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Episode 49: How a bad review might be good for business

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All Xero Gravity episodes

Hosted by Elizabeth Ü

Perception is reality. Online review sites led by OpenTable, TripAdvisor and Yelp turn opinion into purchasing power.

A recent study found an incredible 90% of consumers look to these sites right before their final purchase decision. On the flipside, there’s a huge missed opportunity for small businesses — the negative reviews.  

Meet Bill Tancer, consumer behavior mad scientist, best-selling author, street photographer and aspiring world ruler of latte art. On Xero Gravity 49, he talks about how even a one-star rating can lead to new customers, the OpenTable study that revealed every half star increase of a restaurant’s overall rating equals a 10%+ increase in reservations, plus Jay the Locksmith, the Prom Dress King and a bunch more.

Suffice it to say, if customers review your business and you want more customers — this is one podcast you must not miss!

Small Business Resources:

Episode transcript

Host: Elizabeth Ü [EÜ]
Guest: Bill Tancer [BT]

EÜ: Howdy everyone! I’m Elizabeth U, and you’ve just tuned in to Xero Gravity.

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Guest soundbite

“No one wants to hear their baby’s ugly. And because of that fact, it’s true because a lot of small business owners out there are not paying attention to reviews.”

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EÜ: Meet Bill Tancer. Bill’s a New York Times best-selling author and former GM of global research at Experian Marketing Services. He also consults startups around what he calls data evangelism. He’s a frequent guest on CNBC and Bloomberg, and writes for major publications about online consumer behavior. Most recently Bill wrote the book, Everyone’s a Critic, which suggests that popular sites like Facebook and Instagram are not as effective as you might think, when it comes to attracting customers.

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Guest soundbite

“None of these channels are as important to getting new customers to your business as the online review platforms are, because that’s where customers are actually making the decision of where to go to spend their dollars.”

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EÜ: So we’ll have all that and more, coming on Xero Gravity, right after this.

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EÜ: Bill Tancer, thanks for joining us on Xero Gravity.

BT: Thanks for having me.

EÜ: Tell us a bit more about what you get up to when you’re not writing best sellers?

BT: Well, it really depends on the day of the week. One of my favorite hobbies is roaming the streets of Los Angeles as a street photographer. But my latest passion, and I don’t know how I got into this passion — I’m dedicated to winning the International Latte Art Competition that’s coming around. I don’t think I’m going to make the cut off…

EÜ: Oh wow.

BT: …for 2016, but I’m setting my sights on 2017.

EÜ: So what is the key to creating the best latte art?

BT: Well, a couple of things. First is the milk steaming. You have to stretch the milk in just a certain way to a silky texture so it looks like latex paint. And then after that it is all about the pour. So just getting that perfect pour — that’s where the art comes in. I pour about 40-50 coffees a day in my little basement coffee shop that I built.

EÜ: Oh my gosh! I hope you don’t drink them all!

BT: I sip almost all of them, which is why I’m a bit wired right now.

EÜ: Well I won’t ask you for any more details, because I don’t want you to divulge your winning skills. In a former life you were the GM of global research at Experian Marketing Services. Tell us more about what that role involved.

BT: So at Experian Marketing Services I held that role for over 11 years; first as the head of research at Hitwise and then Hitwise was acquired Experian Marketing Services. I guess the best way to describe what I did for Experian is I was the mad scientist for the company.

EÜ: That’s an awesome title!

BT: They gave me access to all of their data and let me play with that data, and find interesting stories. And the primary dataset that I spent most of my time with over those 11 years was the Hitwise data, which captures what 25 million people were doing worldwide, and 10 million specific to the US. What sites they were going to on the internet, what search terms they used on Google and Yahoo Search and Bing and 55 other search terms, and then finding stories that I could tell about that data, and in the process get a lot of interest for the company.

EÜ: So I imagine that you came across some really weird and wonderful data insights in that role. Are there any that you can share with us?

BT: There’s so many. I’m probably best known in marketing circles for my obsession with prom dresses. I’d have to credit one of my analysts with first finding this data anomaly. What I had done…

EÜ: I thought you were going to say first finding the perfect prom dress.

