Positive Customer Reviews Lead to Increases in Revenue [New Research]

by Magdalena Georgieva

Date

October 11, 2011 at 3:00 PM

two thumbs upWe’ve always known that negative customer reviews can bulldoze a business. But what can positive consumer reviews do? 

Michael Luca, a Harvard Business School student, discovered that consumer reviews have a positive effect on revenues in the restaurant industry. In his research, “Reviews, Reputation, and Revenue: The Case of Yelp.com,” Luca revealed that “a one-star increase in Yelp rating leads to a 5-9 percent increase in revenue.” Interestingly enough, this dynamic seems to affect independent restaurants and not chain restaurants. 

A Great Opportunity for Small Businesses 

“The data show that people respond more to reviews when they don’t know much about a company. In industries where this is the case, the response should be larger,” said Luca in an email interview with HubSpot. This is great news for small businesses, for they can level the playing field and take advantage of customer reviews to grow their reputation

Make Information Visible

“Consumers also react more strongly to information that is more visible, suggesting that the way information is presented matters,” wrote Luca in his paper. Online shoppers often enter a research mode before making a purchasing decision. Customer reviews play an important role in these research habits because they provide more information around a specific product or service. 

As a marketer or business owner, you should brainstorm ideas to incorporate customer reviews throughout your web pages, on places where they could make a difference. For instance, you could add praises on your homepage, include case studies next to your product pages, and place testimonials on landing pages for your whitepapers or webinars. Experiment with different placement of customer reviews to see what affects your conversion rates most. 

Is Social Media the Next Reputation Mechanism? 

Customer reviews on sites such as Yelp and Zagat are one form of measuring a company's reputation and quality of service. Social media, one might argue, has become another reputation mechanism. With their inclusion in search engine results, social networks have increased their impact on our pre-shopping research habits. So how would a Yelp 'star' measure up to a Facebook or Twitter 'connection'?

Are you leveraging positive customer reviews in your inbound marketing efforts? In what other ways are you using them?

Image Credit: Anthony Kelly

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