Harvard Business School published a study in August 4, 2011, conducted by Michael Luca, assistant professor at HBS, about the effect Yelp.com reviews have on restaurant revenues. In the past six years, Yelp has amassed more than 20 million reviews about restaurants and other service based businesses.
Michael’s study shows that a “one-star increase on Yelp leads to a 5 to 9 percent increase in revenue”. Chain restaurants have been largely unaffected by changes in their Yelp ratings due to significant marketing budgets and branding efforts.
However, this will change as Yelp and other review sites continue to gain in everyday use. Michael noted that chain restaurants have declined in market share as Yelp penetration has increased. You can read the entire study at HBS Working Knowledge.
a one-star increase on Yelp leads to a 5 to 9 percent increase in revenue
Solicit Reviews from Yelp Regulars
It’s common knowledge that consumers rely more on Yelp reviews that are written by Yelp regulars (e.g. “elite” reviewers), and contain detailed information about the experience. This much was also supported in the Harvard study. It might be interesting to create a marketing campaign targeting these elite reviewers because their reviews, hopefully positive, will carry more weight.
Encourage More Detailed Reviews
Many companies are already asking for customers to leave reviews. Why not ask for more detailed reviews? It may be a double edged sword if you’re not prepared to hear about every aspect of your service or product.
Number of Reviews Matters
The study found that restaurant ratings had greater impact on consumers when there were many ratings versus a restaurant with less than, say, 10 ratings. Again, this is a common concept in marketing known as Groupthink. The lesson here is to obtain well over forty reviews, preferably positive for obvious reasons.
A final note on how to go about obtaining reviews online from customers: why not give a 25% to 35% discount to existing customers after they leave a review online? Regular customers are certain to leave positive reviews, otherwise the discount wouldn’t motivate them in the first place. Unhappy customers aren’t going to be returning for any amount of discount. The easiest way to make this happen would be to offer the discount on your website or other online deal site, and the customer can print out the discount, write their reviewer name on it (for proof), and bring it in on their next visit.