Dawn Wigginton is a dynamite online and offline media mind here in Louisville. We were chatting recently and she had a client recently who asked her how much reach and impact online reviews, particularly a bad review on Facebook had on a business.

While Dawn and I discussed online reviews a bit, she came up with about as good an explanation as anyone could muster. Here’s a version of how she responded:

Negative online reviews have become the number on factor in consumers forming a bad opinion about a product or services. Statistics show that nine out of 10 consumers base purchase decisions on reviews and 80 percent of those buyers will change their purchasing decision based on negative evaluations. With two-thirds of consumers sharing their experiences and opinions on social media, recent data shows that only 14 percent of consumers will even consider buying from a business that has two stars or less on online reviews and 19 percent will not buy after reading just one bad review.  

According to Review Trackers, Facebook has become a major source of online reviews and 55 percent of consumers consider the social network a common place to learn about brands. This year’s index uncovered how reviews and recommendations play a role in the path to purchase. Facebook users report that reviews are more reliable than posts or comments and 71 percent of them trust those reviews.  

online reviewsFurther and according to Nielsen, 68 percent of consumers trust online opinions regarding products and services. That means that when someone is looking for a new business, possibly after moving, they will most likely look to find an online review of a new company to help influence their decision. (And this applies to anything from cable providers to health care insurance to barber shops and mechanics.)

In fact, for local businesses, 88 percent of people read online reviews before visiting them, while 39 percent read reviews on a regular basis.

Research conducted by Right Now Technologies in 2006 found that 68 percent of customers would not return to a business after a negative customer experience. In just two years (up to 2008), that number jumped up to 87 percent. In 2011 it was 89 percent.

On average, a single negative review will cost you 30 customers, according to a 2009 Convergys Corporation study. That’s just from a single online review. Even if you only have 100 bad customer experiences in a year, and only one tenth of them decides to write about it online, that means you’re losing 300 potential customers.

What this means is companies must take a proactive approach to negative customer feedback. If people feel like their comments are not being heard, they are significantly less likely to change their opinion and at times, become even more vocal. The 2011 Harris Customer Experience Impact Report showed that 50 percent of customer give brands a week to respond to a question before they stop doing business with them. And that was five years ago. Now, it’s more like a few hours.

So without even reviewing newer research in books like Hug Your Haters by Jay Baer, we can conclude that coming into 2016 one negative online review will cost your company around 30 potential customers. If your average customer spends $200 with you, you’re losing $6000 per year for every negative review.

If you extrapolate out the lifetime value of a customer, if your average customer spends $8,000 over the course of their relationship with you, you’re losing a potential revenue stream of $240,000 for a single negative review.

So yeah. Go mind your online reviews, people.

For more from Dawn, especially to work with her on your social and digital advertising, you can find her at dRAE Media and Marketing or on Twitter at @dawnwigg.

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