Online reviews pt. 3 - The mystery behind Star Ratings

 
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Star Ratings - There’s a sweet spot for revenue, and it’s not 5 stars

Yes, you read that correctly: you don’t want a 5 star average. Ironically, or maybe not depending on how skeptical you are, the optimal star rating for companies is between 3.5 and 4.5 stars. While low scores are as damaging as you might suspect, having a 5 star average creates a “too good to be true” vibe that turns customers off. See image below.

This is the third of a series of three posts that will help you to understand the importance of reviews and how you can protect and strengthen your brand reputation by handling your reviews correctly. In today’s post we will go through how Star Ratings works and how it can affect businesses revenues.

So, in the two other posts in this series, we’ve covered the things that a business owner can control when it comes to review sites, let’s get into the reviews themselves. We’ll start with what many business owners consider the most important part of their online presence—their overall star rating.

Image 1: Star rating vs revenue, showing the 3.5-4.5 “sweet spot” Source: Womply. How online reviews impact small business revenue. 2018. https://www.womply.com/impact-of-online-reviews-on-small-business-revenue/ (2019-09-24)

The sweet spot for local businesses is from 3.5 stars to 4.5 stars, with 4 to 4.5 star businesses earning the highest average revenue.

According to Womply’s study, they examined this surprising result and offered some potential explanations. They stated that 5 star rated companies may earn less income “...because most 5 star average businesses have fewer reviews, are less established, or may be guilty of black-hat practices like buying fake reviews.”

One last note on star ratings; Womply suggests that while there is value in nurturing your star ratings, the real powerhouse here is claiming and handling reviews. 

“Overall, high star ratings have an impact on revenue at local businesses, but not nearly to the extent that many business owners might think.” - Womply

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Does the number of reviews counts? 

Well, according to Womplys study, the total number of reviews has a larger impact on revenue than average star rating.

Many business owners fret about their star rating, but in Womplys study, findings suggest that businesses should focus much more on increasing the number of reviews than almost anything else.

Businesses in the analysis averaged 82.5 reviews across all review sites. We analyzed the revenue of businesses whose review counts fall above and below that threshold.

Annual revenue on businesses based on # of reviews. Source: Womply. How online reviews impact small business revenue. 2018. https://www.womply.com/impact-of-online-reviews-on-small-business-revenue/ (2019-09-24)

The results of this analysis reveal a strong positive correlation between review count and sales revenue. Businesses with more than the average number of reviews bring in 82% more in annual revenue than businesses with review counts below the average.

There’s certainly a lot of nuance behind these numbers, but it’s clear that local businesses benefit from getting legitimate and honest reviews from as many customers as possible. Even if some of those are negative reviews, customers seem to put more value in a higher number of reviews than they do in a 5-star rating.

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Have questions about claiming your listings? Need help with review management? Want general advice? Drop us an email Hello@pinmeto.com or jump on over to our web page and chat with us live! 

 
Daniel Melkersson