We’re roughly 10 years into the golden era of online review sites, and small business owners often stress about their “star rating” and spend lots of time fretting about a bad review online. But how much impact do online reviews actually have on a local business?
To find out, Womply conducted a landmark study that uncovers the financial impact of online reviews on small business revenue. Womply’s data science team conducted an in-depth analysis of transactions and online review data for more than 209,000 U.S. small businesses in every state and across dozens of industries.
The results confirm a strong correlation between online reviews and revenue, but it’s not as straightforward as you might think, and there are some surprises.
A 5-star rating isn’t all it’s cracked up to be
For example, a 5-star rating is actually NOT associated with the highest revenue for small businesses. In fact, 5-star businesses actually earn less on average than 1-star businesses.
There may be several reasons for this, but the most likely is that when customers browse reviews online, they expect to see a certain amount of bad reviews. A business with little to no negative reviews may look unproven or even suspiciously guilty of “black-hat” practices like buying fake reviews.
The star-rating sweet spot for revenue is between 3.5 and 4.5 stars, according to Womply’s study. But even businesses that average 35-50% negative reviews earn nearly the same as the average business.
So if you’re a business owner, don’t overly stress about the occasional bad review.
Replying to reviews correlates to an increase in revenue, and recent reviews are more valuable
However, you should start replying to your reviews, if you haven’t already. Businesses that reply to at least 25% of their reviews average 35% more revenue than the average business in the study.
Small business owners will also benefit from efforts to secure regular, recent reviews — regardless of whether they are positive or negative. The study shows that businesses with more than nine “fresh” reviews (reviews posted in the past 90 days) earned 52% more revenue than average. Additionally, businesses with 25 or more fresh reviews earned 108% more than average.
This supports the study’s observation that the number of online reviews matters more overall than the overall quality of those reviews. Businesses with more than the average number of reviews (83) earned 82% more annual revenue than businesses with below-average review counts. In addition, businesses with over 200 reviews earned twice as much revenue compared to the average business.
Negative Google reviews are more impactful than those on Yelp or Facebook.
Another surprise for small businesses struggling with the “Yelp factor” is that low ratings on Google are more potentially damaging to small businesses than poor ratings on any other major online review site.
In the study, businesses with an average Google star rating of 1 to 1.5 averaged 33% less revenue per year than the average business, while businesses with the same star rating on Yelp or Facebook averaged 19% and 9% less than average.
More online review profiles claimed correlates with more revenue
An oft-quoted statistic is that only 44% of Google business profiles have been claimed by business owners. Womply’s study shows how important it is to claim these free listings.
Businesses that claimed their free listings on at least three of the major review sites (e.g. Google, Yelp, Facebook, and TripAdvisor) averaged $107,000 more annual revenue than a typical business, and $179,000 more than businesses that don’t claim their listings on any review sites, representing a 60% swing in revenue.
Customers are kinder than you might think
Another surprise is that Americans are actually more positive in online reviews that you might expect. Often, small business owners get the impression that everyone who leaves a review is out to get them. The data shows that, nationally, 81% of online reviews for a typical business are positive.
Womply’s Impact of Online Reviews on Small Business Revenue study is now available on Womply.com. Access to the full report.
Ready to take control of your online reputation? You can experience Womply’s CRM, online reputation, and business management software free for the first 30 days! Visit https://www.womply.com/authnet/ to learn more! Full terms and conditions can be accessed at www.womply.com/terms.
About the study
To compile this study, Womply’s data science team conducted an in-depth analysis of transaction and online review data for more than 200,000 U.S. small businesses in every state and across dozens of industries, including restaurants, retailers, lodging places, salons, auto shops, and medical offices.
Womply’s mission is to help small businesses thrive in a digital world. Our AI-powered data platform enhances our comprehensive small business management software, which includes the world’s only pre-populated CRM plus small business intelligence, reputation management, marketing automation, and integrated payments. Every day, we serve more than 150,000 small businesses across 400+ verticals, in every corner of America . To learn more, visit www.womply.com or email firstname.lastname@example.org.