Matching form and substance is tough to do (image credit: Carlos Porto)

Case study shows how Yelp.com ratings can lead to 9% revenue increase

Reading Time: 2 minutes In a working paper titled ‘Reviews, Reputation, and Revenue: The Case of Yelp.com’ the author Michael Luca, an assistant professor of business administration at Harvard Business School, states “a one-star increase in (a) Yelp rating lead(s) to a 5-9 percent increase in revenue”.

While the headline stat of a ‘5-9% increase in revenue’ will capture a social strategist’s attention, here’s a couple of industry-agnostic insights that could help get your your social media strategy across the line.

Reading Time: 2 minutes
When seeking senior management approval for a social media based marketing strategy, case studies are usually a ‘must have’ to help turn your strategy into a commercial reality.
Matching form and substance is tough to do (image credit: Carlos Porto)

In a working paper titled ‘Reviews, Reputation, and Revenue: The Case of Yelp.com’ the author Michael Luca, an assistant professor of business administration at Harvard Business School, states “a one-star increase in (a) Yelp rating lead(s) to a 5-9 percent increase in revenue”.

While the headline stat of a ‘5-9% increase in revenue’ directly relevant to the restaurant industry, here’s a couple of industry-agnostic insights that could be relevant as you work to get your social media strategy across the line.

What impact does customer ratings and reviews have on your products/services?
The study suggests that “this effect (5-9% revenue increase) is driven by independent restaurants; ratings do not affect restaurants with chain affiliation, and chain restaurants have declined in revenue share as Yelp penetration has increased.”

If the correlation between the increase in Yelp’s market penetration and the decrease in chain restaurants revenue share is accurate, does this provide quantitative support where the real value of a brand resides?

If you consider the brand to be ‘a promise’, is the traditional / push marketing efforts of a chain restaurant, enough to convey the promise of quality across the chain’s branded restaurants in a new media rich environment?

Or should marketers by default, start with the notion that the customer now controls how the brand is perceived?  Should all brand marketing efforts without question begin with the customer experience?  Should the Net Promoter Score be the standard customer experience metric in all Australian corporations?

‘Form and substance’ is important if you want to influence your target customer.
Michael Luca writes “consistent with standard learning models, consumer response is larger when ratings contain more information. However, consumers also react more strongly to information that is more visible, suggesting that the way information is presented matters.”

This place gets an extra star just on looks alone

In general, corporations seeking to have an impact in social media, must resource it correctly. For most large Australian corporations, ‘free’ social media is unlikely to generate the customer reach required to have a noticeable commercial impact.

Don’t waste information that’s relevant and of interest to the customer by not supporting it with a sufficient media budget and an intuitive user experience.

(Disclaimer: While I work for Telstra, I am not involved in the Sensis – Yelp.com partnership.)

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