I’ve heard of business owners who owe the world to Yelp, and I’ve heard of business owners that wish Yelp to be damned. One thing is for sure, consumer review sites have become the first stop for recommendations on everything from hair salons to restaurants. With well over 20 million reviews since its inception in 2005, business owners are being forced to up their game and go the extra mile for their customers – yes, great for the consumer. For the business owner, the feeling can be ugly as online review sites are controlling their reputation and as a result, their bottom line.
Assistant professor Michael Luca of Harvard Business School set out in 2011 to study what effect Yelp reviews had on the bottom line of a business. Professor Luca considered Yelp reviews and revenues of every restaurant in Seattle, WA that operated between the years 2003 and 2009. Using a formula to signify any correlation between the two factors resulted buy reviews on yelp : “that a one-star increase on Yelp leads to a 5 to 9 percent increase in revenue.” This effect was on local, small businesses, as national chains seem un-affected by online consumer reviews. Because restaurants like McDonald’s and Applebee’s can spend a fortune on advertising, consumers already expect a certain level of quality from these brands.
The business owner’s quibble is that potential customers use online review sites as a reliable measure of the quality of their product or service. There have been accusations about rigging of the system by competitors stacking their reviews from friends, family or by entering some popularity contest. Online advertising help can seem necessary for small business owners trying to wade through this confusion. On top of that, Yelp was actually hit with a proposed class-action lawsuit for degrading ratings if the business didn’t buy advertising. The lawsuit was dismissed under the Communications Decency Act of 1996 that states a website cannot be sued for publishing user-generated content. However, the beef isn’t that user-reviews are displayed, but how the deployment of Yelp’s automatic filtering system operates to prevent distorted ratings from fake reviews – this point was central to the lawsuit.
What has become reality is business owner’s must present their customer with the very best. Of course it is impossible to please everyone that walks in your door so try to displace negative reviews and encourage loyal customers to leave positive reviews on customer review sites like Yelp. As a business owner, preventing negative reviews that discourage potential customers from making their own decision about the quality of your service is paramount. Not only is the reputation of your business at stake, but its longevity could be short-lived if the right foot isn’t put forward.