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: 10 minutes

Updated: 2/10/2020

What’s the toughest part of review management? 

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 something unexpected. 

It’s demonstrating the ROI of online review management. 

It’s a difficult thing to demonstrate, but as you’ll soon see, it’s absolutely necessary.

Ignoring the ROI of online review management means you'll lose

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). On their own, these are legitimate reasons to validate your performance. But that’s not the real reason. 

Your competitors are looking to take (steal) the credit for your hard work.

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 your competitors are looking to accomplish several specific goals:

1. Internal depts. want to maintain their current budget. Corporate depts. and teams are under a tremendous amount of pressure to justify their usefulness. When internal teams are successful, their budgets are maintained, team members keep their jobs, and the work continues. When they’re unsuccessful, budget cuts and layoffs are often the result.

2. Internal depts. want to increase their current budget. A select number of organizations like Accenture or Amazon subscribe to the “if you’re not growing you’re dying” mantra. Their corporate culture is a hyper-competitive form of social Darwinism. The amazing results you achieved yesterday will cost you your job today. Teams in these environments are expected to move up or move out.

3. Individuals are looking for a career-defining moment. In every organization, employees are jockeying for position. They need results to snag an upcoming promotion, win a coveted salary increase or snatch that corner office.

4. External competitors are looking to attract a bigger share of business from the organization. It’s common for organizations to work with a mix of external service providers. It’s also common that there’s a bit of overlap; your agency and a local PR firm both offer review management services.

When it comes to demonstrating the ROI of online review management, you can make a case for the obvious. Decision-makers want to know 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?

You can't take credit for your work without marketing attribution

When I mention marketing attribution I’m referring to a process that identifies a set of customer actions (e.g., events or touchpoints) that contribute, in some way, to the outcomes you want. This process assigns a value to those actions.

I know, I know, marketing 101. 

I’m not sharing this to be condescending and I’m not trying to insult your intelligence here. I want to make sure we’re on the same page because these definitions are our starting point.

Okay.

With marketing attribution you can:

  • Create a comprehensive list of touchpoints. What do surveys, in-store visits, sales calls and website conversions have in common? They're all touchpoints - the points where customers interact with organizations.
  • Identify high and low-quality touchpoints. When you have a comprehensive list of touchpoints, it's easier to determine what is or isn't working. Imagine your positive reviews have given you a nice conversion lift. Your reviews bring in fresh leads, but they're not converting. After speaking with customers, you realize sales reps are making promises the organization can't keep.
  • Assign a value to each touchpoint or event. Imagine that you make a sale after every ten PPC clicks. Using simple math, you'd be able to determine the value of a click in your analytics tool of choice. Now imagine that you're able to assign a value to the vast majority of each touchpoint.
  • Optimize campaigns and funnels. With attribution data in place, you're able to quantify the value online reviews bring to the table. This hard data enables you to (a.) show decision-makers your ORM campaign is working and (b.) provide the leverage you need to request a bigger budget.

Just one problem.

You’ll need an attribution model. Attribution models determine which touchpoint gets credit for what. An important distinction to make when you’re determining the value of online review management. If you’re working with a client, they may already have a preference for the model they choose.

success attribution model visual graphic

You can take the single source, fractional or algorithmic approach. Let’s say you’re using a service like Google AdWords or the Model Comparison tool in Google Analytics. You can use their tools to identify the attribution model that works best for you.

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With your attribution models in place, you can:

Calculate the ROI of your online review management campaigns

What specifically are you looking for? 

And how exactly do you go about calculating the ROI of your online review management campaigns? You focus on two distinct areas.

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.

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. 

4 negative results on Google SERP

Your formula would look like this: 

Y = 69.9 / (100 – 69.9)

Which 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

There are several different methods you can use to calculate this data. I’ve opted to focus on methods with data points clients are far more likely to share. 

Here’s a list of metrics you’ll need to calculate earned revenue:

  • Average order value (per customer)
  • Average number of transactions
  • How long customers stay with the business
  • Total number of new website/offline visitors per month
  • Your conversion rate

Let’s plug some sample numbers for a B2B client, a small business accountant, into this figure.

  • Average order value (per customer): $2,000
  • Average number of transactions per year: 2
  • How long customers stay with the business: 4 years
  • Total number of new website/offline visitors per month: 2,632.5
  • A conversion rate of: 2%

$2,000 * 2 transactions per yr * 4 years = $16,000 lifetime value (per customer)

52.65 customers * $16,000 = $842,400 in projected revenue. 

These numbers are impressive.

This revenue isn't enough to overcome agency-client resistance

Why?

If you’re like most digital marketing agencies, you’re asking prospective clients to spend (invest) money! Experienced agencies immediately see the problem.

  • Small businesses are desperate to preserve positive cash flow
  • Medium businesses are interested in spending more with providers who can take them to the next level
  • Large businesses have long sales cycles and often require teams of people to close a deal

Which is why most agencies focus on the small-to-medium market.

This is a problem.

Small and medium-sized brands are looking for a few specific things from your agency.

  • Minimal risk: You know the story. Agencies receive a hefty retainer, clients receive zero leads. This is the kind of risk that makes clients hesitate when agencies try to close the deal.
  • A strong value proposition: Clients want a compelling answer to "what's in it for me?" The ironic downside is the fact that agencies are often unable or unwilling to provide clients with a strong value proposition. There's nothing special about their agency, so there's no reason clients should choose them.
  • A compelling offer: Clients want a deal. It's simple economics. They want to receive $2 of value for every $1 they spend. The best agencies provide clients with a compelling offer that satisfies this need.

