Finance with the Stars

Should you worry about customer reviews?

Anjali Oberoi | A Harvard study found that each additional star on Yelp results in a 5% to 9% increase in revenue for a restaurant. That’s significant! Say you operate a café with an annual revenue of $1 million, improving your Yelp rating by one star only could help you afford one more full-timer on your team.

Online reviews have immeasurably disrupted the restaurant industry. Like them or hate them, they are a factor to reckon with if you operate a food business. A recent study by TripAdvisors found that 94% of US diners read online reviews before choosing a  restaurant. Besides, customer trust is not earned easily. Apparently, a majority of people will give up on you after reading three negative reviews.

Having read that, you might already be succumbing to the dark side of the force and browsing the web for fake review factories. If you are, stop right there, please! First off, let’s state what should be an obvious and self-sufficient argument:  fabricating reviews is just wrong. Secondly, it could get you in deep trouble. Public prosecutors in the US and Europe are increasingly cracking down on deceptive practices on the internet. And if that’s not enough to dissuade you, there is a growing rationale for not engaging in fake review fabrication.

What is to keep in mind is that the impact of fake reviews is short-lived. People are not just reading more online reviews, they are writing them more frequently. More than four customers out of ten say they are likely to leave a review after a notably good or a notably bad experience at a restaurant. What this means is that, regardless of how you have meddled with your online ratings, it will very quickly adjust to the true perception that customers have of you. So you can either spend tons of effort and money to keep producing fake reviews… or you can do the smart thing and learn how to address customer reviews.

A most interesting piece of insight that has been emerging across studies is that customers are not just looking for a good in-store experience. They want engagement. They want to feel heard and understood. Almost half the people interviewed in a recent study claimed they were more likely to visit a local business again if they saw that the business owner responds to negative reviews. In other words, community engagement is becoming a critical component of a restaurant’s business.

The spread of online reviews are sometimes perceived to have made the restaurant industry more volatile, and muddied the link between technical merit and success. The volatility part might be true. But on the merit part, a more accurate reading might be that online reviews have empowered consumers and brought to light that customer expectation is so much more than about the product. Offering food is, truly, proposing a social experience.

* Illustration by Dannae Alvarez