Three things small business owners need to know about Yelp

What do you think of Yelp? Some business owners love it while others hate it. But like it or not, your customers are using consumer rating sites like Yelp to make decisions about your business. They’re filling out their own customer service surveys for the world to see, and other customers are deciding whether or not to give your business a try on the strength of those reviews.

If you are a small business owner, you should understand three things about Yelp.

#1 Yelp Drives Business
I was recently chatting about Yelp with Tara Julian, the owner of Hair Play, while she gave me a haircut. She mentioned that if you Google “best men’s haircut in San Diego” the first search result directs you to a Yelp page with Hair Play Salon at the very top. Tara joked that she didn’t know if she truly gave the best men’s haircut in town, but she knew she did a good job and works hard to take good care of her clients. Yelp was how I had found Hair Play myself, and I’ve certainly found Tara deserving of the five star rating so many clients have given.

Good reviews drive business. A 2011 study by Michael Luca at the Harvard Business School estimates that a one star increase in a Yelp rating generates a 5 – 9% increase in revenue for a small restaurant. (Read the study here.) While his study was limited to restaurants, consumers turn to Yelp to decide where to get their hair cut, find a garage door repair service (thanks Up and Down Garage Doors!), or find a housekeeping service (thanks Pure Cleaning Agency!).

What’s the best way to earn good reviews on Yelp? Make sure you consistently take great care of your customers. Which leads to #2…

#2 Yelp Provides Feedback
The beauty and bane of Yelp is the unvarnished, public feedback that customers post alongside their reviews. Some business owners feel that people only write reviews on Yelp to complain or support their friends’ businesses, but in between the flowery praise or angry rants are often some very useful points of feedback. Look at the most consistent comments made about your business, both good and bad, and you’ll see a fairly accurate picture of what your company looks like through your customers’ eyes.

For example, if you look carefully at the comments reviewers have made about Pure Cleaning Agency, you’ll notice people who give them great reviews tend to really like the person who cleans their home. My wife and I are definitely in this boat and have relied on the same terrific house keeper for a couple of years. The bad reviews are typically written by someone who had a bad experience on their first visit. Clearly, success at Pure is linked to making a positive first impression.

What’s the best way to use customer feedback? Act on it! Which leads to #3…

#3 Yelp Can Help Solve Problems
Feedback that consistently points to a similar problem should prompt small business owners to make necessary improvements to improve service. For example, Pure may want to look for ways to make sure the first visit with each new customer is spectacular. If this is their achilles heel, then getting better in this area will help them convert more first-time customers into long-term fans.

Individual reviews can also provide an opportunity to rectify specific customer service issues. Yelp allows business owners to respond to customer comments, and savvy owners take advantage of this feature. A best practice is to reply to an upset customer, apologize for their poor experience, and offer to contact them privately to discuss a solution. One caveat here – avoid turning a customer service response into a customer confrontation. It’s always bad to argue with a customer, but it really looks bad when that argument takes place via a website that’s accessible to the public.

Good goals vs. Bad Goals

Companies that are serious about customer service set goals that motivate employees and allow them to evaluate how well they're doing. But beware - not all goals are created equal! Some will help drive the desired results while others can inadvertantly contribute to poor performance and bad behavior.

Motivational Impact
First, let's briefly examine why goals are important. The video below is a demonstration that shows how goals can foster positive behaviors such as innovation, teamwork, and healty competition. You'll also notice that a good goal itself is powerful enough to motivate people without an external reward like a prize or bonus.

Good Goals vs. Bad Goals
Setting appropriate goals requires some careful choices or you'll end up motivating people to do the wrong thing. Good goals have three distinct characteristics:

• Focuses attention on the desired results, rather than diverting attention from the big picture.
• Promotes teamwork rather than rewarding selfishness.
• Relies on intrinsic, or internal, motivation to driver performance rather than external rewards.

This short video provides a more in-depth explanation of the difference between good and bad goals:

SMART Goals Are Best
The most powerful customer service goals follow the SMART model. SMART is an acronym that stands for five qualities every good goal should have:

• S = Specific
• M = Measurable
• A = Attainable
• R = Relevant
• T = Time-bound

The short tutorial video below provides a more in-depth explanation of SMART goals and transforms a weak, "squishy" goal into a solid example:

Companies fall short on measuring customer service

I recently conducted a survey to determine how companies were measuring the effectiveness of their customer service. The results were disappointing, though not at all surprising.

How do companies measure customer service?
A whopping 25% of respondents don't formally measure their customer service at all. If you aren't trying to measure something, it's hard to make the case that it's important. Maybe this is one of the reasons customers receive poor service so often these days.

Of the companies that do measure service, surveys are the most popular option. Here are the results:

Do companies set goals for customer service?
The survey also asked whether respondents set measurable goals for customer service. Failing to set goals for customer service is like spending money without a budget -- it's really hard to tell how well your're doing. Yet, 37.5% of companies don't set measurable goals. Here's the breakdown:

Does company size matter?
The survey also included an optional question on company size by revenue. The goal was to determine whether larger or perhaps smaller companies were more likely to measure service. The results were inconclusive, though many participants opted to skip this question.

I set out to discover what companies are doing and instead found myself focusing on what companies are not doing. What do you make of the results?

TPS Named a 2011 ASTD Champion of Learning

If you notice me walking around with a little extra swagger in my stride it's because Toister Performance Solutions, Inc. has been named a 2011 ASTD Champion of Learning. The designation recognizes a commitment to workplace learning and performance through participation in the 2011 Employee Learning Week.

This honor marks the third year running for TPS. Drop me a line to learn how your organization can join me in 2012 or visit the official website.

Customer service measurement survey

The survey will close on Friday, January 20. Click here if you have trouble viewing the survey on this page.