A special report from Womply Research

How online reviews impact small business revenue

These days, people use the internet to find local businesses when they’re looking to spend money. That means online reviews are the new word of mouth, which got us wondering: how do online reviews impact small business revenue?

Impact of Reviews on Revenue page masthead graphic. A special report from Womply Research.

To understand the correlation between reviews and revenue, Womply’s data science team conducted an in-depth analysis of transactions and online review data for more than 200,000 U.S. small businesses in every state and across dozens of industries, including restaurants, salons, auto shops, medical and dental offices, retailers, and more.

Key findings include

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Businesses that claim their free listings on at least 4 review sites earn 58% more revenue

Businesses that reply to their reviews at least 25% of the time average 35% more revenue

5 star rated businesses have below-average sales—the sweet spot is 3.5 to 4.5 stars

Businesses with more than the average number of reviews across all review sites bring in 54% more in annual revenue

Businesses whose total number of reviews are 15-20% negative average 13% more annual revenue than businesses whose reviews are 5-10% negative

Go deeper by reading our analysis for businesses in your specific industry.

Potential customers use review sites like Google, Yelp, Facebook, and TripAdvisor to discover and learn about all sorts of new local businesses. As these sites have grown more important and ubiquitous, many business owners feel like they’re at the mercy of anonymous reviewers and star ratings.

The good news for business owners: our research reveals that a few simple actions, directly within a business owner’s control, can make a significant impact on revenue.

Claiming free listings

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Businesses that claim free listings on multiple review sites make 36% more revenue

Key findings include

Businesses that claim their free listings on at least 3 review sites earn 36% more revenue than average

Only businesses that claimed more than 1 review site listing earned more revenue than average

Businesses that don’t claim their listing on any review sites earn 24% less revenue than average

Google is the most important free listing for businesses to claim

The average annual revenue across all local businesses in our study was $301,000. When you break down annual revenue at businesses by the number of free listings they claimed on review sites, a clear pattern emerges. The more review sites a business claims, the bigger the average increase in annual revenue.

Let’s put it this way: businesses that follow the simple action of claiming their profiles on at least three of the major review sites (Google, Yelp, Facebook, and TripAdvisor) average a whopping $107,000 more in annual revenue than the typical business.

Meanwhile, businesses who don’t claim their listing on any review sites average $72,000 less in annual revenue than the typical business.

This 60% swing in revenue should put “claim all review site profiles” on the top of any business owner’s to-do list.

In terms of its correlation to increased sales, Google is the most important of any of the single review sites. Businesses who claim their Google listing average 10% more in annual revenue than the average business, but those who don’t claim theirs average 24% less in annual revenue.

Go deeper by reading our analysis for businesses in your specific industry.

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Replying to reviews

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People spend up to 58% more money at businesses that reply to reviews

Key findings include

75% of businesses don’t respond to any of their reviews

The reply rate among businesses who respond to reviews is 20.8%

Businesses that reply to more than 20% of their reviews earn 33% more revenue than average

Businesses that don’t reply to any reviews earn 9% less revenue than average

It’s clearly important for businesses to claim their listings on review sites, but a business owner shouldn’t just stop there. Our analysis reveals that it’s also important for businesses to be active in engaging with customers on those review sites.

Replying to customer reviews is associated with an increase in annual revenue for local businesses, particularly those who do so on a regular basis. Businesses that are more active in responding to customer reviews make more money, on average.

The vast majority of businesses (75%) don’t respond to any of their reviews, and as you can see in the charts above, they may want to seriously reconsider this approach.

Businesses who respond to reviews less frequently than the average engaged business earn 26% more revenue than the average business. And businesses who reply to at least half of their reviews earn more than $166,000 in annual revenue than businesses who don’t reply to any of their reviews.

Our hypothesis is that customers view businesses that are active on review sites as more credible and responsive to customer needs, and therefore customers are more likely to spend money with them.

Businesses that respond to at least 1 review respond to a total of 26 reviews on average.

But businesses that respond to even just one review earn 4% more than average, and you can see the averages climb quickly the more frequently a business responds to a review.

By the time you get to quick serve businesses who reply to 50 reviews or more, they are earning an astounding $343,000 more each year than average.

When it comes to responding to reviews, it’s clear that quick serve businesses should focus primarily on giving genuine responses to both negative and positive reviews.

As we’ll explain in the sections below, getting more reviews is clearly important, but staying engaged with customers in a real and meaningful way can make a clear difference.

Go deeper by reading our analysis for businesses in your specific industry.

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Star ratings

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How much does overall star rating impact revenue?

