Is online review management worth the investment? While it might seem obvious that there is value in managing your online reputation, how do you accurately calculate the actual ROI or return on investment for these essential efforts in today’s business climate?
Establish the Recognized Benefits of Online Reputation Management
Before you can calculate the return on investment, you should clearly define what that investment buys. Evaluate the search results for competing company names or brands and compare them to your own. Google reviews have a direct impact on where your business appears in comparison to other local businesses.
Online review management has a measurable impact on your:
- Business reputation
- Brand loyalty
- Customer satisfaction
- Website traffic
- New customer contacts
- Revenue growth
Once the impact of business reviews is clearly understood, you have laid a solid foundation for calculating the ROI of existing efforts and planned investments in improving how you manage your online presence.
Calculating the ROI of Online Review Management
For these calculations, use recent market research1 to establish the impact of positive and negative reviews on revenue. There are two factors to calculate, which are revenue lost from negative reviews and estimating revenue that could be generated by better online review management.
Calculating Revenue Lost
Determine how many negative reviews of the business are listed on page one of Google search results compared to the competition. Using the data from a recent study,1 X will equal the percentage of customers lost on average for the number of negative reviews present:
- 9% of customers for 1 negative review visible
- 1% of customers for 2 negative reviews visible
- 2% of customers for 3 negative reviews visible
- 9% of customers for businesses with 4 or more negative reviews visible
Use this percentage as X in the formula Y=X/(100-X). Y will be the percentage of customers lost based on the company’s negative reviews
As an example, a business with four or more negative reviews could have 232% more new customer contacts if negative reviews were not driving customers away. These numbers can be very attention-grabbing for upper management and investors.
Calculating the Return on Investment
Of course, every new customer contact does not generate a sale. We will need to determine the conversion rate with this formula: Y = X / T or [conversion rate = converted leads / total leads]
Armed with existing data on the number of clients and average order value per client, calculate the projected revenue increase if negative reviews were effectively managed using the current conversion rate.
Determine the cost of purchasing review software and employee efforts to manage reviews.
Use this formula to calculate the ROI: ROI = (E – S) / S or [ROI = (projected additional revenue earned – investment in online reputation management) / investment in online reputation management].
Outline an Action Plan to Improve Review Responses
Once you understand how much impact negative reviews are having on your earning potential, your business will need to make an investment in tools and resources to improve your bottom line. Some of the factors to consider will include:
- How large the current volume of online reviews and social media content is that needs to be managed
- How you plan to scale up your online review management for planned growth as your online reputation improves
- Whether a single manager will respond to customer feedback or if a representative from each department will be involved in the team
- Actively planning for new content and encouraging positive reviews to dilute or diminish the impact of older negative reviews
- Which sites will be monitored and will a full time position be needed to effectively monitor all review sites and take action on negative reviews
Investing in Better Online Review Management
Once you understand the impact of how your business rates on review platforms and the impact to your bottom line, you can make an informed decision about investing in software, systems, and services for monitoring reviews and customer feedback. Your business can assign staff to respond to online reviews and thank customers for positive comments. You can also more effectively respond to negative reviews and reduce their impact on your first page results.
Take the next step and schedule a free demo of ReviewInc review management software and discover how easy and cost-effective it can be to actively manage your reviews online. Our platform provides real-time monitoring of all major sites and makes it easy to respond quickly to a negative review before it gains traction. With full visibility in a single service, ReviewInc is changing how businesses manage, protect, and grow their online reputations. Contact us today to demo the best review software that offers reliable return on your investment.