How to Calculate ROI for Reviews
Online reviews have become a critical source of strategic insights for businesses in every industry. Whether you are measuring customer service, benchmarking against competitors, or searching for hidden opportunities, online reviews provide real-time consumer insights that few other sources can offer.
Reviews stand to have an incredible impact on businesses when marketers can accurately measure value and calculate ROI. According to SOCi’s 2021 Localized Marketing Benchmark Report, reviews are the number one factor consumers consider when making purchasing decisions. Unfortunately, tracking the impact of positive ratings and calculating ROI for reviews is challenging for many businesses.
Why is it so hard to calculate ROI for reviews?
A review strategy is a long-term investment. Unlike short-term marketing goals, such as acquiring new customers through online advertising, reviews have incredible longevity. A review posted six months ago might be just as valuable as a review posted last week, but with a limited ability to attribute sales to online reviews, results can be difficult to track.
Calculating ROI for Reviews: The Formula
To calculate ROI for reviews, we need to look at revenue earned and revenue lost. Research from Moz shows that companies risk losing as many as 22 percent of customers when just one negative review is listed on page one of Google results, and 44 percent of customers when two negative results are posted.
Based on this data, it’s possible to use a simple formula to measure lost revenue from negative reviews:
Y = X / (100 – X)
Y = Average percent of customers lost (based on Moz data)
X = How many more customers your company would have had (as a percentage)
Using the data from Moz that we references above, the formula for measuring lost revenue from negative reviews would look like this:
Y = 22 / (100-22)
Y = .2
The company in this example would have potentially had 22 percent more business if its Yelp ratings were higher.
Now let’s take a look at how to track the results of positive reviews using basic review management techniques.
Review Management ROI
Calculating the ROI from positive online reviews is challenging. It requires knowing how much investment your business has put into managing online reviews, the number of leads your company has gotten from reviews, the average customer spend and number of visits, and your lead conversion rate.
Be prepared by having the following metrics on hand:
- Average order value per customer
- Average number of transactions
- Length of time customers stay with your business
- Number of new website visitors each month
- Conversion rate
Some of this information is available through your website analytics dashboard. With strong commitment from company leadership, you should be able to demonstrate the value of reviews over the long-term by comparing positive review sentiment with online conversion rates. However, accessing and understanding these metrics requires you to calculate ROI for an advanced review management strategy. For help navigating this extensive process, and to get a clearer understanding of the value that online reviews bring to your business, contact SOCi for support.
To learn more about the benefits of ratings and reviews, and highlight how positive reviews will affect your multi-location business’s ROI, read What Is the ROI of Your Ratings and Reviews?