Connected Consumers and the Revenue Impact of On-line Reviews

Connected Consumers and the Revenue Impact of On-line Reviews

 1 in 4 consumers uses both a smart phone and a tablet.  Which isn’t all that shocking. What I do find interesting is that many of my peers and colleagues are becoming less and interested in measuring (or trying to measure) social media’s ROI.  There are tomes of metrics floating around out there and none of them seem to have found the mark in terms of clearly quantifying the payback from participating in the social world.  Anymore, “social media” itself has become an dusty old phrase.  Recently, Time Sanders adopted “User/Solution” as his new label.  After all, social sharing is user driven and loyalty to various social connections are largely solution-based.  Yet the lingering demand of payback and return hang over every marketing department and business owner.  Is the time spent sharing worth it?  Is there a true value to positive reciprocity, reputation management, designed strategy?  In his research paper “Reviews, Reputation, and Revenue: The Case for” Harvard researcher Michael Luca argues that not only is a positive social identity vital to a businesses local reputation but that it has revenue-positive impacts as well.

According to Luca, a “one star improvement on Yelp increases revenue 5-9%.”  Significant!  Does a newspaper campaign impact revenue in this manner?  How about a direct mail piece?  A t.v advertisement?  Taken as a whole these legacy media pieces may have a similar impact, but Luca doesn’t feel they do.  It’s customer reviews.  People that have had a positive experience and willingly pass along their feedback to the world are the ones increasing a business’ profitability.  Plain and simple.  Clearly there’s a case for staying connected, delivering an exceptional and individualized experience, and leveraging crowd sourced feedback in order to increase revenue.

We may never reach a point at which we can put clear ROI data to social sharing.  Strikes me that trying to force a Klout framework around the topic of ‘influence’ doesn’t make a whole lot of sense and is artificial.  Nonetheless, social sharing has become a natural extension of a business identity.  Simply because it can’t be measured in terms of clear return does not mean that it’s valueless.  Company’s and brands are now co-created and, as Luca argues, the financial effects of this trend can be legitimate and exciting.  Stay connected with your customers because you can, because you have the resources to do so, and because it creates participatory commerce.  Trying buying that with a 1/4 page ad!

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