It would seem that the more top ratings a company or product can receive in online reviews, the better it would be for their business.
As it turns out, this isn’t exactly the case. A recent national study has concluded that businesses earning star-ratings averaging between 3.5 and 4.5 on a five-point scale earn more revenues annually than those with other ratings – higher or lower.
And even more surprising, top-rated businesses with five stars actually earn less in revenues than those whose customer ratings are two stars or lower.
What’s going on here?
It would seem that five-star ratings are considered “too good to be true.” Seeing them, people tend to think something’s fishy about how the ratings can be so high. And if there’s something worse than getting low ratings, it’s the feeling that the ratings a company has earned aren’t “genuine.”
The analysis, conducted recently by small business SaaS supplier Womply, sought to study the correlation between online customer reviews and company revenues, and in doing so it looked at data from a large number of U.S. small businesses.
The more than 200,000 businesses studied had an average annual revenues of around $300,000. The Womply research spanned diverse industries and markets including restaurants, auto shops, retailers, medical and dental offices, hair and nail salons, etc.
While the ratings dynamics may be surprising, another Womply finding reinforces the intuitive view that attracting more reviews online is better than attracting fewer ones.
The businesses studied by Womply averaged ~82 total reviews across multiple online review sites. But for those businesses attracting more than the average number of reviews, they earned ~54% more in annual revenues than the average. And for those with 200 reviews or more, the average annual revenues were nearly double the average revenue figure.
The propensity for companies to respond to reviews appears to boost revenue performance as well. The Womply study found that businesses that fail to interact with their customers’ reviews earn lower revenue on balance – as much as 10% less than their counterparts.
The key takeaway points from the Womply research appear to be:
- Too many top-rating reviews risk making a company’s reputation appear less genuine, actually repelling business rather than attracting it.
- To improve revenues, businesses should encourage their customers to post reviews online.
- To improve revenues, businesses should engage with reviewers by responding to their comments, addressing concerns, and expressing gratitude for praise.
- People feel more affinity with companies that acknowledge their customers and treat them like they care. It’s basically the Golden Rule in practice.
What are your thoughts? Do the findings surprise you? Please share your perspectives with other readers.