The True Cost of a Bad Review (and How to Fix It)

Did you know that 91% of consumers check online reviews before deciding to do business with a company?

Or that for every star rating (out of 5 stars) that a business is down on Google and Yelp, they stand to lose 9% of their annual income as a results of poor reviews?

In today’s world, consumers trust online reviews to guide their purchasing decisions — and an unhappy customer is an influential customer who is 3 times more likely than a happy customer to tell their friends about a negative experience they had with a business.

Multiple bad reviews can have a devastating impact on a company’s bottom line. In fact, it’s been estimated that the actual cost of a bad reputation exceeds $500 billion in the United States alone.

A research study of 1,000 consumers by Moz Local found that:

• Businesses risk losing as many as 22% of customers when just one negative article is found by users considering buying their product.
• If three negative articles pop up in a search query, the potential for lost customers increases to 59.2%.
• Four or more negative articles about a company or product appearing in Google search results can cause a business to lose 70% of potential customers.

That’s why it’s essential for every business these days to have a system in place that:

(a) Regularly follows up with customers and clients to request their feedback on their experience with your company,

(b) Invites your happy customers to share their testimonials and recommendations on Google, Facebook and other review sites that your customers are most likely to check before choosing a company to do business with,

(c) Alerts you whenever a new review is published about your company, and

(d) Responds promptly to bad reviews to address and resolve consumer complaints.

How to Calculate the Cost of Bad Reviews for Your Business

Suppose you own a residential cleaning business that charges $150 on average to clean a 3-bedroom home and your typical customer has their home cleaned once a month.

That would make the annual value of a single residential customer $1,800 per year. And if the average customer stays with the same residential cleaning company for 4 years, then their life time value is $7,200.

If a single bad review causes 10 potential customers to choose a different company, the potential loss of revenue from a single bad review would be $72,000 over their lifetime as a customer of your company.

And if your customers typically refer two or more customers to you, the potential loss in referral business could easily be an extra $144,000 (i.e., two referred customers with a lifetime value of $72,000 each.)

If you’re in a higher ticket business like car sales or home remodeling or cosmetic surgery or emergency restoration — the potential loss of revenue can be far higher. All it takes is a quick glance at a company’s Google, Facebook, Home Advisor, Trip Advisor, Yelp or other reviews to prompt an undecided prospect to choose a competitor.

What is a Single New Customer Worth to You?

Enter the numbers that apply to your business in the calculator below to determine the true lifetime value of a single new customer — and the amount you stand to lose (including potential word-of-mouth business that a single happy customer can refer to you) when a potential customer chooses not to do business with you because of bad reviews.

How to Protect Your Business From Bad Reviews

The best way to protect your business and control any damage that can be done by a bad review is to plan for it ahead of time.

1. Implement a Customer Feedback System In Your Company

The first step you should take is to implement a customer feedback system that can ward off bad reviews before they happen. Our recommended system makes it easy to invite every customer or client to give feedback immediately after they’ve visited your business or after you’ve completed their service.

If a customer has a grievance or complaint, the sooner they are given an opportunity to complain to you directly the better. This will give you an opportunity to hear them out and resolve their complaint before they decide to post their grievance online.

2. Bury the Negative Review With Positive Reviews

Our recommended system also makes it easy for happy customers to share their 4- and 5-star reviews and comments directly to Google, Facebook, Yelp or other sites your customers typically rely on for guidance — which will help other potential customers find you and decide to do business with you based on the positive feedback they see online.

When a potential customer sees many more positive than negative reviews about your company online, they are more likely to trust the positive reviews and less likely to let the negative review or reviews influence their purchasing decision.

3. Respond to Every Bad Review

If you do get a bad review, don’t let it go unanswered. How you respond to a bad review online can lessen its impact. The formula for responding to a bad review is:

A. Be calm and respectful in your reply
B. Acknowledge the complaint
C. Let them know you appreciate that they brought their complaint to your attention
D. Ask them to contact you directly to get their complaint resolved.

Sometimes negative reviews are left by competitors or people who you know never visited your business. If this is the case, be sure to mention that fact in your reply so that anyone else reading the review will know the complaint is false and lacks merit.