Key findings include

Businesses with a rating between 3.5 and 4.5 stars earn more revenue than any other rating

5 star businesses earn less in revenue than 1 to 1.5 star businesses

Businesses with a 4 to 4.5 star rating earn 28% more in annual revenue

Low ratings on Google and TripAdvisor have the largest negative impact on revenue

Now that we’ve covered the things that a business owner can control when it comes to review sites, let’s get into the reviews themselves. We’ll start with what many business owners consider the most important part of their online presence—their overall star rating.

The chart below illustrates how much the average star rating matters to small business revenue.

The sweet spot for local businesses is from 3.5 stars to 4.5 stars, with 4 to 4.5 star businesses earning the highest average revenue.

Interestingly, 5 star businesses average far less revenue than the typical business, possibly because most 5 star average businesses have fewer reviews, are less established, or may be guilty of black-hat practices like buying fake reviews.

Here’s a look at revenue vs the average for businesses on different online review sites. As you can see, low ratings on Google and TripAdvisor are most damaging to businesses, while low ratings on Yelp and Facebook have a much less negative impact on revenue.

Overall, high star ratings have an impact on revenue at local businesses, but not nearly to the extent that many business owners might think.

As you can see in the chart above, this may be due to the fact that most businesses (80%) have a star rating between 3 and 4.5 stars, so customers get used to seeing a lot of listings with similar scores. As a result, these customers might start to look at other factors in order to evaluate business listings online.

Go deeper by reading our analysis for businesses in your specific industry.

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Number of reviews

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Total number of reviews has a larger impact on revenue than average star rating

Key findings include

Businesses average 82.5 total reviews across all review sites

Businesses with more than 82 total reviews earn 54% more in annual revenue than average

Businesses with less than 82 total reviews earn 15% less in revenue than average

Businesses with 200 reviews or more earn nearly twice as much in revenue than average

Many business owners fret about their star rating, but our findings suggest that they should focus much more on increasing the number of reviews than almost anything else.

Businesses in our analysis averaged 82.5 reviews across all review sites. We analyzed the revenue of businesses whose review counts fall above and below that threshold.

The results of this analysis reveal a strong positive correlation between review count and sales revenue. Businesses with more than the average number of reviews bring in 82% more in annual revenue than businesses with review counts below the average.

Looking deeper, we see an even more distinct relationship between an increase in number of reviews and an increase in average revenue. Businesses start to trend above average revenue levels when they reach 82 reviews. Businesses with greater than the average review count threshold of 82 show much larger increases in revenue.

Emphasizing just how important a large number of total reviews can be for local businesses, revenue for those with more than 400 reviews is more than double compared to the average business.

Once again, Google is the most important when we look at individual review sites. Businesses with more than the average number of reviews on Google average 51% more in revenue.

There’s certainly a lot of nuance behind these numbers, but it’s clear that small businesses benefit from getting legitimate and honest reviews from as many real customers as possible.

Even if some of those are negative reviews (which isn’t necessarily a bad thing, as we’ll explain later in this report), there’s little question that customers put more value in a higher number of reviews than they do in a 5-star rating.

Go deeper by reading our analysis for businesses in your specific industry.

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Fresh vs stale reviews

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Fresh vs. stale reviews: impact on sales

Key findings include

The average number of “fresh” reviews (posted within the past 90 days) per business is 9

Businesses with more than 9 fresh reviews earn 52% more than average

Businesses with no fresh reviews earn 13% less than average

Businesses with 25 or more fresh reviews earn 108% more than average

The number of reviews a business has on review sites is clearly important, but how important is the “freshness” of those reviews? We looked at the number of reviews each business received within the most recent 90 days to find out.

The average total number of “fresh” reviews per business in our analysis was 9. So we first looked at revenue for businesses that received more or fewer than 9 reviews in the past 90 days, or if they’d received no new reviews at all.

As you can see, the number of “fresh” reviews a business receives is clearly important. Businesses without any new reviews for the past 90 days average 20% less in total revenue than the average business. But even just a handful of fresh reviews wasn’t quite enough, as businesses with less than the average number of fresh reviews saw revenues below average.

Getting more than the average number of new reviews, on the other hand, correlates with a 52% increase in revenue. Our hypothesis is that consumers put a premium on recent reviews and are more likely to spend money at businesses with more fresh customer feedback.

Breaking this down even further, we can see that 1 to 3 fresh reviews (again, “fresh” means posted in the last 90 days) makes little difference compared to zero fresh reviews. Businesses start to show a noticeable bump in revenue at around 7 fresh reviews, and by 25 or more fresh reviews, businesses earn near double our baseline average.

The takeaway is that local businesses benefit more from a constant flow of legitimate reviews than a perfect star rating. And, a large number of recent reviews clearly holds more weight than glowing reviews from a year ago.

Go deeper by reading our analysis for businesses in your specific industry.

