Harvard Study finds link between online Yelp reviews and revenue

The study, by Michael Luca, used Yelp reviews and revenue data from Seattle's Department of Revenue to explore the relationship between business performance and online reviews. A number of statistical models supported this relationship.

What does this mean for your business? In this blog post, we'll highlight the key lessons and takeaways that you can use from this study to improve your business' bottom line.

1. Every customer matters
The connection between online reviews and business performance should not come as a surprise. In our increasingly connected world, every customer is able to leverage the ability to leave a review. Every customer interaction -- whether good or bad -- has the potential to be amplified on rating sites and affect potential customers as they decide whether to visit certain businesses.

2. Online reviews are important to every single business in a city
The study additionally highlighted the ubiquitous nature of online reviews. Whereas past review guides, such as Zagat, at best included 5% of a city's businesses, the study found that over 70% of the city's businesses were represented on Yelp. The remaining 30% of businesses are unfortunately neglecting their online strategy by not encouraging customers to leave reviews for their business. The Luca study suggests that these businesses are missing out on concrete positive increases to their bottom line.

3. Make sure to focus on online review performance, even if other competitors aren't doing so yet
The study also focused on a city that has a high number of businesses on Yelp. Imagine the potential possible effect from being one of the first businesses to hit the online review space. Markets favour innovators, particularly today's digitally-oriented market. By encouraging your customers to leave reviews, monitoring your review performance, and letting your online reviewers know that their opinion is being heard, you could benefit from this increased exposure.

Online reviews are a key part of the consumer acquisition funnel. Companies that acknowledge this are positioning themselves for increased chances of business success.

As always, we want to hear more from our readers -- what are your thoughts about the Luca study? Will it change how you conduct your business?

[1] Luca, Michael. "Reviews, Reputation, and Revenue: the Case of Yelp.com". Harvard Business School Working Paper, No. 12-016, September 2011. (Revised March 2016).

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