Study correlates highest star review rating with lower revenue

Research conducted by Womply, a SaaS that provides reputation management tools, studied over 200,000 small businesses to determine how reviews affect their revenue. They found that small businesses with the highest average rating were reported as having lower revenue.

Reviews are typically seen as a blessing or curse for many small businesses. When they are ignored or neglected, they can be detrimental to revenue if the review average is low, and most of the comments are negative.

Womply, a company that helps companies keep track of and interact with customer reviews, conducted a study of over 200,000 small businesses. Some of the correlations they found were predictable – more reviews result in more revenue – but a handful were unexpected and offered insight into how consumers shop online.

The lowest percentage of negative reviews correlated with less revenue

Star Review Chart
Chart illustrating how much the average star rating matters to small business revenue.

It’s natural to think that the higher the positive review percentage is, the more orders and revenue a business will have. However, the study found that the opposite was true.

Businesses whose total number of reviews are 15-20% negative average 13% more annual revenue than businesses whose reviews are 5-10% negative

There are many reasons why this may be true, but one of the most likely reasons may be the appearance of review manipulation. When a business has a 5-star average review percentage, online consumers may consider it to be artificially inflated. It’s important to note that the revenue impact wasn’t as severe for local businesses, but it was still lower.

Number of reviews is more important than rating

The quantity of reviews versus average rating percentage correlates with higher revenue.

Total number of reviews has a larger impact on revenue than average star rating.

The causation for the higher revenue may be that the company has more customers and therefore has more reviews. However, it’s also possible that more reviews increase the trust level of online consumers. They may assume that a company with more reviews, regardless of average star ratings, has been in business longer and has more customers. That, in turn, may be the deciding factor when shoppers choose a business.

Businesses that respond to online reviews have higher revenue

Perhaps the biggest takeaway from the study is that businesses need to be monitoring and responding to online reviews.

The study stated that 75% of businesses don’t respond to any of their reviews. However, they should be, because consumers spend up to 58% more money at businesses that reply to reviews. Surprisingly, businesses that reply to more than 20% of their reviews earn 33% more revenue than average.

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Jon is the founder and Managing Editor of Coywolf. He has over 25 years of experience in web development, SaaS, internet strategy, digital marketing, and entrepreneurship. Follow @henshaw