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Impact of negative reviews

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Don't be afraid of getting bad reviews

Key findings include

19% of the reviews the average business receives are negative

Businesses whose reviews are 15-20% negative earn 13% more in annual revenue than businesses whose are 5-10% negative

Businesses whose reviews are 0-5% negative earn less than those whose are 90-100% negative

Businesses whose reviews are 35-50% negative still earn close to the same as the average business

It’s clearly important to get a steady stream of fresh reviews, but how important is the mix of positive vs. negative reviews? Let’s find out.

Here’s a look at revenue based on what percentage of businesses’ reviews are negative.

These findings show that while quantity of reviews is important, when it comes to quality it’s all about authentic reviews.

Businesses whose total number of reviews are 15-20% negative average 13% more in annual revenue than businesses whose reviews are only 5-10% negative! In other words, businesses with a higher ratio of bad reviews actually make more money, to a point. The optimal ratio of negative reviews is 10-25%.

When customers browse business listings on review sites, they expect to see a certain amount of bad reviews. In fact, many users skip past all positive reviews to read the first negative review they can find. And a business profile with little to no negative reviews may look untested or even suspiciously guilty of buying fake reviews.

Our takeaway: businesses that focus on getting as many real and authentic reviews as possible reap the rewards.

Go deeper by reading our analysis for businesses in your specific industry.

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Best reviewed industries

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Which industries get the best (and worst) online reviews?

Now that we’ve covered the correlation between reviews and revenue for businesses, let’s look at some interesting insights and observations across industries.

Because our data gave us a deep look at reviews across different industries, we’re able to see which industries get the most consistently favorable reviews, and which don’t.

Religious organizations are the most favorably reviewed industry in our analysis, averaging a positive review rate of 92% per location.

The positive review rate for most industries falls in the 80% range, with pet services at the high end at 87% and professional services at the low end with an average positive review rate of 78%.

Americans are by far the harshest in their reviews of lodging places, though. Listings in that industry average a positive review rate of only 69%.

Go deeper by reading our analysis for businesses in your specific industry.

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Kindest and harshest states for reviews

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Where in the U.S. are consumers kindest (and harshest) to local businesses in their online reviews?

Next we analyzed online reviews at a state-by-state level to see which parts of the country are kindest (and harshest) in their reviews.

rank state positive review rate
1 Maine 85.0%
2 Vermont 84.3%
3 Montana 84.0%
4 North Dakota 83.8%
5 New Hampshire 83.7%
6 South Dakota 83.7%
7 Wyoming 83.4%
8 Alabama 83.4%
9 Wisconsin 83.3%
10 Idaho 83.2%
11 Nebraska 82.9%
12 Iowa 82.4%
13 Kansas 82.4%
14 Missouri 82.3%
15 Ohio 82.2%
16 Louisiana 82.2%
17 Tennessee 82.1%
18 Indiana 82.0%
19 Arkansas 82.0%
20 Michigan 81.9%
21 North Carolina 81.8%
22 South Carolina 81.6%
23 Minnesota 81.6%
24 Massachusetts 81.5%
25 Pennsylvania 81.5%
26 Kentucky 81.4%
27 Oklahoma 81.4%
28 Connecticut 81.4%
29 New Jersey 81.3%
30 Illinois 81.2%
31 Florida 81.2%
32 New Mexico 81.1%
33 Colorado 81.1%
34 Washington 81.1%
35 Georgia 81.0%
36 Mississippi 81.0%
37 Utah 80.9%
38 Rhode Island 80.9%
39 Virginia 80.9%
40 California 80.8%
41 Oregon 80.7%
42 West Virginia 80.6%
43 New York 80.4%
44 Delaware 80.3%
45 Texas 80.3%
46 Hawaii 80.1%
47 Arizona 79.9%
48 Alaska 79.5%
49 Maryland 79.2%
50 Nevada 77.7%

Reviewers are particularly kind in northern New England. Maine and Vermont top the list at #1 and #2 with average positive review ratios of 85% and 84.3%, respectively. New Hampshire came in not far behind at #5 with a positive review ratio of 83.8%.

As we move west, Montana and North Dakota round out the top five at #3 and #4.

The truth is that Americans in every state are generally favorable in their reviews. Even Nevada, which came in at the bottom of the list, still averaged 77.7% favorable reviews. This suggests that people are more likely to post positive reviews than one might expect.

Go deeper by reading our analysis for businesses in your specific industry.

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States best at managing online presence

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Where in the U.S. are local businesses the best at managing their online presence?

