Customer-review websites are the game-changer that business owners must be alert to when becoming the referee of their online corporate reputation.
The trend is rapidly disrupting the travel media business and is forcing small-business owners to think twice about how to spend marketing dollars.
Evidence that advertising is shifting to customer-review websites, such as TripAdvisor Inc. (Nasdaq:TRIP) and Yelp Inc. (Nasdaq:YELP), is clear from how those companies keep topping analysts' revenue estimates, enabling stock prices to more than double in the past year.
Google Inc. (Nasdaq:GOOG), meanwhile, continues to pump resources into its Google+ social networking site, which also has customer reviews.
Five years ago, monitoring an online reputation largely meant typing a company's brand into Google's search engine to see what popped up.
Oh, how things change.
ReviewSprout owner Michael Shih, whose business is focused on managing customers' online reputations, noted a Harvard Business Review study in 2011 that found there was a 5% to 9% increase in revenue at independent restaurants for each star increase on their average Yelp ranking. He believes this impact has likely increased since the study was completed.
"If you don't have any reviews or if you have bad reviews, the customer can go to another business below your listing," Shih said.
He advises small-business owners to join customer-review websites and then monitor all reviews that mention their business.
"Always engage reviewers," Shih said. "It's like if someone's in your store and they give you feedback. You don't leave them alone."
A response such as "thank you for the review" can build loyalty among fans, whereas a thoughtful response to a critical review both appeases the critic and tells future readers of the review that management has listened to criticisms and are acting on them.
Shih believes customers are more motivated to review a business if they are disappointed with service – something that heightens the importance of business owners encouraging customers to leave reviews.
A small sign at a cashier or front desk is one way. Tweeting is another. The best, however, might be to email customers and include a direct link to the business' listing on a customer-review website.
L'Hermitage Hotel general manager Jean-Michel Tanguy told Business in Vancouver that he sends all guests a follow-up email to thank them for their stay. Each of those emails contains a link to his hotel's profile on TripAdvisor.
Encouraging customer reviews has helped L'Hermitage rise to be No. 1 on TripAdvisor's list of Vancouver hotels – impressive for a hard-to-find, 60-room boutique hotel wedged on the fifth, sixth and seventh floors of a mixed-use building at the corner of Richards and Robson streets.
Tanguy estimates that 70% of his hotel's business comes from TripAdvisor reviews.
He stressed, however, that providing a quality stay is the best way to ensure that whenever a review is written, it is positive.
Owners of other businesses can ask customers for email addresses as part of a contest or a promotion, where discounts or coupons are emailed.
Once a customer has written a positive review on Yelp or TripAdvisor, the business owner is able to quote that review on their website or other marketing materials, Shih said.
"Asking the customer first is always the best policy, but you're allowed to quote the review because it is in the public domain," he said. "What you can't do is gather reviews and post them on behalf of a customer."
TripAdvisor, Yelp and other popular review sites have sophisticated systems to weed out presumed fake reviews. They track IP addresses to ensure that a bunch of positive reviews do not come from the same computer. Their staff scrutinize reviews for suspicious patterns.
Getting fake reviews could mean reviews are not posted, or worse, fines and lawsuits follow.
Yelp filed a lawsuit in B.C. Supreme Court September 19 alleging that a North Vancouver man, using aliases such as James McNulty, posted fake reviews.
Four days later, New York Attorney General Eric Schneiderman announced that a massive crackdown on deceptive online customer reviews had netted agreements with 19 companies to stop misleading practices and pay a total of $350,000 in penalties.
QR Mobile Marketing Inc. principal Jeff Stark added that customer reviews are part of a marketing arsenal that should also include an active presence on both Facebook and Twitter as well as a mobile-optimized website.
