ROI of Online Review Management

How To Prove the ROI of Online Review Management

If you're a digital marketing agency prospecting for reputation management clients, demonstrating the ROI of online review management will close the deal.
Reading Time: 5 minutes

What’s the toughest part of review management as a marketing agency? It isn’t getting the review. It isn’t even dealing with a flood of negative reviews from a horde of angry customers. No, the hardest part of online review management is demonstrating the ROI of online review management. It’s a difficult thing to accomplish, but as you’ll soon see, it is possible.

Risks of ignoring the ROI of online review management 

If you aren’t currently sharing or reporting on the ROI of your review management efforts, it’s not because you aren’t doing an exceptional job (you are). It’s also not because you don’t know what you’re doing (you do). But if you aren’t the chances that someone else is going to take credit for your effort is pretty good. 

For example, if you’re serving a large organization, you’ll have competition from a variety of internal and external sources. At any given time, each of these “competitors” is looking to credit their work for an improvement in revenue. 

When it comes to demonstrating the ROI of online review management, you can make a case for the obvious. Decision-makers want to know if the work is worth their continued investment.

The hidden reason is much more nuanced. You’ll need to demonstrate the value of online review management because those around you will take credit for your work if you don’t. How are you supposed to do that? How exactly do you go about determining or proving the ROI of online review management services?

1. Sell review management to the C-suite

It’s a good idea to approach this from a few different angles; to do that, you’ll need to identify: 

  • Your role in the review management process: If you’re an agency, you’re responsible for selling your client (via the executives) on the strategy for their review management campaign. You’re also responsible for implementing the work and managing the process. 
  • What if you’re part of an in-house team? Same thing —you’ll need to identify the information covered above, only it’s likely to be a bit more difficult. If you’re an in-house customer service or marketing team, you will compete with other departments to maintain your current budget. 

Depending on the silos and internal politics at your company, the other departments may not be as willing to share all of the information you need to sway key decision-makers. That said, where there’s a will, there’s a way (more on that later).

The decision-makers in your organization — the owner, executives, and directors, all have their own set of goals and objectives. Specific and actionable goals like increased traffic, revenue, profit, etc., are simple enough to achieve. If you do your homework, you’ll have a clear idea of the potential impact this will have on your company. You’ll need to make sure that: 

  • You’re achieving your decision-makers’ desired outcomes
  • Your team (agency, dept, in-house team) receives ample credit for those outcomes
  • You accommodate the individual goals that are also vying for attention (e.g., a career-defining moment, increased budget, avoiding layoffs, etc.). 

Your ability to manage macro and micro, group, and individual goals will determine your ability to prove the ROI of review management. 

2. Show don’t tell 

Telling someone something isn’t the same as showing them. When you sell decision makers on the ROI of review management, you also sell them on your ability to achieve these results.

They’re going to need evidence from you showing that you have the appropriate systems and procedures in place to manage your review management campaigns effectively. If you’re part of a larger organization, you may also need to verify that certain legalities have been taken care of. 

This means you’ll need to show that your team can: 

  • Manage the current volume of reviews and content
  • Scale and manage reviews over time 
  • Respond appropriately to customer feedback across all profiles
  • Demonstrate the specific impact reviews have on the business
  • Amplify positive impact while minimizing the negative impact

All of this needs to be discussed ahead of time and demonstrated during the campaign. Management is an essential part of demonstrating the ROI of review management. 

Calculating the ROI of your review management efforts

Start with these two metrics: 

  1. Lost revenue (estimated). The revenue your client has lost as a result of negative reviews. This metric, at its core, is an estimate. The vast majority of customers won’t tell you if or why they’ve abandoned your business. This means our estimates will rely on research data.
  2. Earned revenue. The revenue from your positive reviews and review content via review sites, social media, advertising, case studies, etc.

Lost revenue from reviews

Let’s look at lost revenue first

Research from Moz found businesses risk losing as many as:

  • 21.9% of customers if you have just one negative review listed on page one of Google
  • 44.1% of customers if you have two negative results
  • 59.2%of customers with 3 negative results
  • 69.9% of customers with 4 negative results

So we’ll use this data for our formula:

Y = X / (100 – X)

Y = How many more customers you could have had (as a percentage)

X = Average percent of lost customers for businesses like yours

Where are we going to get X? From the data provided by Moz! If you have one negative result, X would be 21.9%, if it’s two 44.1%, and so on. Let’s say you’re working with a client with four negative results. Your formula would look like this: 

Y = 69.9 / (100 – 69.9)

This means Y = 2.32 or 232% more business! Yikes. 

When you look at the data it makes sense, but it’s still pretty devastating. If this business isn’t on life support now, it will be if this disaster continues. These negative reviews are killing this business. With more data (traffic numbers, average order values, conversion rate, etc.), you’ll have concrete numbers you can use. Next, let’s look at earned revenue.

Earned revenue from reviews

There are several different methods you can use to calculate this data. This method focuses on data points clients are far more likely to share. Here are some basic formulas you can use in your calculations:

Conversion rate: Y = X / T  or [conversion rate = converted leads / total leads]

ROAS: Y = V / S  or [Return on ad spend = Revenue / marketing cost]

ROI:  Y = (E – S) / S or [ROI = (Revenue earned – total marketing expense) / total marketing expense]

If you’re an agency using these formulas to sell review management you’ll need the following data:

  • Investment (the total cost, e.g., your retainer or per lead cost, and third-party tools and expenses)
  • Leads from your review management profiles (e.g., Yelp, TripAdvisor, Houzz, etc.)
  • Average order value (per client)
  • The average number of transactions (monthly, quarterly, annually, etc.)
  • Your conversion rate

Using these basic formulas and the numbers above, you can provide clients with an accurate estimate of their expected return on investment. The following stats below may also help you estimate or benchmark your efforts: 

  • Research from Reevoo found “businesses displaying ratings and reviews experience average revenue uplifts of around 18%.” Other sources estimate the lift from online reviews to be even higher. 
  • Northwestern University’s Spiegel Research Center analyzed 57,000 reviews from anonymous consumers and 65,000 reviews from verified buyers of more than 13,500 unique products in diverse categories. Their findings mentioned reviews could increase conversion rates by 270%!
  • Research from Harvard University found that restaurants experienced a significant lift in conversion. “Each rating star added on a Yelp review translated to anywhere from a 5% to 9% effect on revenues.” Pretty significant, right?

Final considerations for calculating ROI of review management

Online reviews matter very, very much. Quantifying the ROI of online review management takes work, but as you can see, it is possible. But it’s not an exact science. Tweak the recommendations we’ve made above to find what makes the most sense for your agency and clients. 

Remember, the toughest part about review management t isn’t getting the review. And it isn’t dealing with negative reviews – that can be fixed. It’s demonstrating the value and the ROI of review management to decision-makers. 

If decision-makers can’t see it, they won’t invest. But as we’ve shown, the ROI is there. Focus on the ROI of online review management and you’ll win big with your clients.

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