It is something that every business owner lives by: good reviews are key to business. This has become even more relevent in a day and age where anyone can be an online critic within minutes.
Two economists from the University of California researched the effects of positive online ratings from Yelp.com, a popular restaurant review website.
They found that an extra half star caused a restaurant’s 7pm bookings to sell out on from 30% to 49% of the evenings it was open for business.
The economists write: ”The findings of this study demonstrate that – although social media sites and forums may not generate the financial returns for which investors yearn – they play an increasingly important role in how consumers judge the quality of goods and services.”
Their study collected reviews and daily reservation availability for 328 restaurants in San Francisco. They found that moving from 3 stars to 3.5 increased a restaurant’s chance of selling out during prime time from 13% to 34%.
The pair concluded that the change in consumer preference ”occur even though restaurant quality is held constant. This study demonstrates that these reviews have become a salient factor in consumer decisions.”
With these effects now common knowledge, concerns have been raised about retailers and restaurant owners making up fake reviews to increase their scores.
“Everyone’s trying to do something to make themselves look better,” Linchi Kwok, an assistant professor at Syracuse University in New York who is researching social media and the hospitality industry, told theNew York Times last month. “Some of them, if they cannot generate authentic reviews, may hire somebody to do it.”
Many websites have introduced a “flag” system is the business is suspected of faking reviews.