Thanks to websites like Yelp, public commentary and reviews have become a go-to for consumers trying to decide where to spend their money. These resources can be helpful for customers and, if the reviews are positive, can also be great marketing for businesses. But bad reviews can drive away business and even be personally hurtful.
A business can do everything right and still wind up on the wrong end of a bad (and inaccurate review). Even more problematic is the fact that bad reviews don’t always necessarily reflect the state of a business.
In fact, bad reviews are actually one of the least accurate indicators of how well a business is doing, because customers routinely express different tastes and desires in words or even conscious thoughts than in where they spend their money and do their business. This is referred to as “stated preference” versus “revealed preference.”
In an episode of Planet Money about Spirit Airlines — the fastest-growing, but most-hated airline in the U.S. — Jacob Goldstein explained the difference.
“Stated preferences are what people say they want, and then revealed preferences are what people actually choose when they go out and buy something.”
The theory of revealed preference was first described by American economist Paul Samuelson in 1938, long before customers were reviewing their sandwiches and service on their cell phones. But the idea itself still stands — that customers tend to show their real desires not in how they talk about products or services, but in how they utilize them.
In the case of Spirit, which offers cut-rate flights but does not offer the same luxuries as other airlines (like free carry-on bags or even in-flight beverages), the airline was rated the “worst” airline by consumers. Its reviews are terrible, and customers routinely express disappointment in the lack of amenities, threatening to never again fly with them.
However, consumers also almost always rank price of a ticket as one of the single most important factors when booking a flight, and Spirit continues to grow in leaps and bounds, regularly filling their planes.
This doesn’t give businesses a green light to provide terrible service — reports of poor service tend to, on average, be listened to/internalized by more potential clients, and it takes a disproportionate amount of great service to win over a customer who’s been truly burned — but it does provide some insight into how business owners can separate out the customer complaints that matter versus those which might be unnecessarily negative.
Say you’ve receiving a few reviews that your prices are too high. Does that mean you should necessarily lower your prices?
That depends on how much research you’ve done to set your pricing. Odds are, if you run a small business, you’re probably not over-inflating your prices in an attempt to take advantage of your customers, but rather, have to charge what you do to not just survive, but thrive. If that’s the case, your prices really can’t (and shouldn’t!) be lowered — and that’s perfectly fine. But perhaps there is something you can do to make the experience more enticing for customers.
In a 2011 survey, 55% of customers said they’d pay more for a product if they were also treated a little better. Instead of lowering prices, as customers say they’d like, try to win them over in other, inexpensive ways, like personalized cards with purchase, gift-wrapping. This tactic has worked for photographer Sal Cincotta, who recommends that, instead of keeping prices low, small businesses invest their time back into their clients’ happiness.
In deciding which critics to listen to, it’s imperative to know whether the insight they’re providing is valuable. For Spirit Airlines, who made the conscious decision not to offer sodas on flights, and instead, offer a high volume of in-demand flights for a very low rate, complaints that the beverages cost money really don’t matter much. And when customers say they’ll “never come back,” but they, in fact, do continue to pack the flights and continue to say that price is the most important factor in booking, Spirit’s higher-ups know that they’re on the right track.
If the complaints, however, veer into customer service (rude attendants, disastrous gates, difficult online booking), that might be worth looking into.
Bad reviews aren’t the end of the world — instead, they’re growing opportunities, and a chance to gain some insight into the stated preferences of your customers.
