Behold, the power of a single star!

According to a study done by Michael Luca of the Harvard Business School, the power of positive consumer reviews on Yelp has a dramatic impact on revenue. Luca found the following:

  • A one-star increase in Yelp rating leads to a 5% to 9% increase in revenue.
  • This effect is driven by independent restaurants; ratings do not affect restaurants with chain affiliation.
  • Chain restaurants have declined in market share as Yelp penetration has increased. This suggests that online consumer reviews substitute for more traditional forms of reputation.
Yelp has grown by leaps and bounds (and is nearly set for their long-anticipated IPO), and has become one of the major destinations for consumers when searching for information on a business. While restaurants are heavily represented on Yelp, many other types of businesses are reviewed.
If you own a small to mid-sized business that interfaces with the public, research your company on Yelp. If you want to build your online reputation on sites like Yelp and others, contact the Line Marketing Group to design a social media strategy that will boost your sales by an “extra star.”

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