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Local Marketing, Marketing, Small Business Tools

Do Yelp Reviews Even Matter?

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In this digital world we live in, online reviews from sites like Yelp, eBay, Amazon, and Etsy have the power to give your business a good or bad online reputation.

But what does that even mean, and do these reputations really even matter?

Before the advent of the Internet, the word “review” was much less scary; probably because ‘reviews’ were limited to newspaper or magazine print and word-of-mouth – which means, most of the time the good businesses were reviewed and the bad were ignored. Nowadays, you take too long to refill a person’s water and the entire world knows about it! No longer do we look to certified critics to find the best restaurants in town, instead we turn to a little thing called Yelp.

With everyone and their mother now putting their two-cents in on each small business they frequent, how is it possible to keep an unscathed reputation, if at all? And if it isn’t possible, does it really matter what your reviewers are saying, or will the masses flock to your business anyway?

That coupled with the fact that Yelp has won multiple legal battles regarding their right to to filter reviews and to allow businesses to potentially pay for good reviews, has led many users (both consumers and retail) to stop using the review site all together. Lack of transparency and honestly are critical to the success of a company like Yelp, who started with a mission to deliver real reviews, by real people.

Since the decision was made to allow Yelp to continue filtering reviews using their ‘top-secret’ algorithm, many business owners have spoken out against the company and banded together with their customers in the hopes of making Yelp Reviews insignificant. However, according to Michael Luca, an Assistant Professor at Harvard Business School, who ran a study measuring “The Yelp Factor,” ratings do in fact impact revenue. More specifically, Luca was able to determine that adding a star on a rating for a restaurant would translate to anywhere from a 5 to 9 percent effect on revenues, with local, independent restaurants being the most affected by reviews, and larger, chain restaurants being the least affected.

So perhaps consumers are becoming more aware that Yelp ratings are not really a reliable measure of a business’ quality, but it doesn’t seem as if that awareness is translating into better consumer behavior. Even though you may be aware that a review is not entirely accurate and that it is probably stained with uncontrollable factors, like the person not liking Indian food at all, or being sick that day, or just in a bad mood; if a restaurant is not ranked highly and has a few bad reviews on their Yelp page, you are probably not going to try it.

It is true then that Yelp reviews matter and can have a measurable affect on the success of your business. In essence, Yelp has become a digital reputation maker. Even though your business may feel as if Yelp has taken the reigns and given complete control to your customer, there is no denying that Yelp holds a large influence, so it may be time to learn to deal with it.

Has your business had to deal with the Yelp Factor? Tell us about it in the comments section below or tweet us @KabbageInc.

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