Being Listed on Yelp Gives Small Businesses an Edge

By Rieva Lesonsky

Is your small business on local review and ratings sites such as Yelp.com? If not, you could be missing out in a big way. In fact, a Harvard Business School professor recently did a study which showed that being on Yelp actually gave small independent businesses an advantage over larger, better-known chains.

In the study, reported on Harvard Business Review’s blog, Michael Luca reviewed records on all 3,582 restaurants in Seattle between 2003 and 2009. He found that when independent restaurants’ Yelp ratings rose, the restaurants’ sales also increased. The more good reviews the restaurant earned, the more effect reviews had on sales.

Luca says his data suggest that if every independent restaurant in Seattle was on Yelp, the result would be a shift in revenues with the average big chain restaurant seeing a 5 percent sales decline. In other words, by making potential customers more aware of independent restaurants, Yelp can attract attention to them and away from the bigger, more familiar chains.

“Although my research focused on restaurants, it’s likely that Yelp and other consumer-review sites are helping (or have the potential to help) independent businesses in a variety of industries, from retailers to tax preparers to tutors to dental practices,” Luca wrote, adding that he believes the most dramatic changes would occur in industries where consumers are excited about writing reviews and where traditional advertising is expensive.

I find this fascinating, especially since so many independent business owners are intimidated by Yelp. Yes, if your business is on Yelp, you could get some bad reviews, but Luca’s study suggests that the benefits of being on Yelp far outweigh the risks.

Sites like Yelp help consumers spread their knowledge of the products and services you offer and how they differ from the competition. If you’re not already listed on Yelp or other rating and review sites, take some time to learn how they work and get involved. It’s a simple step that could make all the difference in your business’s profile, image—and bank account.

Image by Flickr user Mike Licht (Creative Commons)

This entry was posted on Friday, December 23rd, 2011 at 6:00 am and is filed under Marketing, Search Marketing, Small Business, small business, Social Media, social media. You can follow any responses to this entry through the RSS 2.0 feed.


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