Finally, we looked at which states’ businesses were the best at managing their online presence. First we looked at the percentage of businesses in each state that had claimed at least one review site listing.

rank state claimed at least one listing
1 Rhode Island 83.7%
2 Arizona 82.7%
3 Utah 81.7%
4 New Hampshire 80.4%
5 Minnesota 80.0%
6 Colorado 79.7%
7 Wisconsin 79.5%
8 Michigan 79.4%
9 Florida 79.2%
10 Nevada 78.8%
11 New Jersey 78.6%
12 Montana 78.3%
13 Massachusetts 78.2%
14 Iowa 78.1%
15 Virginia 77.8%
16 Maryland 77.8%
17 Connecticut 77.7%
18 New York 77.6%
19 Vermont 77.5%
20 Washington 77.5%
21 Nebraska 77.3%
22 Illinois 76.7%
23 Hawaii 76.3%
24 California 76.3%
25 North Dakota 76.0%
26 Oregon 75.9%
27 Wyoming 75.8%
28 Texas 75.7%
29 Ohio 75.6%
30 Missouri 74.9%
31 North Carolina 74.8%
32 Georgia 74.6%
33 Alaska 74.5%
34 Pennsylvania 74.4%
35 Maine 74.0%
36 Indiana 73.9%
37 Kansas 73.5%
38 Idaho 73.3%
39 New Mexico 73.2%
40 Tennessee 73.1%
41 South Dakota 72.8%
42 Delaware 72.0%
43 South Carolina 72.0%
44 Louisiana 71.2%
45 Oklahoma 70.8%
46 Kentucky 69.8%
47 Alabama 67.4%
48 Arkansas 67.0%
49 West Virginia 66.3%
50 Mississippi 64.6%

83.7% of Rhode Island businesses have claimed at least 1 business listing, which is good for the top spot nationwide. Arizona and Utah are close behind with 82.7% and 81.7%, respectively.

On the other end of the spectrum, over 30% of businesses in Mississippi, West Virginia, Arkansas, and Alabama haven’t claimed their listing on any review sites.

Lastly, we looked at how frequently businesses in each state responded to their reviews.

rank state responded to at least one review
1 Arizona 33.7%
2 Utah 33.5%
3 Colorado 32.6%
4 Nevada 31.2%
5 Florida 30.0%
6 Michigan 27.9%
7 Washington 27.8%
8 Oregon 27.4%
9 New Mexico 27.3%
10 Idaho 26.7%
11 Missouri 26.5%
12 Wisconsin 25.9%
13 Minnesota 25.9%
14 Maryland 25.5%
15 Texas 25.5%
16 California 25.4%
17 Virginia 25.3%
18 North Carolina 25.1%
19 Vermont 24.8%
20 Hawaii 24.6%
21 Tennessee 24.5%
22 Illinois 24.5%
23 New Jersey 24.4%
24 Alaska 23.9%
25 New York 23.9%
26 Ohio 23.6%
27 Montana 23.5%
28 Rhode Island 23.5%
29 Indiana 23.4%
30 Georgia 23.4%
31 South Carolina 23.3%
32 Connecticut 23.3%
33 Kansas 22.9%
34 Wyoming 22.8%
35 New Hampshire 22.7%
36 North Dakota 22.6%
37 Nebraska 22.5%
38 Pennsylvania 21.8%
39 Massachusetts 21.6%
40 Iowa 21.6%
41 Maine 21.4%
42 Delaware 20.9%
43 Kentucky 18.9%
44 Oklahoma 18.2%
45 South Dakota 18.2%
46 Arkansas 18.0%
47 Alabama 17.3%
48 West Virginia 17.0%
49 Louisiana 16.6%
50 Mississippi 14.7%

The most engaged businesses were in Arizona in Utah where over 33% of businesses have responded to at least one review. The neighboring states of Colorado and Nevada fall close behind with over 31% of businesses responding to at least one review as well.

Mississippi businesses also come in at the bottom of this list, as only 14.7% of businesses in the Magnolia State have engaged their customers online by responding to at least one review.

Go deeper by reading our analysis for businesses in your specific industry.

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Conclusion

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Conclusion

Online reviews are a proxy for word of mouth in the digital age. Local businesses that recognize and respond to how consumers use the internet to find, evaluate, and choose where to spend perform better financially than those that don’t.

Specifically, local businesses experience the best revenue performance when they:

  • Claim all their free business listings on relevant review sites
  • Are highly responsive to customer feedback posted on review sites
  • Get and maintain a star rating between 3.5 and 4.5 on key review sites
  • Receive a steady flow of authentic reviews from real customers
  • Have an authentic review profile, comprised of about 15-30% negative reviews

Go deeper by reading our analysis for businesses in your specific industry.

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Methodology

To conduct this analysis, Womply’s data science team analyzed transaction trends and online reputation data for more than 200,000 local businesses in dozens of consumer-facing categories. Revenue data reflects all of the 2018 calendar year, and reputation data was calculated as of December 31, 2018. Care was taken to exclude businesses that do not qualify as “small.” This was done by calculating the interquartile range for revenue during the period of analysis and excluding outliers.