The Cost of a Bad Online Review for Your Small Business

While the Internet can help entrepreneurs spread the word about their business’s products and services, it can also be used by detractors to broadcast negative experiences. If you don’t manage your online reputation, a bad review can cost your business revenue and future customers.

Small businesses should take advantage of the level playing field that the Internet provides because unlike traditional advertising, “The company that has the largest budget wins. However, managing your online reputation can be done very affordably,” says Andy Beal, author of Repped: 30 Days to a Better Online Reputation and CEO of social media monitoring company Trackur. Here’s how much a bad online review can cost you, and how reputation management can minimize its effects.

Turning a Bad Review Into a Positive Experience

Recover from a bad review of your business by following these tips.

Calculate the approximate cost. Beal recommends the following formula:

1. To calculate the average lifetime cost of an unhappy customer, multiply the cost of your product or service by the number of times the average customer buys the product or service. For example, if the average customer buys a $30 service from you annually for five years, the average lifetime cost of an unhappy customer is $30 X 5 = $150.

2. It’s impossible to know exactly how many people see a bad review and take their business elsewhere, but you can estimate the potential damage each time it happens. The higher the online review appears in search results, the more likely it is that potential customers are going to see it. If the average lifetime cost of an unhappy customer is $150 and only one potential customer per month sees the bad review and decides not to buy your services, you’re losing out on $150 in future sales per month or $1,800 in future sales per year.

Be proactive. Bad reviews can be offset by positive reviews and other online information about your company. “Create social media profiles so they push a bad review down lower than the first 10 search results on Google, which is where most potential customers look,” says Beal. Every month, Google your company’s name in search of complaints and check social media and online forums for customer concerns.

Provide great service. A lot of bad online reviews can be avoided if you create a good customer experience. For example, if your customers demand immediate assistance, an online chat tool lets them speak with a company representative instantly. “Always follow up to make sure customers are satisfied,” Beal says. “Many people won’t volunteer that information to you, but will instead go home and write a negative review.”

Offer to make amends. Volunteer to give dissatisfied customers a refund or discount. The cost of doing so is almost always less than the cost of a bad online review. If a customer complains on social media, address the complaint publicly and offer to speak privately with the customer about how the situation can be rectified. By addressing the complaint on the forum other potential customers will see the interaction and know that you care about making your customers happy.

Be wary of fake complaints. It’s not uncommon for competitors to write fictitious bad reviews in an effort to undermine the competition. “Try to get as much information as you can about the alleged bad service,” Beal says. If it becomes evident that a transaction never occurred, you might say: “We’d love to assist you with this, but we’ve been unable to locate this order. Please reach out to us and we can resolve this for you because you may have us confused with someone else.”

The way you handle a customer’s complaint can cost you customers or win them, says Beal. “If a customer is happy they’ll tell five people. If they’re unhappy they’ll tell 10. If they were unhappy but then you did something amazing to make them happy again, they’ll tell 20.”

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