Yelp and Your Business

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I use Yelp almost daily. Not consciously, but I’m moving soon and Trulia, a website I often use to search for house rentals, utilizes Yelp to provide ratings for local amenities. Therefore, my very first impression of an area’s restaurants and other businesses comes from Yelp. Granted, I’m not going to choose my next home on the basis of how well the nearest pizza place is rated, but I have found myself shying away from areas where I can’t find many restaurants with an average review over three stars. I can also guarantee you that when I move this summer, I’ll be trying out the most highly rated restaurants first, searching for my next batch of local go-to places.

This is obviously just my experience—not all consumers are obsessive digital scouts inspecting potential new homes like I am. Some may just be hankering for a burger at lunchtime, and they do a quick search on Grubhub. What comes up? A list of burger joints, and how Grubhub users have rated each. Click on an option, however, and the Yelp rating also appears for comparison. This is how I found my favorite Chinese place out of the several within walking distance of my office. I can’t help it—unless I have some overwhelming reason to disregard a business’s online rating (for example, if several different friends have raved about it), I will not visit a restaurant with fewer than three and a half stars. Four or more is preferable. And thanks to smartphones, people aren’t only checking ratings from their homes and workplaces—they’re checking from the street, as they’re walking or driving by the restaurants themselves. If you’re trying to choose between two restaurants on the same block, and one has a two-star rating and the other has a four-star rating, which would you choose? Which do you think your customers would choose?

The impact of Yelp ratings isn’t only apparent via anecdotal evidence. There have been actual studies. A 2011 study by Harvard Business School faculty member Michael Luca found that a one-star increase in a restaurant’s rating on Yelp can result in a five to nine percent increase in revenue. Interestingly, this doesn’t hold for chain restaurants. A small, family-owned restaurant’s Yelp review has a bigger impact than a chain restaurant’s Yelp review. The reason for this is pretty obvious—thanks to marketing and years of experience, everyone knows what to expect when they walk into a McDonalds. But a local restaurant in a small town you’re passing through on vacation is a mystery—a mystery Yelp can help solve. What a great solution, right?

There is some contention on this matter. Not everyone who uses Yelp is honest and ratings can be skewed. There have been cases of a business’s rating being brought down by petty grudges and dishonesty. Or perhaps fans of a competing restaurant will give a place a series of bad reviews. The skewing of ratings can also go the other way—perhaps the family members of a restaurant owner all give it five-star reviews. Like everything on the Internet, Yelp ratings should perhaps be taken with a grain of salt, especially if only a few reviews exist. For businesses with many reviews, this seems less likely to be a problem, as biased reviews will typically be balanced out by fair ones.

Yelp is also aware that problems exist and takes measures to stop people from gaming the system. For example, reviews may be filtered out of a business’s rating if they are judged fishy by Yelp’s filtering system.

Time for another anecdote. A couple of years ago, I was in desperate need of a haircut. I’d been putting off getting one for months and my hair was so long I was concerned I might choke on it in my sleep. Finally, a new salon opened a few blocks from me. It was clean and colorful and their grand opening celebration included a generous discount for new customers. I went, and I got one of the best haircuts of my life. Because they were a new business and I had such a wonderful experience, I wrote them a five-star Yelp review. It remains the only Yelp review I have ever written. For that reason, it’s been filtered. Thankfully, the salon is doing just fine without my five-star review, but I remember speaking to the owner about the situation when I went to get my next haircut months later. She was distraught—Yelp was filtering a lot of their positive reviews, presumably because they were from people like me, locals who didn’t make a habit out of writing reviews but wanted to help a great new place get on its feet.

Obviously the system is imperfect. But, there’s at least a clear system of logic behind the imperfection. Playing the numbers—which is what these review filtration systems do—if someone has written only one Yelp review in two years, it’s certainly more likely that she did so as a favor to a friend or a family member, rather than because she loves this one small business so much more than any other small business ever. In my case, they’re wrong, but I understand. I don’t hold a grudge.

I think the take-away here for business owners is to monitor your reviews, but not to panic if a few positive reviews are filtered out. As stated on Yelp’s FAQ page: “The filter continually reevaluates its decisions based on the information at hand. As a result, it’s fairly common to see reviews come and go as the filter picks up new information. Either way, business owners should probably focus less on any one review and more on their entire body of reviews. Reviewers, in turn, should contribute to the site and give the filter a chance to get to know them over the long-term.

Owners or managers of businesses can set up free business accounts at Yelp. This allows you to monitor the reviews you receive, to post additional information about your business—such as photos—and even to respond to reviews. You’ll have the opportunity to thank people for positive reviews, or even to make amends in the case of a legitimate negative review.


Returning to the above-mentioned Harvard Business School paper, one important take-away that all small business owners should keep in mind is that consumer reviews, such as on Yelp, can serve as not only a supplement, but even as a replacement for traditional marketing. In this era of constant connectivity, high customer ratings can do much more for your business than an ad.

And the best way to keep those ratings high? Let’s return to my hair salon example. Today they have nearly a perfect five-star rating on Yelp, even with sixteen positive reviews—including my own—having been filtered. They’ve accomplished this not by panicking over the perceived unfairness of Yelp’s filtering system, but by providing consistently great service. As always, it comes down to running your business well and keeping your customers happy. Do that, and chances are the reviews will follow.










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About the Author

Editorial Team is a leading industry news site for the point of sale and payments industry.We are also the go-to resource for small business owners that want expert tips and inspiration on how to run a successful business. Collectively, our team of experts has decades of POS, payments, and small business experience.