Play Live Radio
Next Up:
Available On Air Stations

Online Reviews Make Big Difference To Small Businesses

PORTLAND - Northwest cities, including Seattle and Portland, are awash in great restaurants. And these venues must compete for attention from a highly discerning crowd. Online rating sites such as Yelp, Google and FourSquare are making those customers even more discriminating. You can even pick up those reviews as you walk down the street. That’s great for some small business, but as journalist Julia Flucht reports, there are some downsides.

I am caught in the lunchtime crowd at downtown Portland’s Luc Lac Vietnamese Kitchen. I am with one of city’s most prolific restaurant critics.

“I have approximately, today, 585 reviews,” says Sherry Secreast.

She doesn’t work for the Oregonian or Portland Monthly or any food magazine ... she is a Yelp reviewer. With every dining experience, she takes very careful notes. She tells this story.

“I went to this one sushi place and we were getting all these samples," Secreast recalls. "He was turning us on to some new food because he is a wonderful chef and we were talking to him and building up a rapport. He didn’t know I was Yelping or anything. Well, he was also charging me.”

Secreast says she wrote a good review of the place but she did warn her readers to watch out for the chef’s samples!

"Well the next time I went in there he treated me like royalty," she says. "I got so much free food. He said ‘I am sorry, I didn’t mean to do it that way. In fact my husband was with me and he said, ‘you were like a queen in there!”

And that’s just a small example. Another avid Yelper told me she once heard from six restaurant owners in a week.

Online reviews are making a huge difference in how small businesses operate. Julie Bond owns and manages Serrato Restaurant in NW Portland. She uses the reviews in two ways: as a marketing tool and for customer research.

“If we are getting consistently negative comments about one type of service, about something that is happening at one time of day, we can actually affect change immediately. And we do," Bond says. "I have actually taken reviews into our staff meetings and said ‘Now this has been coming up consistently. Let’s solve it.’”

But sometimes the problem gets resolved and the negative review still hangs around ... permanently.

Take Gigi’s East Indian Brow Design in NW Portland. It specializes in the threading method for hair removal. Owner Gigi Polk has experienced the wrath of one bad reviewer.

“They were doing a lot of construction on NW 23rd and she was definitely very frustrated because she couldn’t find parking and that was reflected on a review that she did.”

But here’s the thing: the construction lasted two months and ended three years ago.

Another complaint: Yelp deemed a third of her reviews as too positive and tucked them behind a filter.

“The clients came in here they got the service, they liked it, and they wrote the review," Polk says. "So when I asked, I am still puzzled. I don’t know what they are using to filter these reviews, but they are out there.”

Yelp doesn’t disclose how its filter process works, but the company maintains that it protects against fraud and abuse.

Despite Polk’s problems with online rating sites, that’s where she gets about half her business. And her reviews are good.

Last Fall, Harvard Business School professor Michael Luca looked at just how much online reviews matter. He examined Yelp’s impact on Seattle restaurants between 2003-2009. He found that each star on Yelp’s rating system makes quite a difference:

“What you see is that a one-star increase leads to a 5 to 9 percent increase in revenue.”

And Luca discovered that it’s the Mom and Pop shops that get all the benefit.

“Yelp ratings matter for independent restaurants," Luca says. "But do not matter for a chain restaurant.”

Luca believes online reviews are leveling the playing field for local joints. And the increased exposure could change the balance of independent vs. chain restaurants in the future.

“Yelp is able to cover more than 70 percent of restaurants in Seattle, where my study took place. By contrast, more traditional sources of information cover only about five percent of restaurants.”

These days, Yelp is facing a lot of competition. Not long before Marissa Mayer became the new CEO of Yahoo!, she directed Google’s effort to seriously expand its local business outreach. Portland was one of Google’s test markets for its online rating product. Other sites such as FourSquare, Citysearch, and OpenTable are also vying to be the first stop for hungry consumers.

As for Yelper Sherry Secreast, she not only writes reviews, she also reads them.

“I tend to look at the whole picture," she explains. "I have only given one one-star review and part of that is because I look at Yelp and I don’t want to go to places that look bad already. So I go, I don’t want to waste my time and money on a one-star place.”

Yelp reviewer Sherry Secreast is one of Portland’s most prolific restaurant critics. Photo by Julia Flutch
Yelp reviewer Sherry Secreast is one of Portland’s most prolific restaurant critics. Photo by Julia Flutch

And more and more restaurants are making sure they don’t fall in this category.

Copyright 2012 Northwest News Network

Copyright 2012 Northwest News Network

Julia Flucht