BT: [Laughs] Well, that probably goes back to before I had employed her, but a new analyst, her name is Leanne Prescott, she joined the company. I gave her what most people would consider a sadistic assignment. I gave her about a half million search terms that were driving traffic to retail sites with the assignment of telling me what’s the number one thing that people search for.

EÜ: Oh wow!

BT: So Leanne had to employ all of these tools to categorize those half million terms. And she came back and she said “There’s something wrong with our data”. Now, my hypothesis before I sent her away, was that it would be something like ‘digital cameras’ — this is back in 2004. So I was thinking ‘digital cameras’, ‘MP3 players,’ something along those lines would be the top thing that people search for.

She said, “No, it’s not it. It’s prom dresses.” And she said, “It gets stranger still, because the that dataset you gave me was the first week in January — and then she kind of educated me — that most proms happen in May and girls probably search for their prom dresses between March and May.

So we set out on this search, figuring out what was going on with our dataset. We called our engineers back in Australia, and they said there’s nothing wrong with the data. They said it’s absolutely human-driven search activity, and then we had about 1,700 clients at the time. We contacted all of our department store clients and we asked them, “When do you market your prom dresses? When do you buy search listings on Google about your prom dresses? When do you put up new display ads? When do you change your site?” And they all said March to May. So it became this mystery.

And the way I work as the mad scientist, is that if something crosses my desk I can’t figure out, I clear the desk and that’s all I can talk about. And so as the months wore on I was invited to do a number of keynotes at travel conferences, investor conferences. And I remember I was giving this keynote at a big travel conference and somehow I just ended up talking all about this prom dress anomaly, just because I was fascinated with it and couldn’t figure out what it was. I remember my company was getting a little concerned at the time. Word got back to the executives that their head of research was just travelling the globe talking about prom dresses.

EÜ: And doing nothing else apparently!

BT: But I kept at it. And about a couple of months later, I spoke at the Online Publishers Association meeting in New York. And after my speech, this older very distinguished looking gentleman came up to me and he said “Son, I’m all about prom dresses.” I’m thinking, wow! I’ve met my mental doppelganger! He handed me his card, and it was the Editor in Chief of a big teen fashion magazine. And he said to me, he said, “What you found in your data has proved that what we’ve been doing in the teen fashion industry has actually worked.”

EÜ: Ah.

BT: And I said, “Tell me more!” And he said, “Well as a teen fashion title we make almost all of our revenue between March and May, just as you had first suspected. That was the season for prom dress shopping. But we needed to make more money. The street expected us to make more money, so we came up upon a strategy that we would change consumer behavior. We would change the way that girls search for prom dresses and we did it by hitting the newsstands really hard with these teen fashion editions of our magazines about the upcoming prom fashions, and your data that you showed today is the first time we’ve seen proof that the behavior has actually shifted.”

And this was a huge a-ha moment for us, because there was this massive inefficiency in the marketplace. If you remember back to those department stores that we talked to: this is big revenue for them, especially the executives that manage that part of the business to not know that girls were thinking about prom dresses that early, of course they’re not going to buy them then but…

EÜ: Right.

BT: …you’d want to be top of mind, front and center on Google when someone searched for prom dresses, so you could start to get that recall and that brand identity. That was probably one of the biggest influential moments in my career, was finding that anomaly and then — maybe upsetting a few executives in the early going, but in the end — telling this amazing story about how paying attention to the way we use the internet can tell us a lot about ourselves, and really can help us become better business people.

EÜ: Wow, what a story! And you wrote a best seller, Click, in 2008. And what a huge achievement that was. What were some of the positive and negative byproducts of that kind of success?

BT: Well, the reviews were primarily positive. It think in the end with over 80 reviews, they were almost all four and five star reviews. But I remember my negative reviews best and I can remember that first negative review that came in. It said, “This book is an exercise in navel gazing.” And man…

EÜ: Oh no.

BT: …that just hit me like a ton of bricks. And then the next one came in that said that
I might be the king of data research, but the king could use a better editor.

EÜ: Oh no.

