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Small businesses often believe they are at the mercy of reviewers in online review and recommendation sites. And the more businesses think they're being misrepresented online, the more vocal their dissatisfaction becomes.

Recently, several small businesses filed a class action lawsuit claiming that review site Yelp.com was removing negative reviews and reinstating positive reviews for paying advertisers on its site. In response, Yelp made some adjustments, including adding a function where advertisers on Yelp can no longer post their favorite review at the top of the page.

But for many small businesses without the time or finances to respond to complaints or bad reviews on sites like Yelp, Angie's List and others, they believe they have little in the way of recourse. Oh, they can publicly refute and berate those bad-mouthing customers and third-party review sites, but without the proper tools or training, this action will backfire. And negative reviews can have a big financial impact on a small business. According to BIG research, 92.5 percent of adults say they regularly or occasionally research products online before buying them in a store.

While some business owners don't mind addressing feedback on those open review sites, others are seeking a new reputation management model to proactively find and address what customers are saying--like the "Hug It Out" concept on HBO's Entourage. 

Heather Burns, owner of online retail site SmartMomma.com, realized that as an online retailer, reviews were crucial to her company's e-commerce success. SmartMomma began as an informational website for pregnant women and new moms, evolving into a successful online retailer with a storefront in Raleigh, N.C.

With sales up more than 100 percent compared to last year, Burns attributes a portion of that success to customer reviews, testimonials and online reputation management services. "Everybody has an initial feeling of mistrust online because almost anyone can create an e-commerce site," she said. "Our customers know that other parents have shopped here by reading the reviews, and that creates a sense of trust and credibility."

Burns says her business has a dispute resolution process with online review provider RatePoint to work through any potential issues that customers may have. Through the dispute resolution process, negative online reviews are not made public until the business and customer have an opportunity to work together to resolve the issue. If the customer is still not satisfied after the process, the review is publicly posted. The process is designed to be private in order to engage direct communication between the business and the customer. No communications that are part of the dispute resolution process are posted publicly. 

If the issue is resolved to the satisfaction of both parties, the negative review is not posted, nor does it impact the company's overall rating. If the business does not respond at any point within the designated time period, the review is posted. RatePoint found that 90 percent of disputes end up being resolved and the customer is happy because their situation was addressed. The end result is businesses aren't burdened with a review that is not reflective of their brand and service.

For small businesses to compete with bigger brands and build a positive online reputation, customer service is paramount. An informal RatePoint study found that 49 percent of small retailers say customer service is their biggest asset when competing with big retailers.

"Small businesses know that competing with big brands is possible, and harnessing the power of customer feedback propels these smaller companies in the reputation economy," said RatePoint Co-founder and CEO Neal Creighton. "Customer reviews are not something to fear. When small businesses proactively ask for reviews on their own site, they are building consumer trust."

For small businesses concerned with online reviews and building a positive reputation, Creighton offers these tips to turn customer challenges into opportunities:

  1. Be the first and last person the customer talks to about a negative experience. Communicating with customers before they communicate with others about their negative experiences is an enormous advantage in building and maintaining a small-business reputation.
  2. Turning an unhappy customer into a happy customer can create repeat sales. The problem is not only negative comments that other potential customers will see; the business also may be losing potential future sales from the customer who was dissatisfied in the first place.
  3. Improve the customer experience. Communicating with customers helps small businesses find problem areas that can be fixed before they become major issues.
Ignoring online review sites won't make the issue go away, and the trend for consumers to read reviews prior to making purchases is growing. Almost three quarters--71 percent--of online shoppers read reviews. That makes it the most widely read consumer-generated content, according to a Forrester Research report.