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C. J. Gordon---Social networking and media is doing a lot to impact the way we do business. From Pinterest to Facebook, Twitter to Yelp, businesses have many avenues in which to direct a message and build customer loyalty as well as brand identity. But is Yelp one of those sites that aids businesses in the way folks expect that it can?
It is rare in this age of technology that a business does not understand the power of such sites as Yelp. However, a Boston Consulting Group survey of 550 small businesses found that only about 3 percent of those surveyed spend their advertising dollars online. Additionally, many small business owners and executives remain largely unaware of online advertising and promotional opportunities and how they impact their businesses.
Yelp describes itself as an online urban digital guide. The company, founded in 2004 by members of the reputed PayPal mafia, Russel Simmons and Jeremy Stoppelman, who serve as Chief Technology Officer and Chief Executive Officer respectively, is based in San Francisco and trades publicly on the New York Stock Exchange. In a March 2013 New York Times blog post, the company asserted that small businesses advertising on Yelp saw an average boost of $23,000 in revenue annually.
Why a Business Should Consider Yelp
Yelp, which takes its name from the four letters of the Yellow Pages, provides customers with the ability to write reviews and give ratings. These reviews and ratings provide potential new customers with the ability to see what others think about the business. Businesses that have listed themselves on Yelp also have the ability to provide detailed information about the business. This includes location and hours of operation, products or services offered, pricing information, and more. Yelp also allows businesses to list their website information in order for customers to link directly to their primary online presence and learn more about the business.
Does Yelp Impact Business Profitability?
A 2011 study by Harvard Business School demonstrated Yelp's impact on a business's profitability. The study found that a restaurant, for example, maintaining a listing on Yelp whose customers gave ratings saw an increase of 5 to 9 percent in revenue for each additional star rating received. The study further demonstrated that non-chain restaurants benefitted more from the online rating review provided by Yelp than those that were part of a chain.
The casual effect of reviews suggests that small businesses stand to benefit greatly through the use of Yelp as a way to create and manage their reputation. A September 2013 study by Merchant Warehouse found that 72 percent of consumers trust online reviews. Ninety percent of Yelp users make buying decisions based on positive reviews.
A Reluctance to Change
Many small businesses, particularly those that are family-run or are headed by individuals who are not technologically savvy, are reluctant to use online review sites like Yelp. This reluctance to change can be fueled by a variety of factors including fear of the unknown and lack of education on how the technology may provide a benefit relevant to effort. This is referred to as Return of Effort, or ROE, and a business needs to see a high ROE to be convinced that the effort is worth their time. Demystifying online advertising and investing some effort in learning how Yelp can help a business may prove profitable.
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