BT: And another one that said that this book was written by a guy who must have ADHD. And I think just with those three negative reviews out of 80-plus positive reviews, it was enough to shut down my desire to write for several years.

EÜ: And what was the turning point that got you back into writing?

BT: Well as a research analyst, you know, working with the Hitwise data I was paying attention to the review sites, Yelp, TripAdvisor, the reviews that are happening on Facebook and other platforms, like OpenTable. And I was monitoring the growth and just how important those review sites were to businesses. And I happened to be talking to a restaurant owner in my town: I was living in Burlingame, California.
I said, “Do you pay attention to your Yelp reviews at all?” And his response to me was that, “No I don’t, I think they’re a lot of noise, I don’t read them at all, but let me tell you about this negative review I got,” and then he cited this negative review verbatim.

And it made me think about my response to reviews, and the fact that I could remember verbatim my negative reviews, and it stopped me from doing what I loved and I decided, you know what? I’m going to write a book about this because it’s the thing that kept me from writing another book. So why not just hit it head on.

EÜ: Wow, I love that it was a personal experience around these reviews that got you into it. And doing the research into how people can respond. And that’s a great segue because now it’s time to dig a little deeper into this episode’s theme, which is of course, how a bad review might be good for business. So first of all, I wanted to define this whole concept of user-generated reviews. What are they and why are they important to small businesses?

BT: Well, when we talk about user-generated reviews, we’re talking primarily about those reviews that happen in the platforms like Yelp and TripAdvisor, OpenTable reviews, Facebook reviews. Although it’s possible you can find reviews in a number of other platforms. They can show up in tweets on Twitter, they can show up in video on Periscope. But for the purposes of this discussion let’s just pick the main platforms of Yelp, TripAdvisor and maybe some secondary and tertiary ones like Facebook reviews and OpenTable reviews.

EÜ: So I’m definitely familiar with all of those sites, and for a small business, how do you recommend building a strategy around all of them?

BT: Well, first, I think the first thing we have to get to is the importance of building a strategy around them. Talking to small business owners: a lot of them don’t want to pay attention to their reviews, and I think that’s the first thing that we have to address. The reason being I believe is no one wants to read criticism, “No one wants to hear their baby’s ugly”. And…

EÜ: [Laughs]

BT: …because of that fact, it’s true: a lot of small business owners out there are not paying attention to reviews. So why should you build an online review strategy? The answer’s very simple: because of the importance those reviews play in getting new customers to your business.

So several research studies have been done over the last several years. The first one from the University of California. Dr Anderson did the research, and what he did is he looked at the reviews on OpenTable and restaurant bookings, and found that every half star increase in a restaurant’s reviews was massive in terms of the increases in bookings at that restaurant. I believe it was over 10% increase in bookings for every half star increase on reviews.

And the research I was conducting at the time when I started writing the book, we had determined that over 70% of consumers look at reviews before they make a purchase decision. By the time I finished writing the book that percentage had risen up to 80%, and just in the last few months I have seen some other research figures that are now pegging that at 90%.

EÜ: Wow that is a huge number!

BT: And what that translates to is that even though we’ve been hit over the head — you have to be in social media, you have to start a Facebook page, you should be tweeting about your small business — none of these channels are as important to getting new customers to your business as the online review platforms. Because that’s where customers are actually making the decision of where to go spend their dollars.

EÜ: I’m really fascinated about how there’s now all of these sites that actually allow the business owner, or in the case of Über, the freelancer, whomever it might be, to actually rate the customer. Is this a trend that we should really be looking out for?

BT: I’ve noticed that reviews themselves have caused drivers to constantly want to improve their service. In the San Francisco Bay Area, if a driver falls below 4.7 or 4.6, he’s put on probation and eventually could just be kicked off the service.

So I’ve noticed that drivers will do little things, you know, first it was the free bottles of water in the car. Then it was the free bottles of water and the little bowl of individually wrapped lifesaver mints, and then it was the power strip with every charger imaginable to charge your phone. And it seemed like every time I’d get in an Über, someone would think of another way of making the service that much better. It’s changing the way we do business.

