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Restaurant owner on computer

Are you a restaurateur? What’s more valuable to your business: a Facebook like, a Twitter mention, an Instagram follower, a LinkedIn share, or a Foursquare check-in?

Actually, the answer may turn out to be none of the above. Or at least they don’t seem to be quite as valuable as a half-star Yelp rating increase.

According to a recent study by two economists from the University of California, Berkeley, a half-star rating improvement in online review site Yelp makes a restaurant 30 to 49 percent more likely to be fully booked during peak dining times.

To arrive at this conclusion, Berkeley professors Jeremy Magruder and Michael Anderson took a sample of 328 restaurants in San Francisco, monitoring their Yelp ratings and studying the relationship of these ratings with the reservation availability of every restaurant. The study also ruled out external factors like quality of food and service or pricing changes, which is how they were able to demonstrate that the Yelp ratings improvement was the primary factor for selling out and going fully booked.

Don’t stop at social – stay on top of online restaurant reviews, too

The Berkeley study underscores once again the increasing impact of online reviews and review sites. Apart from Yelp, sites like Google+ Local (which features Zagat), OpenTable, Urbanspoon, MenuPages, Restaurantica, GrubHub, and Seamless have also enjoyed tremendous popularity among masses of diners, each of whom now has the unique ability to become an online critic.

For customers, this means the ability to search for and find relevant local information in ways that weren’t previously possible. For businesses, it highlights an emerging new trend as well as a potential shift in focus: from social media marketing to online reputation management and review monitoring. More importantly, it calls business owners (not just restaurateurs, but also mom-and-pops, small businesses, and enterprises in other industries) to go back to basics and focus on delivering a great customer experience.

“You can have the best Twitter patter and the finest Facebook page, but a half-star rating change on Yelp because you failed to flip that burger in time or didn’t make eye contact with a customer might have a bigger impact,” wrote Alex Salkever of Street Fight magazine.

He added: “Twitter and Facebook make it easy for a mom-and-pop to have the same-sized mouth as a giant multi-national. But social media is not a substitute for service delivery and customer satisfaction.”

Indeed, online reviews serve as a reflection of how excellently the service is delivered or how satisfied the customers are. That’s why – just like we’ve been advocating here at ReviewTrackers since day one – businesses must stay on top of these reviews and actively track and respond to what their customers are saying.

Last year, a Harvard Business School study revealed another unique link between a restaurant’s rating and revenue. According to Michael Luca’s study, “Reviews, Reputation, and Revenue: The Case of Yelp.com,” a one-star increase is associated with a 5.4 percent increase in revenue.

“Online consumer review websites improve the information available about product quality,” wrote Luca. “The impact of this information is larger for products of relatively unknown quality.”

The increasing impact of online reviews

Here are a few more numbers that call attention to the increasing impact of online reviews:

  • 93 percent of respondents check reviews before dining or shopping (Street Fight)
  • Nearly 65 percent of consumers, and more than 76 percent among the 18-34 set, reported a review has previously encouraged them to avoid shopping at a business, and 74 percent said online reviews are an accurate way to evaluate a local merchant (Street Fight)
  • 20 percent of online searches on Google are for local businesses
  • 4 out of 5 customers reverse a purchase decision after reading a negative review (Cone)
  • 89 percent of customers say they find online channels trustworthy sources for product and service reviews, up from 67 percent in 2010

Migs Bassig

Migs is the Content Manager for ReviewTrackers. He's a creative writer who has helped numerous companies communicate more effectively online, and he loves sharing his local marketing knowledge to help brands and business succeed.

Discussion

  1. Hans Anders

    I’m sorry, but I have to disagree. Yelp, Google+ and others are good for your business, but not nearly as social websites, especially the most popular ones like Facebook and Twitter.
    Let’s be real, which site has more users, Facebook or Yelp? Of course, the answer is Facebook, and therefore, I believe that advertising your business on FB and posting updates regularly are much more important than, as you said, a half-star rating on Yelp.
    When people finish their dinner, they’re more likely to grab their phones, go to their Facebook app and post a short review on your page, they might even check in your restaurant. That must be worth more than a review on sites that half of people on Earth never heard of.

    Reply
    • Dandundun

      But, it’s not always about the quantity of the users it’s about the quality, or in this case interests of the users. The thing you mentioning is cute, and you’ve got the point, but people checking facebook at the restaurant are not reviewing restaurants, they are checking whether someone liked their status or not, the image of their meal…

      Reply

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