A special report from Womply Research

How do online reviews impact revenue for local services?

If you've read our full report, you've already got a sense for just how important review sites are for local businesses. But what about local services like dry cleaning businesses, HVAC services, local storage facilities, landscaping and gardener services, contractors, and the like?

Are reviews more (or less) influential on revenue for local service businesses than other types of businesses?

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

To understand the correlation between reviews and revenue for local service businesses, Womply's data science team conducted an in-depth analysis of transactions and online review data for more than 18,000 local service businesses in every state.

Key findings include

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Local service businesses that claim their free listings on 3 or more review sites earn 11% more revenue

Local service businesses that don't reply to any reviews earn 3% less revenue

5-star rated local service businesses serve earn below-average revenue—the sweet spot is 4.0 to 4.9 stars

Local service businesses with more than the average number of reviews bring in 14% more in annual revenue

Local services whose total number of reviews are 10 to 15% negative earn 12% more annual revenue than those whose reviews are 0 to 10% negative

Go deeper by reading our analysis for businesses in a different industry.

Claiming free listings

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Local services that claim their listing on multiple review sites make more money

Key findings include

Local service businesses that claim their free listings on 3 review sites or more earn 11% more revenue

Local service businesses that don't claim their listing on any review sites earn 22% less revenue

23% of local services haven't claimed a listing on any review sites

Google is the most important review site for local service businesses to claim their listing

The average annual revenue across all local service businesses in our study was $330,000. As with all business in our study, we wanted to start our analysis on the importance of review sites on revenue at local service businesses by first focusing on simple acts like claiming your free profile on prominent review sites.

As you can see above, claiming listings is extremely important for local services. Those who don't claim their profile on one of the major listing sites earn 22% less revenue than the average local service business in our study.

Local service businesses who claim even just one review site profile, meanwhile, earn 7% more than average, and those who claim three or more earn 11% more.

When local service businesses claim their free listing on review sites, they can reply to reviews, add helpful information about their business, and plenty of other things that clearly make an impact on potential patrons.

To see how much of an impact this might make on revenue for local service businesses, look at the results this way—those who follow the simple practice of claiming their free listing on three or more of the major review sites (Google, Yelp, Facebook, TripAdvisor, etc.) earn an astounding $108,000 more each year than those that don't claim any.

More customers use Google to find local service businesses of all kinds, which is likely why local service businesses who don't claim their Google listing earn 30% less than those who do.

No matter which way you look at it, though, local service businesses should be claiming their business listing on every relevant review site.

Go deeper by reading our analysis for businesses in a different industry.

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Replying to reviews

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People spend more money at local service businesses that reply to reviews

Key findings include

77% of local service businesses don't respond to any reviews

Local service businesses that respond to more than 25% of their reviews earn 15% more than average

Local service businesses that don't reply to any reviews earn 3% less in annual revenue

Local service businesses that respond to even just one review earn 3% more than average

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.

Go deeper by reading our analysis for businesses in a different industry.

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Star ratings

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How much does star rating impact revenue for local service businesses?

Key findings include

Local service businesses with a rating between 3.5 and 4.9 stars earn the most revenue

5-star local service businesses earn 8% less than the average

Local service businesses with a 4.5 to 4.9-star rating earn 7% more than average

Only 7% of local service businesses have lower than a 3-star rating

Now that we've discussed things that a local service business owner can control when it comes to review sites, let's get examine the effects of the reviews themselves. We'll begin with what many local service 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 revenue at local service businesses.

As you can see, local services appear to receive only moderate benefits from high star ratings.

Local services with a star rating between 3.5 and 4.9 earn the most on average, but even the highest group (4 to 4.9 stars) only earn 7% more than the average business.

Local service businesses with a star rating of 2.9 or lower earn the least, 15% less than average. Suggesting local services are slightly more impacted by a low rating than other industries. It's important to note, however, that only 7% of the local service businesses in our analysis fall into this category.

As with most other industries, local services with a perfect 5-star rating earn less than average, although the drop is far less severe than that experienced by 5-star businesses in other industries.

93% of local services have a star rating between 3.0 and 5 stars, which suggests that customers browsing online review sites consider many factors in order to choose between several similarly-rated local service businesses.

Go deeper by reading our analysis for businesses in a different industry.

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Number of reviews

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How much does the number of reviews matter for local service businesses?

