How do online reviews impact revenue for local services?

It's clearly important for local service businesses to claim their listings on as many review sites as possible, but they should also focus on engaging their customers via reviews.

77% of local service businesses in our study hadn't responded to even a single review, which goes to show just how few businesses are taking advantage of this beneficial practice.

Let's see how responding to reviews impacts revenue for local service businesses.

As you can see above, local service businesses who don't respond to reviews earn 3% less than average. Local service businesses who responded on a more regular basis, up to 25% of the time, earn 8% more than average.

As the reply rate climbs to above 25%, revenue increases to 15% more than average, before dipping slightly when review reply rate climbs over 50%. This is likely because local service businesses with larger response rates are newer businesses with fewer total reviews.

This becomes clear when you look at revenue by total number of review responses:

Most local services don't respond to reviews at all (77%), but those who do reply to an average of 14 reviews. And, as you can see, local service businesses only stand to benefit by engaging with their customers online.

Those businesses who respond to even just one review earn 3% more than average, but you can see the averages climb quickly the more frequently a local service business responds to reviews. By the time you get to local service businesses who reply to 25 reviews or more, they are earning an impressive $99,000 more each year than average.

It's clear that local service businesses can easily stand out by engaging with customers by posting thoughtful responses to online reviews. Both with genuine thank yous to positive reviews and sincere replies to negative reviews alike.

Local service business owners often stress about their star rating, but as we explain in the section above, chasing a perfect star rating isn't necessarily the best way to increase revenue.

On the other hand, our findings suggest that local service business owners would be well-advised to focus on increasing the number of their reviews.

Local service businesses in our analysis average a combined 34 reviews per business across all review sites. This is far lower than the number of reviews for the average business across all industries, suggesting that even just a handful of reviews might help a local service business stand out online.

We analyzed revenue at local service businesses whose review counts fall above and below that average 34-review threshold.

As suspected, total number of reviews appears to impact revenue at local service businesses. Those who have more than the average 34 reviews earn 14% more in annual revenue than the average local service business.

Those with fewer than the average total number of reviews, meanwhile, earn 4% less.

Looking closer at the numbers helps further clarify the relationship between the number of reviews and average revenue for local service businesses.

Local services with 5 reviews or fewer earn 9% less than average, and those with up to 15 reviews still earn less than the average local service business.

Once local service businesses get into the 15 to 34-review range is when revenue starts to climb above the average.

Then, as you can see, the more reviews a local service business gets, the more money they earn.

Average revenue jumps all the way to a 14% increase when you get to the 61 to 125 review range, and climbs even higher from there. To emphasize how important a lot of reviews can be for local service businesses, those with more than 125 reviews earn $77,000 more than average.

This strongly suggests that when a customer searches online for local services like lawn care, home repair, dry cleaners, and the like, a large number of reviews may outweigh a high star rating.

Once again Google is clearly the most important review site for local services, as those with an above-average review count on the site earn 15% more than average.

Yelp and Facebook appear to be far less utilized by local services. But a local service business owner would be smart to get as many reviews on as many sites as possible.

Some local service business owners may worry that pushing for reviews may expose them to getting more bad reviews, but as we'll explain in a section below, bad reviews can actually be a good thing.

It's clearly important to get a steady stream of fresh reviews, but how important is the ratio of positive to negative reviews?

On average, 19% of the reviews posted about a given local service business were negative. This puts local service businesses right at the average negative review rate across all industries.

Does this mean revenue at local service businesses is more or less impacted by a large number of negative reviews? Let's find out.

As the charts above reveal, local service businesses aren't severely impacted by either a large or a small amount of negative reviews.

As with other industries, local service businesses with a healthy mix of good and bad reviews earn the most on average. The ideal spot is a negative review rate between 5 and 20%, with local service businesses whose reviews are 5 to 15% negative earning 10% more than average.

Local service businesses whose reviews were only 0 to 5% negative earn slightly less than average. This suggests that while customers browse local service business listings on review sites, they likely expect to see some negative reviews. In fact, many customers actively seek out negative reviews first, and a business with little or no negative reviews might appear untested or even a little "too good to be true."

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

Next we looked at which states' local service businesses were the best at managing their online presence. We started by analyzing the percentage of local service businesses in each state that had claimed at least one review site listing.

92% of Vermont's local service businesses in our analysis have claimed at least 1 review site listing, which was far and away the highest in the country. Utah and Hawaii were next on the list with 86% of their local service businesses having claimed at least 1 review site listing.

At the bottom of the list, only 60% of the local service businesses in our analysis from West Virginia have claimed a single listing.

Finally, we looked at how frequently local service businesses in each state responded to reviews.

Local service businesses in Nevada and Hawaii were the most engaged, with 38% of the local services from each state having responding to at least one review. Utah and Arizona were the other two states with over 30% of local service businesses responding to at least one review.

With only 11% of the local service businesses in our study responding to at least one review, West Virginia was the least engaged state.