EÜ: So do you have your phone on you right now?

BT: I do.

EÜ: So I’ve just checked my Über rating and I have a 4.88. What’s yours?

BT: Oh, I don’t even need to check because I check it every day. It’s…

EÜ: You’re kidding?

BT: No, I don’t. I’m kidding…

EÜ: [Laughter] I’m so gullible.

BT: You beat me. I’m a 4.87. And I’m going to find the guy who gave me less than… because I am nothing but nice!

EÜ: No, I think it’s because I actually take the candy when they offer. I’m like, “Oh, thanks!”

BT: That could be, you know, what I do, every time I get in an Über, is I grill these guys about their experience and specifically about reviews. So I imagine there are a few drivers when they get to the airport are like, “Thank god he’s out of my car, I’m so tired of answering these questions.”

EÜ: [Laughter] I wonder if that’s better or worse than when I’m trying to sell them on Xero TaxTouch.

BT: [Laughs]

EÜ: What creative tactics have you seen small business owners use to get those all-important reviews?

BT: Yeah, so in researching the book I talked to over 100 small business owners. And one of those owners was this guy named Jay. We’ll call him Jay the Locksmith. Jay, he’s still I think in his 20s, was working for his dad and they fell out of sorts and Jay quit his job at his dad’s locksmithing company, and ended up broke, living in his mom’s apartment in New York. And in trying to figure out what he was going to do with his life, he decided he was going to open his own locksmithing business, and he was going to cater specifically to his age group. And he thought to himself: if somebody my age is looking for a locksmith in the middle of the night, they’re not going to go to the phonebook, they’re probably going to Google locksmiths in Manhattan, they’re going to go to Yelp.

So he thought to himself, if I could be the five-star locksmith, if I could be the four seasons of locksmiths and, you know, just really do an amazing job and be courteous and dependable and respectful and do an excellent job, I could rule Manhattan in terms of locksmithing. So it was no coincidence at the time — he was dating a concierge from the Four Seasons. I think it gave him this idea of being the Four Seasons Locksmiths. But he did exactly that, and right now I think he is the number one locksmith on Yelp in Manhattan, and he has one of the largest locksmithing businesses in the city in only a few short years.

I think he has over 300 five-star reviews. I asked him how he got those reviews and he said, you know, I do little things that make my clients want to review me. Some businesses kind of differ on this — but, he never asks for the review. He just does something that makes them want to review him. So he gave me this example when he goes to fix someone’s lock, let’s say their key broke off and they call him to come and fix the lock. He does the job, he does it really well. He’s very friendly, but then at the end he says, “I hope you don’t mind, I brought my oil can with me and I’d love to go with you through the house, take only a few minutes ,and I want to oil all the hinges of your doors so they don’t squeak.” And this is something that costs him almost nothing, takes him only a minute or two to do and it solves a problem that, you know, we’re all too lazy to solve and go oil the hinges of the doors.

EÜ: Yeah right.

BT: People are so blown away by that, that they can’t help themselves but log onto Yelp as soon as he leaves and give him a five-star review. And over and over again, as I looked at other businesses that have been successful on the major online review platforms, they found little things that they could do that didn’t cost them very much, that gave the customer a reason to want to go and give a five-star review.

EÜ: I love that. I love that, and I imagine every small business can think about those little things that don’t cost much, don’t take much time, but really go above and beyond to inspire somebody to leave that review. But I know that a lot of small business owners suffer a lot of angst when it comes to engaging with those online reviews. So what suggestions do you have for people to get over that?

BT: Well, one of the things I write about in the book is I tell people they probably should go through some exercises of desensitizing themselves to their negative reviews, and I actually have a series of exercises. The first thing, and I’ll just tell you what they are in general: the first thing I tell them to do is go look at your nearest competitor, somebody that you would consider the closest competitor to your business. Go read every one of their reviews and have either a spreadsheet or a notepad there, and write down what are the key reasons why this business got any negative reviews? What are the positive things that reviewers said about this business?

