Just how important are customer reviews to your business, anyway?
In his study entitled “Reviews, Reputation, and Revenue: The Case of Yelp.com,” Harvard Business School assistant professor Michael Luca writes that each rating “star” on a Yelp review has a 5 to 9 percent effect on that company’s revenue.
Similarly, in a paper published by Chris Anderson, the director of the Center for Hospitality Research at Cornell University, a hotel can increase its rate by 11.2 percent and still maintain the same occupancy and market share if it increases its online review scores by one point on a five-point scale.
To put Anderson’s findings into perspective, if your 250-room hotel charges $150 per night, you could be pulling in $41,750 in one night as opposed to $37,500 (assuming 100 percent occupancy) if you went from a 4-star property to a 5-star property. Even if that rate didn’t fluctuate throughout the year, that’s the difference between $13,687,500 and $15,238,750 over the course of a year—or an increase of $1.5 million.
So, yes. Reviews are very important.
At a time when customer reviews and ratings are one of the top influencers for making a purchase decision, more brands than ever before are prioritizing customer service in order to garner only the best reviews. From TripAdvisor and Yelp to Google My Business and Facebook, customers are flocking to review sites and social platforms in droves—to both provide “the good, the bad and the ugly” about their own experiences with a brand or read about others’ experiences so that they can decide which company deserves their business.
Between TripAdvisor (350+ million reviews) and Yelp (102+ million reviews) alone, that’s nearly half a billion customer experiences that are being consulted, evaluated, measured and compared each day by hundreds of millions of consumers.
More than ever before, companies are recognizing that those customers’ voices can be heard loud and far.
For businesses that don’t prioritize great customer experiences, there are 10 other companies like yours that do. In a recent study by customer service platform Zendesk, 82 percent of respondents said they stopped doing business with a company due to poor customer service, and 40 percent chose a company’s competitor because of that competitor’s reputation for great customer service.
Can you afford to throw that away?