Customer Experience

Managing Customer Feedback: How to Measure and Leverage Your Reputation ROI

April 15, 2015

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Businesses across the globe are engaging in reputation and review management at some level or another. The impact that reputation management has on a business organization is multifaceted and should be tackled as such.

Without a shadow of a doubt, there are intangibles to be gained from engaging in reputation management, but fortunately for all of us, the bulk of activities can be tracked and measured in order to get some clarity and direction regarding your basic return on investment from your efforts.

ROI for reputation has three principal pillars that can be converted into direct metrics.

First, you need to measure the correlation of review site management and engagement with the direct generation of leads from said site.

Second, you need to measure the influence of a positive online reputation with the growth of your internal sales.

Finally, you need to measure the impact of customer loss resulting from negative reviews. In addition to purely monetary gains directly attributed to your online reputation efforts, you can also track, measure, and leverage customer satisfaction, affinity, and likelihood to give a word-of-mouth referral.

Before you get out your spreadsheet and start calculating your ROI, we want to be emphatic in reminding you that unless you decide to astroturf, there are no negative drawbacks to reputation management. When you do decide to take a proactive approach, you will always come out ahead.

Know Where You Are Starting From

To get started, make sure you utilize your current data as the point of reference by which you will track the progress and impact of your engagement. Take a look at your current revenues, and try to identify what percentage of the customers walking through your door originate directly from third-party review sites, or have used review sites to validate or further research your business prior to committing to make a purchase or hire your services.

Track Incremental Direct Leads

Now that you have your base numbers, many review sites provide you with the number of click-through transactions or booking actions taking place in your review-site profile. In the case of click-through activity, you cannot assume that every visit is a sale.

Instead, you will attribute a percentage of your transactions equal to the conversion rate of all your marketing efforts. That is, if you normally receive 100 sales from your site from a total of 1,000 unique visitors, and 100 visitors originate directly from review or social sites, then you can attribute 10 percent of your sales to review sites. To validate your click-through traffic, you can compare your numbers as reported by the third-party review site against the direct traffic, as reported in Google analytics.

Be mindful that this model does not account for phone transactions or direct visits. To track direct visits, your best bet is to track total number of views against incremental sales month over month.

Track Your CAC (Customer Acquisition Cost)

Even if you are not investing in advertising through review sites like Yelp or TripAdvisor, you are still allocating time to review management and monitoring, and you may have other small expenses such as scalable software for review management.

As you begin tracking incremental leads from review sites, divide this by your total costs to understand and improve cost efficiencies associated with review management. Tracking your CAC becomes far more important when you decide to upgrade to paid services by niche-specific review sites. By tracking your customer acquisition cost, you will be better equipped to identify the sites that are best suited for paid advertisements or for pushing promos based on factual data.

Track How Cumulative Ratings Impact Your Overall Sales

This is perhaps the most important and sustainable metric when it comes to sound reputation management. As the tone, quality, and content of your reviews begin to have an upward trend, you will notice an increase in the overall transactions, total wallet share for your segment, and ARPU (average revenue per user).

Many businesses report increases in sales and overall leads in the neighborhood of 10 percent for every half-star increase above 3.5 stars. Additionally, businesses with a high cumulative score have increased price elasticity regardless of the season, allowing a higher margin of profit per transaction executed. The best way to track your ROI based on improved cumulative ratings is to compare total number of transactions month over month or year over year if your business is subject to seasonality.

Tracking the Impact of Negative Reviews

Bad things happen to the best of us. We have spent significant time providing customers with best practices to manage negative reviews, knowing that they will happen and must be dealt with. When a negative review does happen and you have done everything in your power to provide the customer with a resolution that is to his her satisfaction, all that is left to do is to try to track and measure impact in order to properly adjudicate losses in revenue when it comes time to make money decisions related to operational and marketing budgets.

The way to know the impact of one or several negative reviews is to take a sample of lead velocity pre- and post-review. Lead velocity is the frequency in which customers click your link from the third-party review site into yours. By knowing the before and after, you will be able to measure the damage caused by a negative review, while you work diligently to secure additional reviews that will reduce the overall impact of the negative review.

Keep in mind that the bulk of the impact will take place when the review is fresh and at the top. As soon as you are able to secure new and better reviews, the transactional impact of the negative review will be greatly minimized.

Leveraging the ROI of Your Reputation Management Strategy

Use Increased Revenues for Expanded Marketing Efforts: Allocate a portion of the additional revenues that can be directly attributed to reputation management and monitoring to enhanced or paid efforts in the reputation management arena. Consider boosting your profile on the sites that you have identified to be the best channels for customer acquisition, to get the best bang for your buck.

Use Increased Revenues to Deal with Operational Areas of Opportunity: Through the business intelligence acquired via reviews, you will have specific knowledge, as perceived by your customers, of areas that can be improved upon at an operational level. If you are a 4.5-star business and your customers are telling you that you need an updated menu or maybe new linens, then why not direct incremental revenue to giving your customers what they want as a way to strive for a five-star score? This will result in more and better business and the flexibility to adjust your pricing models accordingly.

Tracking your ROI for review and reputation management is a smart decision that will give you the confidence to make your next moves and deliver even better online engagement and offline experiences.

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