Consumers do not make purchasing decisions in a vacuum. Instead, they look to the experiences of others to inform their choices. Indeed, 72% of consumers begin their journey by looking at reviews and will not continue until they get a sense of brand sentiment for a given business. This trend applies to enterprises and small businesses alike. According to a 2018 BrightLocal survey, 86% of consumers read reviews for local businesses. Today, these reviews are more abundant and accessible than ever before. Recent aggregated data from Rio clients shows that the volume of Google reviews across various industries increased exponentially from 2017 to the beginning of 2019.
So, reviews and recommendations go a long way in driving consumer decision-making. Additionally, they also help determine online brand visibility, since Google ranks review signals highly in the Local Pack algorithm. But what impact does this activity have on a business’s bottom line? As it turns out, reviews can boost or bruise a business’s revenue, and some industries are more affected by this relationship than others. In this post, we look at the effect reviews have on four specific industries: retail, hospitality, restaurant and service.
No one wants to waste their time or money buying a faulty product from an unreliable source. When consumers were limited to purchasing goods from a physical store, they could at least hold the item in their hands before checking out. The realm of online retail has changed this arrangement. When buying something online, consumers must rely on others’ firsthand experiences. Because of this, reviews are closely tied to a retail business’s revenue.
If a product’s or seller’s ranking falls too low, the odds of someone making a purchase can fall dramatically. Conversely, the probability of a purchase increases when star ratings fall between 4.2 and 4.5 out of 5. Oddly enough, however, purchase probability dips again as ratings approach 5 stars, according to a study, “Understanding a fury in your words.” This is partly because a 5-star rating typically indicates fewer reviews, and consumers tend to trust brands with a greater amount of feedback, regardless of whether they have negative or positive online reviews. On top of that, customers may have a hard time believing that a brand could maintain a perfect track record. Skepticism does not typically yield a purchase.
Retail brands can increase revenue by acquiring more reviews and displaying them. According to the Speigel Research Center, featuring reviews can increase a retail business’s conversion rates by 270%. The same study also found that reviews for higher-priced products can increase conversion rates by 380%, driving home the importance of review acquisition for retailers.
Purchasing a product is in many ways different than paying for a place to stay. While consumers look for quality in both things, the latter is often more personal and, in most cases, more expensive. As such, consumers take their time choosing the right hotel or motel when traveling to maximize comfort and minimize cost. Browsing customer reviews are crucial in this pursuit. Statistic Brain indicates that 81% of travelers find online reviews important when choosing a hotel, and that 49% of travelers will not make a reservation for a hotel that has no reviews. And some research has found that even a single negative review can cost a hotel or motel up to 30 reservations. Those in the hospitality industry, then, must invest in online review monitoring to acquire, track and respond to online reviews, increase conversions, and boost revenue.
Like the hospitality industry, restaurants provide customers with experiences that affect not only the wallet but also the mind and body. People can be picky about what they eat for a number of reasons, such as allergies, other medical concerns, or simply preference. On top of that, customers also care about the atmosphere of the location. It only makes sense then, that consumers look closely at reviews and ratings for food establishments when looking for a new place to eat. A 2018 BrightLocal survey shows that consumers read reviews for restaurants and cafés more than they did for any other industry. As for how these reviews impact the bottom line, a one-star increase can boost an independent restaurant’s revenue by 5-9%, according to the 2016 Harvard Business School Study: “Reviews, Reputation, and Revenue: The Case of Yelp.com”.
Reviews also have a major effect on the revenue of service providers. The service industry is multi-faceted and far-reaching, including salons, real estate, consulting, and so much more. While reputation management for hotels and restaurants also depends on providing great service, the service industry is all about taking care of the customer on an individual basis. So, if a customer is unhappy with the service, they will likely share their bad experience online in great detail. Just one of these negative reviews can threaten a service provider’s bottom line, as consumers may feel uncomfortable subjecting themselves to, say, a bad haircut or poor advice.
Reviews may have the biggest impact on revenue for the four industries listed above, but online review monitoring is critical to the growth of businesses within any industry. To get up to speed, request a free local audit from Rio SEO.