He shows that the market responds strongest to changes in restaurant ratings when a restaurant has many reviews. First, if each review represents a quality signal, ratings with more reviews will contain more information. His findings show that the strong influence of Yelp for independent restaurants turns close to zero for chains, for which more information is available.įinally, Luca examines whether the observed influence differs, depending on the information provided. One additional Yelp star leads to sales growth of 5-9 percent for independent restaurants. In a related study, Luca found that a restaurant's average rating has a strong influence on sales. User reviews may redirect consumers to higher quality restaurants, with the result that lower grade restaurants close or have to improve their quality to meet changes in consumer demand. Restaurants that are not accredited by experts sell out 27 percent more often if they earn an extra star on Yelp.Īccording to the study, the closer the link between restaurants and customers through reviews, the greater the positive effects on business as a whole. This impact is strongest for restaurants for which information is the scarcest. In a recent study, Anderson and Magruder show that higher Yelp scores help restaurants sell tables 19 percent more frequently during peak periods. This can help users feel more connected to the business and if this community engagement brings in a considerable amount of business, it can be viewed as a worthwhile investment of resources.
They should also engage with, and respond to, both positive and negative online customer reviews.
Restaurateurs should also build a community to promote a positive image of their businesses through, for example, regular updates. They can do this by organizing events for influential consumers or more simply by handing out business cards encouraging customers to review the restaurant online. We recommend that restaurateurs try to ensure that customers post reviews. Restaurant managers need to be mindful that these reviews are often trusted by customers and may result in them trying an outlet due to hype or out of curiosity. However, unlike classic WOM, reviews are available to everyone at all times. One benefit is that restaurants can track consumer opinions in a way which would not be entirely feasible with classic WOM communication. Restaurant reviews offer opportunities and risks. A review platform can create or reinforce a communal spirit and influence the consumer’s decision. Group influence: This is significant as the views expressed by peers in a review can affect the consumer's perception and behavior, even though the individual has not yet visited a particular restaurant.Buyer’s remorse: Turning to reviews reduces the potential regret a consumer may have after spending a non- trivial amount of money on a dining experience.Creating a review platform thus reduces search costs and helps consumers source information about restaurants easily and quickly. Search-time reduction: Consumers find it difficult to sift through information and options when confronted with an abundance of products.Risk reduction: Consumers use reviews to reduce the likelihood that a purchase will lead to disappointment or, at the very least, reduce the severity of a potential disappointment.there are four main reasons why customers read reviews on these platforms: Therefore, restaurant customers are more likely to seek external information sources when they have not experienced it themselves.Īccording to Parikh et al. Academic evidence suggests that product information is more valuable for services than goods as they appear riskier. Online customer reviews have also become significant in swaying consumer decisions. Websites such as TripAdvisor and Yelp offer user-generated content in the form of electronic word-of-mouth (WoM) services, which are often considered more reliable and trustworthy than adverts from retailers. The internet allows customers to share their views and feedback cheaply and efficiently with a large audience. With one click, they can solve an information asymmetry problem in which service providers are better informed than customers. Online customer reviews are valuable as they allow potential consumers to get in-depth information from others for a relatively low cost and little effort. Dining out, going for a movie, or enjoying a bottle of fine wine are all ‘experience goods’, that is, they have to be consumed or experienced in order for them to be assessed and evaluated.