September 6, 2012
Turns Out, Yelp Really Works For Restaurants
Michael Harper for redOrbit.com — Your Universe Online
It´s the service which is hated by food snobs and loved by bouncy food enthusiasts. Now, a UC Berkeley study gives restaurateurs and coffee shop owners a reason to give a new, fresh look at Yelp, the crowd-sourced restaurant review service.
The idea is simple: Users in the mood for something different can check Yelp to view ratings and reviews of local restaurants. Once they select an establishment they´d like to visit, they can check in via the mobile app, take pictures of their meal and even rank and rate the restaurant for themselves, providing even more information for the next would-be diner.
The Berkeley researchers analyzed these ratings and found that, on a scale from 1-5, each half-star rating of a restaurant can equate to 19% more customers during peak business hours. The study found that this increase occurs based on rating, no matter what reviews are left about customer service, price, or quality.
In other words, these Yelpers are making their decisions on a star-based rating system as opposed to actual characteristics of the restaurant itself.
Michael Anderson, the study´s lead author and assistant professor of agricultural and resource economics explains the results this way:
“We show that social media sites and forums play an increasingly important role in how consumers judge the quality of goods and services.”
Together with Jeremy Magruder, fellow assistant professor of agricultural and resource economics, Anderson spent plenty of time with the restaurant-rating service, analyzing some 148,000 reviews for 328 establishments in the San Francisco Bay area, where Yelp was founded.
The study found that the difference between a 3 star rating and a 3.5 star rating increases the restaurants chance of having a full house during dinner service from 13% to 34%. Likewise, a 4 star rating increases these sell out chances by another 19%. No matter what else is said about the establishment, the 5-star rating system held true: The more stars, the greater the odds of a packed house.
The researchers also found these ratings had an even larger impact on a restaurant´s business whenever information about the business was scarce. For instance, if a restaurant doesn´t have a website or list their menu online, people often check Yelp and make their decisions based on what they see there.
Those restaurants that did have their information published online or in guide books didn´t see such a significant change in their business as a result of the Yelp rankings. “If a restaurant has a Michelin star or it appears in the San Francisco Chronicle´s list of Top 100 Restaurants in the Bay Area, the Yelp star becomes irrelevant,” said Magruder.
“Those restaurants are relatively famous, and consumers already know them. For restaurants that were not on those established reviews, we actually saw a 27 percent greater likelihood in filled seats during peak dining times with a half-star rating increase on Yelp.”
When asked if restaurateurs could take advantage of this information and begin posting 5-star reviews for their own place of business, Anderson replied, “There are enough reviews available that it would be difficult to generate enough fake positive reviews to drown out the bad ones. There is also an element of self-policing since customers going to a restaurant on the basis of a good fake review only to be disappointed could submit a bad review. It could be hard for the business owner to sustain the false positives over time.”
The researchers are now looking to expand their analysis to sites such as Amazon.com, Tripadvisor.com and Netflix.com.