Key findings include

Local service businesses with more than 34 total reviews earn 14% more in annual revenue than average

Local service businesses with fewer than 34 total reviews earn 4% less in revenue than average

Local services with 125 reviews or more earn 23% more than the average

An above-average number of reviews on Google has the largest positive impact on revenue of all review sites

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.

Go deeper by reading our analysis for businesses in a different industry.

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Fresh vs stale reviews

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Fresh reviews are crucial for local service businesses

Key findings include

Local service businesses average 4 fresh reviews (posted in the last 90 days)

Locations with more than 4 fresh reviews earn 19% more than average

Local service businesses with no fresh reviews earn 10% less than average

Local service businesses with 20 or more fresh reviews earn 33% more than average

The number of reviews a local service business has on review sites is clearly important, but how important is the "freshness" of those reviews?

The average total number of fresh reviews, (defined as reviews posted within the past 90 days) per local service business in our analysis was 4. This is far lower than the number of fresh reviews across all industries, which continues the trend of local services bringing in less reviews than many other industries.

To see how much fresh reviews affect a local service's revenue, we analyzed shops that had received fewer or greater than 4 reviews in the past 90 days.

As you can see above, getting new reviews is perhaps even more important for local service businesses than amassing a lot of total reviews.

Local service businesses who don't bring in any fresh reviews in the past 90 days earn 10% less revenue than average. Getting more than the average number of new reviews, on the other hand, correlates with a 19% increase in revenue.

A closer look emphasizes the importance of fresh reviews for local services. Local service businesses that get just 3 or 4 fresh reviews earn 8% more than average, and those with 5 to 10 earn 14% more.

From there, you can see how quickly average annual revenue grows as local service businesses gain more fresh reviews. By the time you get to local service businesses who have 20 or more fresh reviews, annual revenue is 33% more than average.

Put another way, getting just 6 to 7 new reviews per month correlates with an extra $109,000 each year for local service businesses.

The takeaway is that local service businesses should focus on getting a steady stream of real, recent reviews rather than trying to chase a perfect star rating. And, even a handful of fresh reviews clearly holds more weight than a lot of glowing reviews from a year or so ago.

Go deeper by reading our analysis for businesses in a different industry.

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Impact of negative reviews

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Customers expect to see negative reviews for local service businesses

Key findings include

19% of the average local service businesses's reviews are negative

Local service businesses whose reviews are 5 to 15% negative earn 10% more than average

Local service businesses whose reviews are 0 to 5% negative earn 2% less than average

Local service businesses whose reviews are 20 to 25% negative still earn more than average

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.

Go deeper by reading our analysis for businesses in a different 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 service businesses in 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 of local services.

rank state positive review rate
FL TX NM AZ AK CA NV UT CO OR WA ID HI OK MT WY ND SD NE KS MN IA MO AR LA MS AL GA SC IL WI MI IN OH TN KY NC WV VA PA NY ME VT NH RI CT NJ DE MD MA DC

Local services in Montana and Kansas were the best-reviewed in the country, with local service businesses in each state averaging a positive review rate of 87%.

Local service businesses across the country are generally well-reviewed, however. At 70%, only Hawaii's average positive review rate was under 75%.

Go deeper by reading our analysis for businesses in a different industry.

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States best at managing online presence

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

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.

rank state claimed at least one listing
FL TX NM AZ AK CA NV UT CO OR WA ID HI OK MT WY ND SD NE KS MN IA MO AR LA MS AL GA SC IL WI MI IN OH TN KY NC WV VA PA NY ME VT NH RI CT NJ DE MD MA DC

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.

rank state responded to at least one review
FL TX NM AZ AK CA NV UT CO OR WA ID HI OK MT WY ND SD NE KS MN IA MO AR LA MS AL GA SC IL WI MI IN OH TN KY NC WV VA PA NY ME VT NH RI CT NJ DE MD MA DC

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.

Go deeper by reading our analysis for businesses in a different industry.

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Conclusion

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Conclusion

In the digital age, online reviews are the new word of mouth. Local services that engage customers online perform better financially than those that don't.

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

  • Claim all their free business listings on relevant review sites
  • Are actively responsive to customer feedback posted on review sites
  • Get and maintain a star rating between 3.5 and 4.9 on key review sites
  • Receive a steady flow of authentic reviews from real customers
  • Have an authentic review profile, comprised of about 5 to 20% negative reviews

Go deeper by reading our analysis for businesses in a different industry.

Read More

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