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Word of Mouth Referrals in the Digital Age

in Platforms on January 22, 2016

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How often do you check reviews for products on Amazon, or search for places to dine on Yelp? Accordingly to a recent survey, 8 out of 10 people read reviews before making a buying decision.

According to GetAmbassador, 92% of consumers trust recommendations from friends and family more than any other form of advertising.

With online (text, email social) becoming our primary communication method for keeping in touch with friends and family, word of mouth recommendations are shifting to digital referrals.

Most consumers trust online reviews as much as a word of mouth recommendation, reviews and ratings are an ever important marketing strategy. A study done by Harvard Business School found restaurants that improved their rating by 1 star on Yelp generated up to a 9% increase in revenue.

Pretty basic concept right? Provide a great customer experience, and you’ll generate more revenue.

Most business directory websites rankings rely heavily on reviews/ratings. Sites like Yelp, Trip Advisor, Google, and Zomato consider a number of reviews and average ratings in determining search page results.

In our analysis of restaurants based in Los Angeles on Yelp, we found the following results:

  • The top 5 restaurants have over 2,258 reviews and a 4.6 average rating.
  • The last 5 results have 2,245 reviews and a 2.9 average rating.

When we compare the top 5 restaurants to those with the same amount of reviews but an average rating of 3 stars or less, we see a clear difference in customer engagement and overall satisfaction.

  • Among the top 5, customer loyalty is 70% (based upon number of check-in’s).
  • For 3 stars or less, customer loyalty is 54% (based upon number of check-in’s).

The top 5 have 24% greater customer loyalty!

In addition, the average number of photos uploaded is 452, compared to the 3 stars or less businesses with 239, a 47% difference.

A recent survey of small business owners showed that 75% of them think their competitors are writing bad reviews about them.

Why are many small businesses against online reviews? Because businesses don’t have full control of their customers’ opinions.

Small businesses aren’t used to semi-anonymous feedback. In the past, unhappy customers were dealt with on the spot. Now, less assertive customers can write their gripes at home instead of making a scene in-store.

Many small businesses owners aren’t tech-savvy, or don’t have time to monitor, reply, and manage the variety of sources reviews are generated on.

Yelp – one of the largest review sites – is cited by many business owners as a blackmail scheme forcing them to buy advertising or suffer the wrath of negative reviews. However, Yelp has successfully defended themselves against these allegations.

In sampling all closed businesses in Los Angeles with greater than 50 reviews, over 75% had 3 or fewer stars, with the remaining having 4 or more. How can a business stay open when it has such negative feedback?

The truth is they can’t.

Welcome to the new age of customer service and customer satisfaction. Businesses that don’t put their customers first will be the first ones looking for a new line of work.

Businesses can leverage negative feedback to impact positive change. 33% of reviews responded to are likely to be revised for a higher ranking. Further, replying to a negative review boosts credibility for customers perusing review sites. Seeing an owner or staff member enthusiastically reply to an unhappy customer demonstrates the business’s attentiveness to serve their customers.

Businesses that take negative feedback and make adjustments are more likely to grow and prosper than those that don’t.

As granularity of reviews and ratings develops from macro (e.g. overall business rating) to a micro assessment (e.g. specific order/service ratings), customer satisfaction will likely rise as recommendations become personalized.

Searches are becoming specific to what you want to eat – e.g. chicken parmesan hero as opposed to Italian food. Recommendations are based upon your previous orders and ratings, so businesses know what you like and can personalize their menu to suit your tastes. Not every restaurant is great, but nearly every restaurant does one thing very well.

 

Are you a small business and need help with reviews? Contact us to see how we can help you boost your ratings and better connect with your customers.


 

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