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Profitable negative reviews? Womply survey proves surprising correlation

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review-correlation

What if we told you that having more negative reviews would lead to more annual revenue? Or that five-star-rated businesses have below-average sales? 

Surprising, no? Maybe even a bit shocking.

How might that change the way you build your creative strategy when it comes to online reviews? 

The reality is that businesses don’t yet have a clear understanding of how online reviews impact revenue creation, stagnation, or loss. The online review ecosystem can feel overwhelming, leading businesses to over simplify the correlation between reviews and bottom line impacts, or even worse, to take no action at all.  

This tendency to oversimplify the relationship between reviews and revenue is really a story about Joe and Sarah.

Joe loves your brand. He loves the products and services your business provides. And he takes to Yelp and gives your business a glowing review. 

Sarah is mad. Why? It really doesn’t matter. She is not happy and skewers your business and employees with the type of Facebook post that businesses have nightmares about. 

Many business owners might think Sarah’s review and reviews like them would hurt revenue, while a slew of Joe reviews would send revenue soaring to new heights. The gut reactions these reviews generate are direct and clear, but the impact a fantastic, mediocre, or horrific online review has on your bottom line is murky, at best. 

Now, remember, businesses with more negative reviews generate more revenue according to Womply, a San Francisco-based software company that recently analyzed the transactions and online review data of 200,000 U.S. small businesses.

Businesses whose total number of reviews are 15-20 percent negative average 13 percent more annual revenue than businesses whose reviews are 5-10 percent negative.

These statistics seem counterintuitive, and perhaps they are, but unexpected data like this illustrates how little businesses really understand the nuanced and surprising relationship between reviews and revenue.

What Did Womply Uncover?

Womply’s survey findings can help businesses cut a practical path through the tangled jungle of online reviews and their impacts on revenue. Its analysis is deep, but its proposed solutions are simple and can be applied by businesses of all sizes and kinds to better leverage reviews for revenue creation. 

Let’s take a look at five of Womply’s key takeaways from the review and revenue small business survey.

Businesses that claim free listing on multiple review sites earn more revenue.

In fact, 36 percent more revenue to be exact when a business claims their free listing on at least three sites. Businesses that fail to claim any free listings earn 24 percent less revenue.  This translates into $107,000 more annual revenue for a business that claims its free listing on three of the big review sites (Google, Yelp, Facebook, and TripAdvisor). Google is the top-dog when it comes to review sites; businesses that claim their Google listing average 10 percent more revenue than the average business.

Practical action item: Claim your free listing on the big review sites.

People spend up to 49 percent more money on businesses that respond to reviews.

The Womply survey makes a very clear case for businesses not just to claim their free listings but to also be actively engaged on these sites. Stronger customer engagement via review sites translates into more revenue:

Businesses that reply to more than 25 percent of their reviews earn 35 percent more revenue than average.

What’s more, businesses that reply to 50 percent of their reviews earn more than $166,000 in revenue than companies that do not reply to reviews at all. Frequency of review response is directly correlated with increased revenues according to the survey data. The quality of a company’s response to negative and positive reviews is also important.

Womply also found that 75 percent of the small businesses that participate in the survey do not respond to reviews. This represents a tremendous opportunity for businesses to differentiate themselves in their respective markets.

Practical action item: Create a review response team armed with protocols, information, and training to consistently and meaningfully engage customers via review responses. 

The total number of reviews a business generates has greater impact than a high star rating.

Again, this seems counterintuitive. Many businesses focus on elevating their star rating on review sites when this might not be the most fruitful strategy according to Womply. The sweet spot for ratings seems to be 3.5 to 4.5 stars; companies within this range earn more revenue than any other rating, including companies with five stars.

Five-star ratings aren’t all they’re cracked up to be. Companies with five stars, according to the survey, earn less revenue than one to 1.5-star rated businesses. 

The real revenue gamechanger is the number of reviews a company can generate. Businesses that exceed the survey average of 82 reviews earn 54 percent more annual revenue and companies with 200 or more reviews earn twice as much revenue than average. 

Practical action item: Put more time and effort into generating real reviews from real customers rather than on maintaining or reaching that five-star rating level. 

Fresh reviews impact revenue generation, too.

It’s important to keep generating new or fresh reviews every month. Womply found that the average business in its survey generated nine fresh reviews within 90 days (the three month window is what the survey categorized as “fresh”).

Companies that generated more than nine fresh reviews earned 52 percent more than average, whereas businesses with 25 or more fresh reviews earned 108 percent more than average. 

Practical action item: Put more time and effort into bulking up your review volume while ensuring a steady stream of new, fresh reviews; the freshness of reviews plus higher volume builds trust, which increases the likelihood a consumer will spend their money with your brand.

Bad reviews aren’t all bad.

To a customer, it's important for a business to have a reasonable mix of good and bad reviews. In other words, Womply’s survey showed that consumers want authenticity when it comes to a company’s mix of reviews. A consumer is more likely to be skeptical of a business with no negative reviews at all or just a few mixed in with a bevy of five-star, glowing comments. Consumers are more savvy than ever. They won’t buy from a company that they believe is forging or buying their reviews. That’s likely why the survey uncovered the shocking data point we shared earlier in this article:

Businesses whose reviews are 15-20 percent negative earn 13 percent more in annual revenue than businesses whose are 5-10 percent negative.

Consumers crave authenticity and real engagement. They tend to trust authentic businesses and therefore will choose to buy from these “real” companies.

Practical action item: Encourage real, authentic reviews, and you’ll attract more customers, as they’ll perceive you as trustworthy and unafraid of authenticity. Change your internal perception of bad reviews: When allowed to be seen and when engaged with properly, bad reviews can actually be a revenue generator for your business. 

What Does This All Mean?

First, Womply’s findings and analysis terminates any excuses for inaction. Businesses now have practical remedies for managing and leveraging the online review ecosystem.  

Companies with a higher number of authentic (both positive and negative) existing reviews and a steady stream of fresh reviews earn more revenue than businesses that don’t engage reviews or do so in a fake or half-hearted way. 

To increase business reviews, take the practical steps Womply lays out for businesses of all sizes and industries:

  1. Claim at least three free listings on the major review sites (Google, Yelp, Facebook, and TripAdvisor)
  2. Actively engage your customers by consistently responding to negative and positive reviews
  3. Keep your star rating in the sweet spot between 3.5 and 4.5 stars
  4. Generate a steady flow of real, honest reviews
  5. Develop an authentic review profile that has approximately 15-20 percent negative reviews

Womply’s survey, which is one of the first of its kind, elicited some unexpected findings, for sure. However, when you dig a few layers deeper, what once seemed counterintuitive makes perfect sense. 

Sales guru and author Zig Ziglar once said: “If people like you, they will listen to you, but if they trust you, they will do business with you.” Womply reinforces the sentiment behind this quote by presenting a strong, numbers-driven business case for investing more money and human capital into trust building via more active, authentic, and engaging online review activity.

This data and Womply’s practical action steps, which are underpinned by a strong business case, could yield tremendous ROI for companies courageous enough to authentically engage their customers.

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