It is something every restaurateur and hotel owner knows: good reviews boost takings while terrible ones can close you down. And, in an age when everyone can be an online critic, ratings have never been more important. But until now no one could be sure just how important the online star ratings system employed by sites such as Toptable and Tripadvisor could be for a business’s fortunes.

Work by two economists at the University of California, Berkeley, Professors Michael Anderson and Jeremy Magruder, published in this month’s edition of the Economic Journal, represents the first attempt to gauge the relationship between online star ratings and customers’ purchasing decisions. The pair focused on the effects of positive online ratings on 300 San Francisco restaurants that were then collated to form a star system on Yelp.com, a popular US ratings site.

They found that a restaurant with a rating improved by just half a star – on a scale of 1 to 5 – was much more likely to be full at peak dining times.

Indeed, an extra half-star rating caused a restaurant’s 7pm bookings to sell out on from 30% to 49% of the evenings it was open for business.

Significantly, the two economists found that the increase in trade happened without any change in prices or the quality of food and service, confirming that it was the reviews that brought in the new customers.

The economists write: “The findings of this study demonstrate that – although social media sites and forums may not generate the financial returns for which investors yearn – they play an increasingly important role in how consumers judge the quality of goods and services.”

The economists conceded that, while restaurants with strong reviews on the site did better business than poorly reviewed restaurants, establishing cause and effect was difficult.

“After all, restaurants that get good reviews are those that appeal to consumers and they would probably do well even in the absence of any reviews,” the pair write. However, they are confident the research is robust. They note that, when Yelp.com computes a business’s average rating (which ranges from 1 to 5 stars), it rounds off to the nearest half-star.

So, two restaurants that have similar average ratings can actually appear to be of very different quality to online viewers. For example, a restaurant with an average rating of 3.74 displays a 3.5-star average rating, while a restaurant with an average rating of 3.76 displays a 4-star average rating.

This, the economists claim, allows them to make important comparisons between restaurants that have different ratings – for example, 4 stars versus 3.5 stars – but are of nearly identical quality (for example, a 3.76 average versus a 3.74 average). Their conclusion? That half a star makes all the difference.

The economists write: “Differences in customer flows between such restaurants can therefore be attributed to the ratings themselves rather than differences in the quality of food or service.”

The study collected reviews and daily reservation availability for 328 restaurants in San Francisco. It found that moving from 3 stars to 3.5 stars increased a restaurant’s chance of selling out during prime dining times from 13% to 34%. Moving from 3.5 stars to 4 stars increased the chance of selling out during prime dining times by 19 percentage points.

The pair conclude that changes in consumer preferences “occur even though restaurant quality is held constant. This study demonstrates that these reviews have become a salient factor in consumer decisions.”

Significantly, they found that the effect was even more profound when alternative information was hard to come by, opening up the possibility that invented reviews could boost fortunes.

The pair write: “These returns suggest that restaurateurs face incentives to leave fake reviews, but a rich set of robustness checks confirm that restaurants do not manipulate ratings in a confounding, discontinuous manner.”

Concerns that retailers and restaurant owners are seeking to manipulate the online ratings system are becoming a key issue for the internet.

“Everyone’s trying to do something to make themselves look better,” Linchi Kwok, an assistant professor at Syracuse University in New York who is researching social media and the hospitality industry, told the New York Times last month. “Some of them, if they cannot generate authentic reviews, may hire somebody to do it.”

Tripadvisor places a “red flag” against the names of hotels that it suspects have planted enthusiastic reviews on its website.

The post How online reviews are crucial to a restaurant’s takings appeared first on Get More Customers With 5-Star Reviews.

Why? Because they rank well on search engines, have positive (and even some negative reviews that does not matter at all) and they are personally recommended by people who’ve tried their service or products.

Online reviews are one of the most important part of any business today. From gaining local organic search rankings to becoming word-of-mouth, online reviews create branding. If you are rarely mentioned anywhere on the web, how will it influence your customers?

Search Engine Land reports that 88% of consumers trust online reviews as much as personal recommendations and this is where big brands out there make a difference. They invite their customers, and even competitors to leave feedback about their service and products which increases their “mentions”, ultimately leading to more exposure and driving more traffic.

There’s no denying that online reviews are very significant today, and not just that, they are part of any marketing campaigns today so that they can create a big impact in the industry and break sales. Check out the 7 best reasons why online reviews are important to your business.

1. Increase local search rankings

Customer reviews play a crucial role today for organic search rankings in search engines. In fact, enabling customer reviews will add credibility to your company while new reviews written is also going to add more amount of unique content to your site.

Increased amount of content that are relevant and unique will add a better chance to get ranked on search engines while the pages are also frequently crawled by search engine bots compared to others. Microformats of reviews when used on your site create higher chances of showing your results as “rich answers” on Google, putting you above the fold of normal search results.

All in all, reviews are very important to improve search visibility and drive more traffic to the site through search engines today.

2. Increase sales

People tend to read online reviews and trust them as much as they are recommended by their friends or families. BrightLocal’s survey reported that an astounding 88 percent people considered online reviews while choosing a product or service of their need.

Similarly, the survey also concluded that 12 percent of people did not follow reviews while picking a consumer product. This means that your business will be exposed to 88 percent of the buying population online and with the information that your customers put in your online reviews, your chances of generating leads and sales will increase automatically.

3. Improve off-site ranking

Having online reviews on an external website adds more credibility to your business rather than having reviews on your own site. Google’s local search algorithms include data from authority third-party directories and platforms like Yelp which reviews restaurants, TripAdvisor that reviews travel-related contents and CrowdReviews, which ranks technology products and services based on user reviews.

This is particularly because CrowdReviews.com aggregate reviews from consumers, competitors and several users out there who have had experience with using the product or service. It has also disrupted the online review industry and because it is unbiased, community driven and transparent, Google rates the listing of several businesses into “search snippets” considering the reviews of any product or service from this platform.

Incorporating five ranking parameters including review strength, reviewer strength, profile strength, reputation strength and verified status, the platform’s unique algorithm ranks products and services and help businesses to pick products or services according to their needs.

4. Increase significance

Online reviews play an important part to add more flexibility to buying decisions of customers. With online reviews getting more credibility, local SEO algorithms consider the weight of such reviews in their visibility and rankings, adding more exposure to small and large businesses online.

Similarly, with different ways of reviewing products and services like videos, infographics and images, companies can expand their brands easily without needing to spend much on marketing. Similarly, people tend to share online reviews with their friends, making your products or services more common to the consumers.

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