Online Reviews Translate into Revenue

Posted: January 26, 2022
Category: Spotlight on Business

One of the highest compliments a consumer can give any retailer is to tell someone the company can be trusted and operate with integrity. Perhaps the accolades were prompted by receiving exceptional service, selling quality products at fair prices, or exceeding the person’s expectations at every step of the buying journey. Whatever the reasons, these comments are worth their weight in gold.

The Better Business Bureau surveyed consumers to determine the importance of honesty and integrity when conducting business within the home improvement industry. The survey points out understanding customer expectations will help retailers figure out what matters most to customers. Business owners can then use the answers to create a positive customer experience to generate repeat business and a steady supply of referrals.

The Power of Online Reviews
One of the best sources to get insight into customer expectations is online reviews. But, managing online reviews and responding to negative ones can be difficult for small companies. However, the feedback from customer reviews is a valuable and powerful way to improve operations and profitability. The BBB spoke to Dr. Evans Baiya, a growth strategist and coach, who says, “We have to think about small targeted segments. You need to have a good understanding of the “what” and “how” of your customer. When you talk about new value—what is it that you are going to take to your customers this year that they instantly will find value in?” There’s no doubt customers read and respond to online reviews.

  • Almost 95 percent of customers read reviews before buying a product. (Spiegel)
  • Seventy-two percent of customers won’t decide before they read reviews.
  • (Testimonial Engine)
  • Ninety-three percent of customers use reviews to determine the quality of local businesses. (BrightLocal)

How Reviews Translate into Revenue

Potential customers constantly seek information about local businesses on Google, Yelp, and Facebook. While many companies fear those negative reviews they may find posted by disgruntled customers —the situation is not as dire as it seems. Womply, a local commerce platform, surveyed 200,000 U.S. small businesses to understand the correlation between reviews and revenue better. Their research indicates that there are simple things retailers can do to manage and improve reviews and use them to generate income.

  • Claiming free listings on at least four review sites can earn a business 58 percent more revenue
  • Replying to about 25 percent of reviews can average 35 percent more revenue
  • Five-star rated businesses have below-average sales. The best rating is 3.5 to 4.5 stars


Why Responding to Reviews Matters
In the eyes of consumers, businesses that respond to positive or negative reviews are seen as being more credible since they actively engage with customers. Surprisingly, only 25 percent of companies respond to their online reviews. That means the vast majority fail to do so. However, when customers see that businesses are active on review sites, they are more prone to spend money with the company.

  • Responding to just one review can earn businesses four percent more than average
  • Businesses that respond to at least one review react to an average of 26 reviews

How Star Ratings Impact Revenue
While there are several factors that business owners directly control with online reviews, star ratings fall into the hands of consumers. Low ratings on Google are more damaging to a businesses’ revenue than a low rating on Yelp or Facebook. Womply survey results indicate that high star rating matter, but not as much as local businesses think they do. Five-star rated establishments average much less revenue than the typical business because they have fewer reviews and are less established. They could also be compromised by buying fake reviews.

  • 5 stars to 4.5 stars is the sweet spot for a local business
  • 4 to 4.5 stars rating earns the highest average revenue

Focus on Increasing the Number of Reviews
Google is the most critical review site for small businesses. The average number of reviews across all sites is 82.5. The survey shows a direct correlation between the number of reviews customers post and the company’s sales revenue. Businesses that exceed the average number of reviews generate 82 percent more annual revenue than those with less than the average number of reviews.

  • 82 reviews trends above-average levels
  • Thresholds above 82 reviews generate much higher levels of revenue
  • Businesses with over 400 reviews more than double the revenue of an average business

Small businesses should do what is necessary to get as many authentic and honest reviews from customers as possible. Although some may be negative, customers value those as well. When organizations respond, potential purchasers view this as a desire to resolve the problem and ensure that the customer is satisfied with the service or product.