December 22, 2018

How online reviews impact revenue for local businesses

Summary:

  • You can’t ignore online reviews anymore if you want to run a successful business
  • A single negative review can cost you customers and hurt revenue
  • Positive reviews can actually increase revenue

Let’s say you decided to completely ignore online reviews and leave your business reputation to chance. What would happen? Well, you’d make less money, for starters.

Sadly, many small business owners learn the hard way that ignoring online reviews can really hurt sales. Negative reviews can cost you new customers, cause repeat visitors to reconsider, and create doubt about your products and services.

Improve your online reputation and make more money with Womply. Get a free demo

How much do negative online reviews hurt revenue?

Let’s say someone posts a negative review about your business on Google, Yelp, or another popular online review site. How much does a bad review cost you?

According to one study, a single negative review can cost your business up to 30 customers. Let’s put that in perspective. If you run an “average” small, independent retail shop, according to our State of Local Retail report, you get 13 customers per day who spend an average of $121 per transaction. A loss of 30 customers means $3,630 in lost sales (nearly 3 days without revenue), and that’s not accounting for forfeited repeat visits.

Retail: 1 negative review = $3,630 in lost sales

Clearly, there’s a lot at stake. But don’t fret—there’s a silver lining.

The good and bad of online reviews

According to research by Cornell professors, a one-star change in your reputation score can change revenue by up to 39%… for better or worse. A higher star rating correlates to more revenue, whereas a lower rating correlates to less revenue.

This means you can actually make more money simply by improving your star rating on key online review sites. In addition, sometimes a negative review can help you identify hard-to-spot problems with your products or services and make a quick fix.

As one example, Junction Kitchen & Provisions in South Carolina used online reviews to learn that a new business process had inadvertently messed up a signature dish on the menu. Armed with this information, owner Kimana Littleflower tweaked the kitchen’s process and was able to keep her customers happy without any lingering harm to sales.  

You might also like: Our Small Business Almanac! Benchmark your revenue against similar businesses in your state. There’s nothing else like it, and it’s free to use.

You can actually make more money simply by improving your star rating on key online review sites.

Take action: Businesses that use Womply see a half-star increase in their star rating, on average! Request a free demo of our small business software solutions by completing the form below.

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