Everyone’s
a critic

How online reviews can make or break your business.

By Julie Wilson

In an age where anyone with an Internet connection has a public voice, everybody’s a critic. Like it or not, an anonymous consumer in the far reaches of cyberspace can do a number on your business’ reputation, for better or for worse.

Word-of-mouth marketing goes digital

A recent study conducted by Lightspeed Research revealed that 62 percent of consumers read reviews online before making a purchase, with half of people researching competitors and comparing prices before parting with their cash. “Social media and social networking have empowered consumers to find their voice,” asserts Andy Beal, CEO of Internet marketing company Trackur and co-author of Radically Transparent: Monitoring & Managing Reputations Online. “Businesses no longer have the sole voice in the conversation. It’s now a two-way dialogue.”

Lisa Barone, chief branding officer at Outspoken Media Inc. in Albany, New York, agrees. “Social media has changed online buying behavior in general over the past couple of years,” she says. “People are going online to research companies in the same way they used to use word-of-mouth recommendations from their friends and family.”

Websites such as Yelp, Kudzu, TripAdvisor and countless others, along with mainstream social media sites like Twitter and Facebook, empower anyone to let the world know what they think about your product or service.

When you’re golden

With so many people making purchasing decisions on the Internet, positive online reviews can help you build your customer base by extending your reach. Rob Graefen, owner of Swedish Auto Specialists in San Marcos, California, has glowing reviews on Yelp, Citysearch, Angie’s List, Yahoo and more. While he has secured his customers through word-of-mouth referrals in the past, he is finding that his reputation on the Internet is bringing new customers his way despite his old-fashioned inclinations. “I think [social media] is something I need to be part of,” he says.

These new customers have a different approach from his older customer base who are used to doing business with a handshake and a smile. “I am getting more phone calls from younger, more computer-savvy people who are looking for an explanation of prices and what the service is,” he explains. Because of the comparison shopping mentality, many of these customers are in search of the best price rather than looking to build a long-term relationship with a mechanic they can trust. “These are harder customers to capture, but I capture them after two or three appointments,” he says of winning them over with his service.

…and when you’re not

As positive reviews can boost your business, negative reviews can have the opposite effect. When Internet movie subscription company Netflix announced it was raising its prices last year, a social media firestorm erupted with angry consumers taking their complaints online. “When Netflix presented [the changes] to its customer base, the customers said, ‘Wait a minute. We are invested in the Netflix brand, and we don’t like this direction,’” says Beal. “Netflix had to backtrack.”

Online reviews can wreak even more havoc on small businesses. “Small businesses don’t have big budgets to buy their way out of a scandal,” says Beal. “A couple of bad reviews can shut down a small restaurant.”

An ounce of prevention

Barone stresses that providing customers with a way for them to contact you directly with their complaints is the best way to prevent a public rant. “Most people just want to be heard,” she says. “Do you want them to go to Yelp, Twitter and Facebook?

Graefen, who has only had one negative online review, deals with dissatisfied customers before they hit the Internet.

“I can tell by their faces if they are unhappy,” he says. He tries to remedy the situation right away, which helps build trust and can prevent customers from posting complaints on a public forum.

Beal recommends proactively building a positive review base online. “If you can build a great product and then provide a great service, people are going to talk about it,” he says. “Start laying the foundation now so you have 50 positive reviews so it doesn’t hurt when one bad one is published.” When you get a negative review, consider taking it offline. Offer the customer your phone number so you can resolve the issue in private.

Barone concurs. “I definitely recommend that businesses encourage their customers to leave reviews,” she says. Some companies include a subtle request on an invoice or receipt, while others are more direct and offer customers discounts for taking their opinions online.

In the end, Beal advises business owners to consider the impact one unhappy customer with a computer can cause over a lifetime. “They might ask for a $25 refund,” he says. “If we don’t give it to them, the potential damage might be in the thousands.”

Julie Wilson is a senior staff writer for Phoenix Focus. She has worked for numerous Fortune 500 companies, nonprofits and small businesses during the past 15 years.