A recent study shows businesses that earn a star rating between 3.5 and 4.5 earn more revenue annually than those with any other ratings, and those earning a 4- to 4.5-star rating earn 28% more in annual revenue. Five-star-rated businesses earn less in revenue than 1- to 1.5-star businesses, according to data released this week.
And while star ratings have an impact on revenue, the number of reviews has an even greater impact, according to Womply, a small business SaaS provider that wanted to understand the correlation between reviews and revenue.
Womply’s data science team conducted an analysis of transactions and online review data from more than 200,000 U.S. businesses. The study spans small businesses in every state across dozens of industries, including restaurants, salons, auto shops, medical and dental offices, retailers, and others.
The study revealed that there is a strong connection between reputation management and revenue. Businesses average 82.5 total reviews across all review sites. Those with more than 82 total reviews earn 54% more in annual revenue than average.
Businesses with less than 82 total reviews earn 15% less in revenue than average, and those with 200 reviews or more earn nearly twice as much in revenue than average.
Free listings also count. Businesses that claim their free listings on at least four review sites, from Google to Yelp, earn 58% more revenue. Businesses that reply to their reviews at least 25% of the time average 35% more revenue.
Five-star-rated businesses have below-average sales. The best place to be is between 3.5 stars and 4.5 stars.
Businesses with reviews that are between 15% and 20% negative average 13% more annual revenue than businesses with reviews that are between 5% and 10% negative.
When breaking down the findings into specific industries, the data found that retail businesses that don't reply to any reviews earn 6% less revenue, and restaurants that don't reply to any reviews earn 9% less in revenue, for example.
Even more interesting, auto service businesses that reply to 50% or more of their reviews earn 19% more than average in revenue.
The average annual revenue across all local businesses in the study was $301,000.
When breaking down annual revenue at businesses by the number of free listings they claimed on review sites, the more review sites a business claims, the bigger the average increase in annual revenue.
The findings also show that businesses that don’t claim their listing on any review sites average $72,000 less in annual revenue than the typical business.
People spend up to 58% more at businesses that reply to reviews, but 75% don’t respond to their customer reviews.
The study suggests that the reply rate among businesses that respond to reviews is 20.8%.
Businesses that reply to more than 20% of their reviews earn 33% more revenue than average. Businesses that don’t reply to any reviews earn 9% less revenue than average.
This column was previously published in the Search Insider on August 9, 2019.