The Crack Down on Online Reviews: The Good, Bad and Ugly Every Small Business Needs To Know

Keeping current customers delighted and finding new ones are inexorably intertwined. Generating favorable word of mouth endorsements – one satisfied customer telling another potential customer about a great experience, service received or purchase made – is the most effective way to finding new customers. Thanks to the prevalence of online reviews and customer ratings, it has become easier and more treacherous to master the many nuances of word of mouth endorsements.

Online reviews are extremely influential. A recent survey by BrightLocal shows “73 percent of customers say positive customer reviews make them trust a business more” and “65 percent of consumers are more likely to use a business which has positive online reviews.” Nielsen, in its 2012 study on the degree of trust consumers place in advertising, seconds this: “Consumers around the world continue to see recommendations from friends and online consumer opinions as by far the most credible. As a result, successful brand advertisers will seek ways to better connect with consumers and leverage their good-will in the form of consumer feedback and experiences.”

Online reviews are not always what they seem. In a recent Wall Street Journal’s Market Watch report, up to 25 percent of reviews on Yelp, a leading customer-driven review site of local businesses, are “’suspicious’ if not fraudulent.” Not only are competitors writing false negative reviews of their competition, a study of deceptive reviews by MIT Sloan School of Business professor Duncan Simister reveals that “many [negative] product reviews are from customers who have not purchased the product they are reviewing.”

Online reviews can hinder as much as they may help. “Negative ratings by influential reviewers adversely affect sales,” concludes the study by Simister. A similar 2011 study by Harvard Business School assistant professor Michael Luca likewise shows that “a one-star increase on Yelp’s five-star review system can raise restaurant sales by 5 to 9 percent.”

Some business owners, frustrated by negative reviews (or an inability to generate positive reviews organically), have foolishly responded by writing their own reviews. Worse, some have listened to bad advice by unscrupulous reputation and search engine marketing firms, offering them the seeming panacea of “paid positive reviews.” There are many obvious reasons why such an approach is not only unethical but may seriously damage your business like a well-intentioned, but badly thrown boomerang.

Writing (or hiring someone to write) reviews for your own company blows your credibility. Not only is a business’ integrity at stake with potential and current customers, but the reason word of mouth works is based on trust. Gaming that system takes trust out of the equation and backfires.

Websites with ratings are publicly outing companies behind false reviews. With increasing pressure on business directories and online storefronts to weed out false reviews, many have taken a tough stance on offending businesses. Yelp, as an example, will alert consumers publicly and flag your business if it is discovered to be generating false reviews. It’s most definitely not something you want associated with your business listing online. Some may even go as far as suing culprits that create fraudulent reviews for damages.

Not just unethical, it is often illegal. Legislators are getting in on the action to prevent prevalent “astroturfing,” a term coined to describe generating false positive reviews of one’s own company. Last week, New York State Attorney General Eric D. Schneiderman announced the conclusion of a yearlong investigation into false advertising and deceptive business practices that focused on companies writing or hiring others to write false positive reviews. The investigation resulted in a settlement with 19 companies, most of them small businesses, who agreed to pay a combined $350,000 and cease writing false positive reviews.

In this vacuum – between consumers seeking to discover new enjoyable and reliable businesses, and businesses that want to grow their business by sharing positive experiences of current customers – a number of review-focused matchmaking services have sprung up. In addition to Yelp, there is the well-known Angie’s List; paid subscription based, it carefully vets and audits reviews from other regional customers. San Francisco based Thumbtack offers multiple referrals to local service providers; they are vetted through a combined process of civil and criminal background checks, license verification and verified community reviews from actual customers. The newest entrant is iTrueReview, which solicits immediate and verified customer reviews, requiring the customers to do so onsite using a tablet or smartphone provided by the business being reviewed.

Customer reviews are an emerging landscape with many great opportunities but also a few pitfalls. Keep these tips in mind to minimize the harmful effect of negative reviews and maximize the benefit of positive ones when managing your small business reputation online:

  1. Get to know the terms and conditions of key review sites. Knowing the terms and conditions of those review sites where most of your customers talk about your business is crucial to keep you out of trouble. Not only do they often tell you what a business can (and cannot) do to legally and ethically enhance its positive reputation, they should also tell you what recourse is available to properly address false negative reviews.
  2. Everyone gets criticized some of the time. It’s impossible to please all customers, all the time. If a site offers business a chance to respond to negative customer reviews, use that tool wisely. Stay factual, genuinely listen and try to do what you can to turn a negative experience into a positive for the customer. Most appreciate an acknowledgement of their complaint and a genuine apology for a bad experience. Not only does this give you a second chance to turn a disgruntled customer into a satisfied one (or at least away from being a very vocal critic), it also shows potential customers reading the reviews how you might treat them if something doesn’t go perfectly in their interactions with you.
  3. Ask for referrals and positive reviews. If you consistently provide excellent service and ask your best customers to write honest reviews about your company in a few key forums that matter to you, the genuine positive reviews will easily outweigh any negative ones. Keep in mind, however, that a majority of customers still do not write reviews, positive or negative. Likewise, while some 83 percent of small business customers state they would gladly refer a company, less than 30 percent actually do so. With affordable tools like Referlia available, don’t hesitate to ask your current delighted customers to refer you directly, while making it hassle free to do so.

Managing your business’ online reputation in an ethical and legal manner is critical. Taking note of the evolving rules and soliciting only valid reviews from your actual customers will go a long way toward keeping you out of trouble. Promptly addressing any negative feedback constructively and with a degree of humility should allow you to turn lemons into lemonade. Ultimately, if you continually provide a solid customer experience, your company’s reviews should reflect that, and this may be the deciding factor when potential customers try to choose between you and a competing small business that does not have stellar reviews.

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About Mario Kroll

Mario is an entertainment industry veteran with extensive executive, managerial, entrepreneurial and hands-on success in marketing, advertising, public relations, social media, customer acquisition, business development, sales management, retail and digital distribution, publishing, general management and operations. Prior to joining the entertainment industry, he was a successful technology and business process improvement consultant for a number of leading financial, technology and consulting firms.