records, or consumer entries, but the profiles aren't nearly as effective if the business isn't participating. And far too many don't. Studies show that as many as 56 percent of Google business listings are unclaimed by business owners.
According to Womply, businesses that claim their profiles in at least three major review sites earned an average of $170,000 more in revenue annually than a typical business and $179,000 more than a business that didn't claim any listings at all.
It might be tempting to aim for perfect scores on those online review sites, but consumers tend to look on this type of "perfection" with suspicion. The results of this study confirmed that some negative reviews will help your business instead of hurt it.
Surprisingly, businesses with a 5-star rating will earn less on average than those with a 1 to 1.5-star rating. Businesses with a 4 to 4.5-star rating earn the highest annual revenue, which is 28 percent higher than the average.
On which sites those ratings occur appears to matter as well. According to Womply, low ratings on TripAdvisor and Google have a much greater impact on revenue than low ratings on Facebook or Yelp.
Several studies have linked restaurant revenue to ratings on different online review sites. One found that 35 percent of consumers would be reluctant to visit a restaurant with a Google or TripAdvisor rating of 3-stars or below.
Researchers at both Harvard and Berkeley concluded that just a half-star improvement on Yelp resulted in increased revenue (5-9 percent) and bookings (19 percent) for restaurants. But, many of today's consumers look at more than just the star rating on review sites.
Beyond taking a quick peek at a company's star rating on a review site, many consumers will filter results to read negative reviews first. This can give the reader a quick idea if there are some glaring trends with product or service issues, and another goal is to see if and how a business responds to unhappy customers.
Replying to online reviews is just a good business practice. It's another way to engage with current and potential customers, and it shows customers that you care and are responsive. It's also a local marketing tactic that is either not used enough or executed poorly.
Womply's study reveals that people spend as much as 58 percent more at businesses that reply to their online reviews. If you're active and engaging on these review sites, you'll be doing something that most other businesses aren't, which will not only set you apart but also be profitable.
About 75 percent of businesses fail to respond to any of their reviews. The study found that businesses that replied to at least 20 percent of their online reviews earned about 33 percent more revenue than the average small company. Businesses that just ignored their reviews (didn't respond to anything) earned about 9 percent less than the average small business.
While your star rating matters as does how you treat the reviews you receive, Womply also discovered several other factors that correlate with business revenue - review volume and freshness.
According to Womply, the total number of reviews that you have is more important than your average star rating. In its analysis, it found that business had an average of 82.5 reviews across all online sites.
The study revealed that businesses with higher than average volume (more than 82 reviews) earned 54 percent higher revenue than the average business. Businesses with less than the average volume of reviews also earned less - 15 percent less than the average revenue.
A substantial boost in a businesses' review volume also translates to much higher revenues. Specifically, getting 200 reviews or more means that a business can earn almost twice as much as the average small business.
When it comes to specific review sites, review volume is more important on Google, followed by Yelp, Facebook, and then TripAdvisor.
Not letting your reviews get "stale" is also a factor that can impact business revenue. Womply determined that, on average, businesses had about 9 reviews posted within the past 90 days, which was their criteria for "freshness."
Businesses that had a higher than average number of fresh reviews were found to earn about 52 percent more than the average small business. Not having fresh reviews resulted in lower revenues, with 13 percent lower earnings for companies that had no fresh reviews.
Getting an influx of fresh reviews can create a virtual windfall for your business. The study found that companies who had 25 or more reviews posted within the past 90 days also earned 108 percent more than the average business.
Online reviews are a fact of life, but that doesn't make them any less intimidating for a small business. The good news is that most consumers (81 percent) post positive reviews about their experiences.
Some industries are more likely to get props while others are more frequent targets of criticism. For example, the most highly-rated industries include religious organizations and pet services. The most negative reviews are posted for lodging places and transportation businesses.
Your company's online reputation should be a priority, and part of this is focusing on your online reviews. Contact us to learn more about how our local marketing services can help you improve the customer experience and grow your business.