In this 4-minute read:
- Is it better to get more reviews or improve my star rating?
- Why you don’t necessarily want a 5-star rating
- How much do negative reviews hurt revenue?
- How do I get more reviews?
What determines the success of a local business? Is it a line of customers out the door? A 5-star rating on Yelp or Google? A healthy supply of fresh reviews online? Revenue/transactions? Or is it a combination?
Many small business owners obsess about their “star rating” on online review sites, and go positively ballistic if they get a bad review that might lower their rating. Let’s look at how closely a business’s star rating correlates with revenue, compared to how the number of reviews correlates, and see if we can shed some light on this subject.
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Womply Research conducted a study on the impact of online reviews on small business revenue, analyzing transaction trends and online reputation data for more than 200,000 local businesses in dozens of consumer-facing categories. What we learned might surprise you.
First, let’s look at star ratings.
Surprise! Businesses with 5-star ratings actually earn far less than average
Nope, we’re not kidding. Womply’s study shows that businesses with 5-star ratings earn less in revenue than 1 to 1.5 star businesses. Check it out:
Our data shows further that 5-star-rated businesses earn more than 28% LESS than the average business. You might wonder how this is possible. It seems, well, counterintuitive. But when you consider the nature of our increasingly online life and the nature of online feedback, it’s absolutely impossible for a business to avoid negative reviews once in a while.
So, a business with a truly pristine, 5-star rating, with zero or very few negative reviews, may be a new, less-established business. The data shows that today’s online-savvy consumers may not trust a 5-star business with very few total reviews, and may prefer to give their business to shops with a lower star rating, but a greater number of reviews for “social proof.”
Another factor is that the revenue brought in by (potentially) new/unestablished businesses may simply not be up to speed yet. In any case, a business’s star rating DOES correlate with increased revenue, but as you can see in the graph above, Womply’s study shows the sweet spot for maximum revenue to be between 3.5 and 4.5 stars—not 5 stars.
So, how much does the number of reviews matter for my business?
It’s important to point out here the scientific maxim that correlation does not equal causation. However, in Womply’s study, it’s clear that:
Getting more reviews correlates with more revenue
The data shows that businesses with a greater number of total reviews earn much more revenue than the average business in the study. Have a look:
Businesses with more than the average number of reviews (the average was 82 reviews in our study) earn 54% more in annual revenue than average. On the other hand, businesses with less than the average number of reviews earn 15% less revenue than average.
Does the correlation hold up as the number of reviews increases? It would appear so. Businesses with 200 total reviews or more earn nearly 100% more annual revenue than the average business.
Now, here’s the key point: this data was examined without looking at whether the reviews are positive or negative. That’s right—the number of reviews appears to correlate strongly with increased annual revenue, without regard as to whether they are positive or negative reviews.
Of course, as we mentioned in the introduction, revenue isn’t the only way to determine whether a local business is successful. It may not matter at all to customers, and it may not even matter to a business owner. However, it may be an indication of how popular a particular business is (as well as how well they encourage and manage their online reviews).
It may be that businesses with lots of reviews may have their products and services nailed down so they can provide better customer service more consistently than some other shops, which could be a factor in getting repeat business, customer referrals, and new customers.
How do I get more reviews for my business?
We go into more specific details in our article How to get more reviews, but there are effective ways to improve your chances of getting more reviews. To start with, you should be aware that each review platform has its own rules on this subject and you should follow them.
Generally, though, if you remind customers that you appreciate their feedback, you’ll have better results. Research shows that 7 in 10 customers will leave a review if you ask them to. There are several ways to do this:
- Put up signage, including official stickers from sites like Yelp, encouraging customers to leave a review
- Make a verbal request while the customer is at your place of business
- Email your customers a link to a survey or review of your business
No matter how you approach it, there are some things you should never do:
- Never trade positive reviews for discounts or gifts
- Never ask customers to leave you a 5-star or “good” or “positive” or “favorable” review
- Never threaten unhappy customers who you think might leave you a bad review
- Never try to buy or pay for reviews
Why bad reviews can be a good thing for your business
Other than reminding customers that you value their opinion and following the rules of your review platforms, one other thing that can have a big impact on your reviews is being engaged with your customers and creating a better customer experience.
Examine every aspect of your business, from your employees to your facilities to your products to your service, and try to find ways you can improve. Your online reviews can actually be a great resource here.
Instead of taking offense at negative reviews and putting your head in the sand, look at them as valuable customer feedback (for which big corporations pay big bucks) and an opportunity for making improvements to your business.
As you increase your efforts to delight your customers, you may find they leave you reviews more often.
Save time managing your online reviews with Womply Reputation
Managing all your online reviews on all the different sites while dealing with customers and running a business can be a tall order. But there is something that can help.
Womply’s reputation management software can make tracking and responding to all of your online reviews easier. You can read and manage all your reviews from one dashboard with one login, and you can even set up customized automatic review replies if you so choose.
You’ll soon be on your way to a better, more effective, positive online business reputation. Learn more, plus get free reputation monitoring and customer insights when you sign up for Womply Free!