And then see if you can find some common streams in both. And then once you’ve done that exercise, do the exact same thing for your business, and I guarantee what you’ll find is two things: one, you’re going to find some opportunities of where you might be able to exploit the weaknesses of your competition and do something better that they’re not doing, or having trouble doing, but then you might also find that there are some weaknesses in your own business that you can build upon. And yes, there are some complaints that aren’t valid on the review platforms, there are people who just want to complain. They’re difficult customers. But we know this just from our everyday dealings with our customer.

If you look at those patterns though, you’re going to find ways of improving your business. So I urge my clients to approach online review platforms as really a competitive intelligence engine. It’s the source of information.

It’s almost like a survey that they’ve fielded without actually having to pay or field a survey. They can use all of that data to help improve their business, and so few people use reviews for that purpose. It’s more about the focus of getting the customer in the door. One thing I want everyone who’s listening to this podcast to take away from it, is that there’s an incredibly valuable source of information that’s right there at their fingertips, for free, that you can use to not only find the strengths and weaknesses of your own business, but also of your competition.

EÜ: And I’m wondering — can you explain a little bit about the actual mechanism? So how do these reviews contribute to attaining customers or growing revenue?

BT: Well it’s really quite simple. We’re in the age of online reviews in the review economy, where consumers — and I think it’s driven by a number of different factors. One of them is that consumers really want to stretch their dollar the most and they want to, when they go out to a nice dinner or they book a hotel or they’re trying to decide what product that they want to buy, they will consult reviews and do a true cost-benefit analysis before they make their purchase decision.

And while, if I looked back, maybe five, six years ago, it was millennials that were primarily engaging in this activity. When I looked most recently — I think it was six months ago at the demographics of visitors to these sites — it is across the board.

It’s hitting every age demographic. So we’re at this point where consumers are finding that they can get a lot of information that can help them make purchase decisions. And if that is one of the gates in the funnel that gets somebody from the top of knowing about your company to the bottom of the funnel, and actually making a purchase, it’s so critical that you make sure that there’s nothing that’s going to stop the flow of that customer through the funnel. So that’s why these reviews are so important.

EÜ: So you mentioned earlier that there are some people who are always going to leave a bad review, and what are some of the other reviewer stereotypes. And not only that, but why do we need to know about them?

BT: Yeah, so here’s the thing: what we find when we do research is you just can’t lump everybody into one category, so you can’t just say, “All reviewers on Yelp or TripAdvisor… .” There are different types of reviewers, and you mentioned the one that leaves the negative reviews. One of the personas that I found as I did my research on review platforms, there’s one persona I call the one-star assassin …

EÜ: Oh no!

BT: Yes, that just leaves that one-star review. They find that Yelp has finally given them the bullhorn that they need to right every wrong that they’ve experienced as a consumer. And so if you look at their review history, you’ll find that predominantly the reviews are one star in nature.

On the other side of the spectrum is the reviewer that leaves almost exclusively five-star reviews. And this is the benevolent reviewer. And a friend of mine falls into this category. So we went out to dinner up in the Peninsula and it was this little deli — kind of a hole in the wall — where the food wasn’t really that good in my opinion. But the couple that ran the restaurant were just so sweet and kind.

I looked on Yelp a couple of days after we’d eaten there and I found that she had given them a five-star review. And I asked her, I said, “What are you doing? The food was not good.” And she said, “Yeah, but they’re so sweet, I just wanted to help them. I wanted to help their business.” And that’s the benevolent reviewer.

It’s important to be able to kind of figure out who your clients are. Because if you have one of those benevolent reviewers, one of the things that we found is that quality service, exceptional service trumps a lot of other things, like poor product, poor food. If you can provide excellent service and really make your customers feel great about coming to your business and about buying your product, they’re going to want — if they’re benevolent reviewers — to give you a positive review, even though the product or service may not have been that great.

EÜ: So what do you recommend for small businesses in terms of how to respond to these reviews. Should they respond?