Here’s a method you can use to give your clients what they want.

1. Use your formulas

The formulas above are helpful, but clients wonder about the return (after your investment is calculated). 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. Third-party tools and expenses)
  • Leads from your review management profiles (e.g., Yelp, TripAdvisor, Houzz, etc.)
  • Average order value (per client)
  • 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 (I’m assuming that you’re a competent marketer).

2. Minimize risk

The more risk your clients shoulder, the lower their return on investment. Increased risk acts as a barrier that increases buyer’s remorse. You can reduce risk in one of two ways:

  • Assume the risk yourself. Money-back guarantees or extended warranties are examples of assuming risk on behalf of your clients. Most agencies prefer to avoid this approach, but it's remarkably effective when done well.
  • Restructure your offer so the risk is minimized. Change the offer or structure of the deal, so both you and your clients benefit (e.g., per lead pricing).

How does this help?

Asking for a $1,500 to $6,000 per month retainer for review management is a tough sell. It’s doable, but it’s difficult to sustain if the results aren’t there immediately. This is the route most agencies take.

The less risky option?

A per lead model. This option is instantly attractive to most clients, especially when contrasted with sizable retainer agreements from other agencies. It’s easy for clients to swallow spending $20, $50 or even $150 for a lead.

It’s less risky, provides instant results for your clients as an agency.

What about profit?

3. Maximize profit

You’ll want to maximize the profit for your clients and your agency. The ideal pricing or compensation model maximizes the return for your clients and your agency. Per lead pricing is a good model because it focuses client attention on the KPIs that matter most to them (e.g., clicks, leads, visits, conversions, etc.).

It’s also very profitable for agencies. 

Think about it.

Your client pays you $1,500 per month with no minimums or maximums for the results you produce. You’re paid the same whether you produce 14 leads or 14,000.

Per lead pricing changes that. 

Now imagine that you’re able to produce 750 leads per month for one client at a per lead cost of $50. You’re suddenly bringing in $37,500 per month (gross).

See the difference?

This is why the per lead model is so enticing for clients and agencies, it:

  • Minimizes risk to you and your clients
  • Maximizes profit to you and your clients
  • Has unlimited financial upside for you and your clients
  • Enables agencies to produce a significant amount of revenue from a tiny client roster
  • Aligns agency and client interests

It’s powerful stuff.

What about review management? You can integrate this in any way you see fit. 

1. Charge clients a nominal fee for review profile management (with the per lead model as your main moneymaker)

2. Offer review management as a free bonus to rapidly boost trust, increase retention, and boost profitability.

What’s really incredible about all of this is the fact that your client’s review management campaigns boost the performance of your per lead campaigns! 

Here’s how it works.

Step #1: Choose specific verticals to specialize in – outdoor, banking, retail, finance, real estate, etc.

Step #2: Create (and test via analytics) landing page offers, layouts and formats for each specific vertical. Get to know what works for each industry. Create three categories of landing pages for cold, warm and hot traffic.

Step #3: Reach out to prospects in your target verticals with a compelling offer.

Step #4: Use a plugin like Grade.us Review Stream to promote your client’s reviews on your battle-tested landing pages.

Step #5: Drive traffic to the landing pages you have set up for your clients. Convert leads for your clients, then deliver those sales-ready leads to your client’s inbox.

Step #6: Invoice, rinse and repeat.

Use this system and your client’s reviews you’ve generated using a review management tool 😉 to boost conversion rates and revenue rapidly.

Can reviews boost conversions on your lead gen landing pages?

They most definitely can.

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%!

Nice!

Research from Harvard University found that restaurants experienced a significant lift in conversion.

“Each ratings star added on a Yelp review translated to anywhere from a 5% to 9% effect on revenues.”

Pretty significant, right?

Okay then. How would this affect our $842,400 in projected revenue from our earlier example if we used Reevoo’s conservative 18% lift? 

Revenue balloons to a whopping $994,032! 

Yes!

What if we used Northwestern’s numbers? We get $3,116,880! That’s a sizable lift in revenue. 

Massive!

Online reviews matter very, very much. Quantifying the ROI of online review management takes work, but as you can see, it’s worth it. Here’s another important detail to cover.

When they’re structured properly, online review management campaigns pay for themselves!

What a time to be alive.

The ROI of online review management is there. Now you can prove it

But it’s not an exact science.

Variables like sentiment – how your customers feel about your product, service or business are difficult to measure. But that doesn’t mean the value isn’t there. 

Surveys, focus groups and customer interviews enable you to draw out the qualitative data. The formulas above give you the quantitative data you need to make a solid case for online review management. It’s the best of both worlds. 

What’s the toughest part of online review management? 

It isn’t getting the review. It isn’t dealing with negative reviews from an online lynch mob – that can be fixed. It’s demonstrating the value, the ROI of ORM to decision-makers. 

If decision-makers can’t see it, they won’t invest. 

When you’re missing the qualitative and quantitative data you need, it’s easy to feel like your budget is being wasted. But as we’ve seen, the ROI is there.

Focus on the ROI of online review management. 

You’ll find a successful campaign is easier than you expected.

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