Landmark study first to combine transaction and online review data from more than 200,000 U.S. small businesses in one comprehensive analysis
Womply, a marketing and CRM software provider for small- and medium-sized businesses (SMBs), published its Impact of Online Reviews on Small Business Revenue study, the first comprehensive look at the correlations between online review patterns and sales revenue at American small businesses.
Among the major findings, the study revealed low ratings on Google are more damaging to small businesses than poor ratings on Yelp or Facebook. Companies with an average Google star rating of 1 to 1.5 average 33% less revenue per year than the average business. For comparison, businesses with the same star rating on Yelp or Facebook average 19% and 9% less yearly revenue than the average business, respectively.
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To compile this study, Womply’s data science team conducted an in-depth analysis of transaction and online review data for more than 200,000 U.S. small businesses in every state and across dozens of industries, including restaurants, retailers, lodging places, salons, auto shops, and medical offices.
The findings are publicly available on Womply.com and shed light on a number of questions facing small businesses, including:
- Which online review sites have the greatest impact on the bottom line?
- Does replying to reviews impact revenue?
- How valuable is a 5-star rating?
“Every business is more successful when they can make data-driven decisions, but small businesses have historically not had access to good data,” says Womply Founder and CEO Toby Scammell. “This groundbreaking study ensures that small business owners don’t have to rely on conjecture when making critical decisions about how to manage their online presence and engage with their customers online.”
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Other key findings from the study:
- It pays to have an open dialogue: Businesses that reply to at least 25% of their reviews average 35% more revenue than the average business.
- Recent reviews have more value: Businesses with more than nine “fresh” reviews (reviews posted in the past 90 days) earn 52% more revenue than the average business. Additionally, businesses with 25 or more fresh reviews earn 108% more than average.
- 5-star ratings aren’t all they’re cracked up to be: The star-rating sweet spot for revenue is between 3.5 and 4.5 stars. In fact, 5-star businesses actually earn less on average than 1-star businesses.
- It’s okay to have a handful of detractors: Businesses that average 35-50% negative reviews earn nearly the same as the average business.
- Response rate matters: 75% of small businesses don’t respond to any reviews, which is a problem, since businesses that reply to more than 20% of their reviews earn 42% more revenue than businesses that don’t respond at all. Consequently, businesses that reply to at least half of their reviews earn $166,000 more in annual revenue than businesses that don’t reply to any reviews.
- More is better: Businesses with more than the average number of reviews (83) earn 82% more annual revenue than businesses with review counts below the average. In addition, businesses with 200+ reviews earn twice as much in revenue compared to the average business.
- More profiles claimed equals more revenue: Businesses that claim their free listings on at least three of the major review sites (e.g. Google, Yelp, Facebook, and TripAdvisor) average $107,000 more annual revenue than a typical business, and $179,000 more than businesses that don’t claim their listings on any review sites, a 60% swing in revenue.
- Consumers are kinder than you think: Nationally, 81% of online reviews for a typical business are positive.
Of all small business categories, Americans are kindest in online reviews to chiropractors (95% positive ratings), followed by religious organizations (92%), art galleries (91%) and dance schools (91%). Americans are the harshest to taxi and shuttle services (65% positive ratings), followed by hotels and motels (67%), real estate businesses (67%), and auto wash and detail business (67%).
“This study gives small businesses insight into where to spend their efforts online,” says Scammell. “We’re excited to democratize this level of data analysis, giving small business owners unparalleled visibility into the financial impact of online reviews so they can better understand their patrons and run more profitable businesses.”
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