Transaction Trends Guest Post: The Surprising Way to Increase Transaction Volume for Every Merchant in Your Portfolio
By Cory Capoccia, President of Womply
Online review sites like Yelp, Google My Business, and TripAdvisor have been a big deal for small businesses for over 10 years. Merchants often stress about maintaining a good “star rating” and panic when they get a bad review.
It turns out online reputation management is about more than vanity. A merchant’s online review profile correlates to big shifts in revenue, which in turn leads to increased transaction volume. In fact, the best way payment processors and agents can help their merchants increase transaction volume (and in turn, their residuals!) is to educate them on why review management matters.
Womply wanted to understand how online reviews impact merchant revenue, so our data science team analyzed transactions and reviews at nearly 210,000 merchants in all 50 states and dozens of industries. What we learned is this: online reviews have a very strong correlation to revenue performance. By extension, these results have big ripple effects on payment processors and merchant-level sales (MLS) agents.
Let’s go over a few key points—and some surprises.
- Replying to reviews correlates to an increase in transactions
According to a recent article by Chatmeter.com, Google has confirmed that “responding to reviews improves your local SEO.” And Harvard Business Review’s study showed what when businesses start replying to reviews, they increase both the total number of reviews received and their overall rating.
Womply’s study goes one step further, showing that businesses that merely respond to customer reviews make more money. According to our analysis, businesses that reply to at least 25% of their reviews process 35% more revenue than the average business.
This means processors and agents can profit from educating merchants about the correlation between engaging in online reputation management techniques like responding to reviews and an increase in transaction volume.
- The “freshness” of a review matters more than whether it’s positive or negative
Womply’s study suggests that agents should encourage merchants to engage in the free small business marketing practice of getting more reviews. In fact, few marketing efforts are more valuable to small merchants than attracting a regular supply of authentic, recent reviews, regardless of whether those reviews are “bad” or “good.”
Our data shows that businesses earning more than nine “fresh” reviews (a fresh review is one posted within the last 90 days) process 52% more revenue than average. And businesses with 25 or more recent reviews process 108% more than average. If you want your merchants to transact more, show them how to get some new customer reviews.
- A greater number of total reviews correlates with more transactions and revenue
The average merchant in our study had 83 online reviews. Businesses that get more reviews than that amount process 82% more annual revenue than businesses with lower-than-average review counts. Furthermore, shops with over 200 reviews process twice as much revenue compared to the average.
- Merchants who claim more of their free listings make more money
Imagine you could spend an hour with a merchant teaching them a trick that had the potential to increase their transaction volume by six figures. That trick is claiming free listings on popular review sites.
Agents who encourage merchants to claim their free business listings on multiple online review sites (e.g. Google, Yelp, Facebook, TripAdvisor, etc.) can see huge increases in processing volume.
For example, merchants that have claimed their listings on at least three of the major review sites process $107,000 more in annual transactions than the average business in the study, and they process $179,000 more than businesses that haven’t claimed any listings—a 60% revenue swing.
- Negative reviews aren’t as harmful as we all thought
What if you help your merchants claim their listings and they get a few bad reviews as a result? Not a problem.
Womply’s study reveals that negative reviews don’t affect revenue as much as one might expect. Surprisingly, the data shows that even merchants averaging 35-50% negative reviews earn nearly the same as the average business. So, perhaps small business owners shouldn’t worry too much about trying to remove negative reviews.
- 1-star merchants earn more than 5-star ones
Another surprising observation is that working to maintain a perfect 5-star rating may not be the most lucrative approach to improving merchants’ online presence. Womply’s data shows that 5-star businesses actually earn less average revenue than 1-star businesses.
There are likely several reasons for this, one probably being that when customers search a business on online review sites, they may be expecting to see a fair amount of negative reviews. A business with little or no bad reviews might appear unproven or “too good to be true.”
Womply’s data shows the sweet spot for revenue to be a rating of between 3.5 and 4.5 stars.
- A bad Google star rating is more damaging than a bad Yelp or Facebook rating
Many merchants like to protest about the “Yelp factor,” but Womply’s report shows a poor business reputation on Google to be more potentially damaging than bad ratings on other major review sites.
Businesses in the study with an average Google star rating of 1 to 1.5 brought in 33% less revenue per year than the average business, while those with the same star rating on Facebook or Yelp earned 19% and 9% less than the average business.
- American consumers are kinder online than expected
Despite the typical portrayal of online customer review sites as an apocalyptic free-for-all of negativity, Womply’s data shows that Americans are actually very positive in online reviews overall.
Nationally, 81% of online reviews for a typical business are positive, with some states and industries as high as 92% positive. (Chiropractors and pet services are among the highest-rated categories, for example.)
For more surprising insights and vertical-specific data broken down by state, you can now access Womply’s full Impact of Online Reviews on Small Business Revenue report on Womply.com.
About the study
To compile this study, Womply’s data science team conducted an in-depth analysis of transaction and online review data for nearly 210,000 U.S. small businesses in every state and across dozens of industries, including restaurants, retailers, lodging places, salons, auto shops, and medical offices.
About the author
Cory Capoccia is Co-Founder and President of Womply, and an ETA Forty Under 40 Honoree for 2019.
Interested in becoming a partner?
Drop us a line at firstname.lastname@example.org