Research Shows Impact of Responding to Reviews on Reputation and Revenue

May 04, 2016

45 percent of customers say they’re more likely to visit businesses that respond to their reviews

Online Reviews Survey

Managing online reviews and customer feedback is one of the biggest investment priorities for hospitality brands and organizations in 2016.

  • According to travel site TripAdvisor, as much as 93 percent of executives consider the improvement and management of their online reviews as the most important factor to the future of their business.
  • Survey results show that, as an investment area, a review and reputation management strategy has become a higher priority for hospitality organizations than marketing and advertising, traffic acquisition, and staff training.

One of the most fundamental and effective ways to manage reviews is by responding to them. By taking the time to listen to, acknowledge, and respond to guest and customer feedback — particularly those posted on websites like TripAdvisor, Yelp, Google, and Facebook, among others — organizations can strengthen their brand reputation, improve social media performance, and boost financial outcomes.

Impact of Reviews and Responses on Reputation and Revenue

A new study by Cornell University explores the ways in which responses to reviews can affect performance. Entitled “Hotel Performance Impact of Socially Engaging with Consumers” and authored by Chris Anderson and Saram Han of the Cornell University School of Hotel Administration, the study analyzed review data on TripAdvisor and examined the effects of reviews and review responses on reputation and revenue.

Here are some highlights from Anderson and Han’s study:

Responding to reviews leads to improved sales and revenue

The Cornell study found that revenue levels, as generated by online travel agents (OTAs), increase as the number of review responses increases.

It also reconfirmed an earlier estimate that an increase in a brand’s rating (on TripAdvisor) is reflected in an increase in revenue.

Wrote Anderson and Han: “Responding to reviews, particularly negative reviews, appears positively related to the consumer’s view of the hotel, as measured by increases in the TripAdvisor score.”

On the other hand, failure to respond at all to reviews is costly. Results showed that organizations that did not acknowledge or respond to reviews and customer feedback experienced lower review scores and overall ratings.

In an industry as competitive as hospitality, it’s critical for organizations to find multiple ways to drive sales, bookings, and revenue (outside traditional sales and marketing tactics), and one such way is by posting management responses to online reviews and customer feedback.

This echoes findings from an earlier study by TripAdvisor, which found that hotels and B&Bs that responded to TripAdvisor reviews enjoyed 17 percent higher levels of engagement and were 21 percent more likely to receive a booking inquiry than those that remained unresponsive.

Added the researchers: “Showing (customers) that you are listening to them by responding to their reviews — particularly negative reviews — has a favorable effect on review scores and revenue.”

Don’t overdo responses to reviews — focus instead on addressing the negative

One of the most interesting findings from the Cornell study is that review responses may, in some cases, be detrimental to the reputation of an organization. The researchers suggested that revenue may start to decrease once the business starts responding to more than 40 percent of its reviews.

They even found that revenues are lower when a business has a response rate of over 85 percent than if it doesn’t respond at all. Also, further analysis suggested that responding to critical reviews and customer feedback benefited overall ratings more than did responding to favorable comments and positive reviews.

“While responding to negative reviews is critical,” wrote Anderson and Han, “perhaps repeating simple thank yous for positive reviews might be detrimental.”

From these findings we can take away a few key learnings:

  • Responding to all reviews is unnecessary, since this may not always be effective in boosting business reputation and performance.
  • The ideal review response rate for hospitality brands and organizations is 40 percent. A higher rate may lead to a point of diminishing returns, and may be even more detrimental to reputation and revenue than not responding at all.
  • Customers appreciate substantive, meaningful responses to negative reviews. It’s best to avoid template responses and repetitive thank you notes; when responding, focus instead on addressing any negative feedback.

CHECK OUT: “Improve Your Entire Organization With Actionable Customer Feedback

Encourage online reviews and customer feedback

Another highlight from the Cornell study is its findings on the impact of encouraging customer feedback. According to the researchers, simply letting customers and guests know that your organization welcomes their opinions and thoughts on the customer experience can give you an edge over the competition.

The researchers wrote, “Encouraging reviews via post-stay surveys not only increases the number of reviews posted to TripAdvisor, but also boosts the hotel’s actual review scores.

“Along with an increase in review volume and review scores, hotels also experience an increase in their TripAdvisor ranking and, more importantly, moderate improvements in occupancy and (revenue).”

One of the most widely used methods for collecting customer feedback and gauging customer loyalty is the Net Promoter Score and System (NPS). The NPS survey asks one question: “On a scale of 0 to 10, how likely are you to recommend this business?”

The results allows companies to categorize respondents according to how they feel about the customer experience.

  • Promoters (score 9-10) are the ones most likely to post online reviews and refer other customers to your business.
  • Passives (score 7-8) are satisfied customers, but they remain vulnerable to competitive offerings.
  • Detractors (score 0-6) are unhappy customers who may post critical comments and spread negative word of mouth.

In the context of encouraging online reviews and customer feedback, the NPS methodology can support hospitality organizations as they seek to drive customer engagement levels and improve performance on online review sites like TripAdvisor.

If detractors and unhappy customers do post reviews, make it a priority to respond and resolve issues raised in their review.

“Consumers seem to be most appreciative of responses to negative reviews, rather than positive reviews,” added the researchers. “Ratings improve more substantially in connection with constructive responses to negative reviews than simple acknowledgment of positive comments.”

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