The Value of An Online Review

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The Value of an Online Review

Online reviews are critically important to the success of an individual restaurant. If you learn how to leverage their power and how to prevent their misuse, these simple reviews can make a dramatic impact your business. The best way to illustrate their impact is with a few numbers.

A 1-Star Difference in Yelp Can Mean a 5-9% Difference in Revenue

One of the first studies to look at the impact of Yelp ratings came from Michael Luca at the Harvard Business School. It is the most referenced study online even though the data was collected from 2003-2009. The study was based on data reported to the government by Seattle restaurants during that time period. It was exceptional look at the correlation between online reviews and revenue.

Since then, Yelp has had ups and down. Facebook’s review platform has grown dramatically. Google has built a critical review platform. So while time has progressed the power of reviews has only gotten stronger.

In his study, Luca found that a 1-star difference on Yelp meant a 5-9% difference in overall annual revenue at independent restaurants. This finding is important because it establishes an important link between reviews and revenue. So whether that difference is worth 1%, 5% or 10%, there is an impact that restaurants cannot ignore.

Each Half-Star on Yelp Nets Restaurants 19% More Reservations

Shortly after the release of this study, a study was published in the Economical Journal about the relationship between Yelp star ratings and the number of reservations. This study concluded that as little as a half-star difference in the overall rating on a restaurant’s Yelp page can make a difference in the number of reservations they receive.  How much of a difference? A half star difference can sway the number reservations as much as 19%. Would you like an additional 19% more reservations on your books? Maybe it’s time to create a review strategy.

72% of Consumers Say Positive Reviews Make Them Trust a Business More

We now know reviews impact both revenue and reservations. Why? It’s because reviews make consumers trust a business. Seven out of ten consumers believe that businesses with positive reviews are more trustworthy than business with negative reviews. So, your online reputation is important to consumers.

These are some pretty significant numbers. Most restaurants don’t have a review strategy intact. Imagine you have 10 reviews yielding you a 4.5-star (impressive) rating. Your gross revenue for the year is roughly $500k. A server messes up an order and the customer is extremely upset. The customer goes home and leaves a 1-star for you. Then has four friends do the same. Your 4.5-star rating is now 3.5-star rating. This study estimates the impact could cost you somewhere between $25k and $45k in lost revenue. Now imagine that customer collects enough friends to leave ten reviews. That would drop your rating to about 2.5 stars. That impact could reach somewhere between $50k and $90k. Do you see the value of online reviews yet?