BT: Absolutely. There is a research study out there that looked at the perception of a consumer for, well let’s talk about negative reviews first. Take a negative review: the study looked at the scenario when the business owner didn’t respond is the first scenario. The second scenario was when a business owner responded inappropriately. And then the third was a business owner responded appropriately. And the perception from the consumer reading these reviews was that the business that he most wanted to visit was that that had the appropriate response. The one that he or she did not really register as wanting to visit, was the one that had no response.

EÜ: Oh wow!

BT: Or in other words, no response was worse than inappropriate response.

EÜ: That’s amazing,

BT: When a business owner’s responding to his reviews, it shows that he cares about what his customer thinks. And when you don’t, it really does leave a bad taste in the mind of the consumer that’s reading these reviews. What I tell the business owners that I’ve consulted with and talked with while writing this book, is that you should treat online reviews of your business the same way you treat a customer that is in your store or in your restaurant. If someone came up to you and had a complaint, you wouldn’t just turn your back and walk away. You’d address that complaint and the business owner who just lets the negative reviews sit there with no response, to the reader of those reviews, it feels like they’re witnessing the owner just hearing this negative complaint and walking away.

EÜ: I’ve heard that negative reviews can actually be helpful in terms of increasing credibility. How does that work?

BT: Yes and this is a very counter-intuitive finding that we talk about in the book. And this is what I use to get a lot of business owners over that, “I don’t want to look at reviews because of the negative reviews.” And how it works: there’s a couple of research studies out there, one that happened at NYU that looked at product reviews of cameras, and they found that when consumers were given a whole bunch of reviews, they felt more positive about the camera that had a few negative reviews sprinkled in, than the one that had all positive reviews. Which seems nonsensical. But the theory behind it is that a few negative reviews actually give your five-star reviews more believability. So sometimes going back to the example of thinking that a business owner is buying all of their reviews, when a consumer sees a few negative reviews within the entire set of reviews, they think, you know what, these must be valid reviews. And yeah, there’s a few complaints but overall people love this business. And I’m going to go there and I’m going to buy this product.

EÜ: All right, well we’re going to finish up with our question countdown, which is five quick questions and five quick answers. Are you ready?

BT: I’m ready!

EÜ: What business, book or idea made the biggest impact on your life, and why?

BT: I’ve got to say Freakonomics. After reading that book, I announced that I was going to write Click, which was that book, my first book that became a New York Times best seller. I was just so fascinated how Levitt and Dubner took all these fascinating insights in what is formally considered a very dry field, and brought them to life, and then inspired me to really launch my career as a data evangelist.

EÜ: I can actually see a lot of similarities between Stephen Dubner’s work and yours so obviously that inspiration has rubbed off.

BT: Thank you, that’s a huge compliment. I appreciate that.

EÜ: What’s the one thing you can’t live without?

BT: Well, now caffeine, you know as an aspiring latte artist. I’m sipping, you know, 20, 30, 40 espressos a day. So I’m pretty much hooked and couldn’t work without
a cup.

EÜ: And what’s the most useful app on your phone right now?

BT: I am an Evernote junkie.

EÜ: In one sentence, what’s the greatest lesson you’ve learned throughout your small business journey?

BT: I think that the most important thing that I’ve gleaned from all these businesses that I talk to, specifically in writing this last book, is that there’s two things that really set aside the extremely successful business owner from the ones who are just successful or not successful. And that is passion for what they do, and the second is the ability to deliver amazing customer service. If you’re small business can have those two things together, I can almost guarantee that you’re going to find success.

EÜ: Ooh, I love that. And finally what skill do you want to enhance in 2016?

BT: Well it’s got to be the latte art skill. I am just determined to win 2017 and the International Latte Art competition.

EÜ: Well, send us some photos and we’ll give you a couple of reviews, shall we?

BT: Awesome!

EÜ: That’s all we’ve got time for today, Bill. Thanks so much for joining us on the show.

BT: Thank you.

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EÜ: That was Bill Tancer, New York Times best-selling author and former GM of global research at Experian Marketing Services. Thanks for listening to Xero Gravity. Be sure to join us next Wednesday, because we’re chatting with the one and only Paco, founder of the Hell Yeah Group and lover of all things creative, freelance and finance. It’s a story worth tuning in for. See you soon!

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