On my way to work today, I stopped by my favorite locally-owned, independent coffee shop. In addition to serving great tasting coffee, it’s one of those places like the 1980s sitcom”Cheers” —  everyone knows your name (and order). Everyone, that is, except the barista who was working the morning shift for the first time. When picking up my coffee, I realized there was a mistake. “I’m sorry, I must have forgotten to ask for hot milk.” At that point, I felt as if I had changed channels to the 1995 episode of Seinfeld featuring the Soup Nazi.  “Next time, you need to order your milk when you are supposed to,” he snapped. All I could think was, “Has this guy ever heard of Yelp?” But no, I did not give the shop a bad review. However, I did send a friendly email to the owner, an acquaintance of mine. 


We live in an era of customer reviews. We’ve shared an extreme example of how NOT to handle reviews. And sites like TripAdvisor and Yelp have guidelines for responding to poor reviews.

But do these guidelines for handling negative reviews actually have any impact, positive or negative, on a company’s online reputation? To find out, David Proserpio, an assistant professor of marketing at USC’s Marshall School of Business and Giorgos Zervas, an assistant professor of marketing at Boston University Questrom School of Business, analyzed tens of thousands of hotel reviews and responses from TripAdvisor.

Management responses are common on TripAdvisor

33% | Percentage of reviews that receive a response from the business
50% | Percentage of hotels that respond to review

“On average, the reviews improved by 0.12 stars,” the professors write in a recap of their study that appeared in the Harvard Business Review. (1 star = terrible, 5 star = excellent)

“While these gains may seem modest, TripAdvisor rounds average ratings to the nearest half star: A hotel with a rating of 4.26 stars will be rounded up to a 4.5, while a hotel with 4.24 stars will be rounded down to a 4. Therefore, even small changes can have a significant impact on consumers’ perceptions.”

12% | When hotels start responding, they receive 12% more reviews and their ratings increase by 12%
33% | Percentage of hotels studied that increased their rounded ratings by half a star or more within six months of their first management response

(In their article, the professors explain how they established a causal relationship between responding to reviews and improved ratings.)

The research shows that improved ratings can be directly linked to management responses. And, perhaps surprisingly, they also found that when managers respond to positive reviews, it has the same benefits as when they respond to negative reviews.

Additional findings of the research

  • Consumers who read previous management responses are less likely to leave short reviews than consumers who had not.
  • Once hotels started responding, they experienced a sharp drop in the rate of short negative reviews.
  • While longer negative reviews still cropped up, these reviews often contained constructive feedback that could be useful to managers trying to make changes.

Quote

“While negative reviews are unavoidable, our work shows that managers can actively participate in shaping their firms’ online reputations. By monitoring and responding to reviews, a manager can make sure that when negative reviews come in — as they inevitably will — they can respond constructively and maybe even raise their firm’s rating along the way.”

Davide Proserpio and Giorgos Zervas


istock

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