What is your most valuable business asset?
A lot of business owners make the mistake of thinking their most valuable assets are tangible, things like their building, equipment, and inventory.
Some are astute enough to realize that intangibles like intellectual property and processes are even more critical. But few understand that in today’s digital world, your online reputation is probably one of the most valuable assets you have. How well you grow and nurture that asset will have a direct effect on your income.
Not convinced? Let’s say you’re looking for a restaurant, hotel, hair salon, or a dentist in your area. Years ago, you might have checked The Yellow Pages, but printed directories like these are being phased out, and within a few years will be nonexistent.
The Internet is the top destination people visit when looking for a company to do business with. Yes, word of mouth and checking with friends and family is still a thing, but 97% of people go online to search for local businesses regularly, and 90% of them read reviews. What they find during these searches will help them decide who gets their patronage.
So, why does this matter? If you have positive reviews and glowing recommendations, people are bound to want to do business with you. But, if people online are saying how awful your business is, people are likely going to steer clear.
While this conclusion is fairly obvious, that’s not the only way your online reputation affects your income. We’ll share 5 metrics that can shift based on what the Internet says about you. Weave helps you easily collect and monitor reviews on Google and Facebook. These reviews can be some of the best marketing for your business.
9 out of 10 people check online reviews before choosing a business
Weave helps you easily collect and monitor reviews on Google and Facebook. These reviews can be some of the best marketing for your business.Schedule Demo
1. Customer Acquisition
You already know from above that 90% of people searching for businesses online read the reviews before deciding where to go. Very few people are going to read a string of scathing reviews about a company that mistreated customers, did a poor job, or had unclean facilities, and then decide to go there.
However, people are logically going to be excited to visit a business with overwhelmingly positive testimonials about the level of care received, the attention to detail provided, and the genuine friendliness of the staff.
How much could you expect to lose if your online reputation isn’t stellar? According to research done by Moz.com, an estimated 22% of prospective customers will avoid your business if they see a negative article written about you on the first page of an Internet search. That number climbs to over 59% if there are three of these types of articles.
If you crunch the numbers, this means that you could be losing a significant amount of dollars each month from potential new customers that perceive doing business with you as risky.
The net effect on your income will vary, but let’s go through a hypothetical example to illustrate.
Let’s say you own a hair salon. For the sake of simplicity, we’ll assume that, on average, you receive about one serious phone call inquiry per day from someone who wants to schedule an appointment, and about 50% of them ultimately decide to make an appointment after hearing your rates, availability, etc.
Here’s what that might look like from a numbers standpoint:
- You’re open 20 days per month, so that equals 20 phone calls.
- With a 50% close rate, you can expect 10 new appointments.
- Your average appointment costs $250.
- Therefore, you can expect to collect an extra $2,500 per month.
- Most of these new clients continue to come to your salon, so now we have to consider Customer Lifetime Value.
- Assuming 75% of them go back to the salon and visit 3 times per year, the annual revenue you can potentially add from this group of new clients is about $5,625.
- Multiply this figure by 12 months, and you get about $67,500 annually from these call-ins.
Now, let’s say you have a negative write up and a bad online review that you haven’t had a chance to respond to yet. Now, 22% of the people who would normally call you are going to decide against it and call one of your competitors instead.
Here’s this formula in action again:
- You no longer get 20 phone calls. Instead, you get 15.6. We’ll be generous and round up to 16.
- With a 50% close rate, you get about 8 appointments.
- You collect $2,000 per month from these appointments.
- Annually, you can expect about $4,500 from these clients assuming they visit your salon a total of 3 times per year.
- Your annual expected revenue from this lead source is $54,000.
That one negative mention on the first page of results cost you $13,500 in a single year.
Keep in mind that this is a hypothetical situation from a small operation. If you’re a high-ticket service provider or medical professional, this loss could be substantially more.
Tip: Negative reviews by themselves won’t necessarily hurt your business. The 22% stat referred to negative mentions and write-ups. If you do have negative reviews on Google, Yelp, or industry-specific review sites, how you reply to them can potentially strengthen your business. Take a look at our guide on how to respond to negative reviews here.
2. How Much Customers Will Pay
If your online reputation is inconsistent and has some dark spots, your business is perceived as riskier. When something is risky, it’s natural to want to pay less for it.
For example, when you’re shopping the clearance rack at a department store, you might buy something you usually wouldn’t consider because it’s so cheap. You figure that for $5.99 you can’t really pass up those leopard print socks. But if the price was $59.99 instead for a pair of socks, you’re not as likely to take the risk.
The same principle holds true for a service-based business. If your potential customers are confident they’ll have a good experience, then they’ll be less resistant to higher prices. They may, in fact, even welcome them as it will help them perceive you as a higher value provider.
The science validates what we naturally assume. A recent study by American Express found that people are willing to pay 17% more when a company provides excellent customer service.
3. Website and Foot Traffic
Just because a potential customer is searching for your type of business doesn’t mean they’re going to choose you. Even if you’re on the first page of Google a review site, you’re still competing with several businesses to get the customer in the door.
For the customer to take that crucial next step, they must have a compelling reason. One thing that’s NOT compelling is a string of bad reviews or angry words and exclamation marks around any mention of your business.
People click to learn more about companies that have positive things being said about them. So, if you want to generate more interest, pay attention to your online reputation, and you’ll get a larger share of the business.
4. Ability to Recruit Talent
Unless you’re a solopreneur, you’ve got employees. And when it comes to hiring, you know that people are a top asset (in addition to your online reputation, of course).
When prospective employees are looking for work, they’ll behave similarly to your customers. They’re going to look you up online. They’re going to read what’s being said about you, your business, and the service you provide. If they don’t like what they see, you can bet they won’t take your job offer, or even apply in the first place.
Even worse, the only talent you’ll likely be able to attract if your online reputation is in the dumps is an employee that can’t get hired anyone else. As a result, instead of having a team that can help bolster your online reputation, you’ll be stuck with “talent” that is likely to make your reputation worse.
5. The Power of Association
Earlier, we alluded to the importance of word-of-mouth. It’s easy to forget how important it is when much of the focus has been on the Internet and bolstering our presence with SEO, gathering reviews and creating content and advertisements.
Though people are searching online for businesses to patronize, we still trust the opinions of our friends, family, and colleagues. When a service is essential, we’ll often turn to a combination of online searches and a discussion with people we know before making a decision.
So, what happens if you have a rock star client base that is always recommending your service, but your online reputation kind of stinks? It’s going to lead to contradiction and confusion. Your clients’ friends and family members will be wondering why someone they trust is recommending a business that appears to be subpar.
Not only does this hinder your ability to grow your business, but it can also cause churn among your current client base. Their friends might find a different service provider with a better reputation and convince your clients to leave your business.
While much of what we’ve discussed had to do with the adverse effects that a poor online reputation can have on your income, the reverse is also true. By having a positive online reputation, you can boost your income and keep your business healthy. Watch a free demo with Weave to learn how to increase your income by boosting your online reputation.