Put simply, reputation management refers to the strategies and efforts your company (or dispensary) invests in controlling and influencing how customers perceive your brand. The ROI of reputation management refers to the return-on-investment you can expect from online reviews.
Social media reviews rule, so what your customers are saying about you on sites like Yelp, Facebook, and Google can make or break your company.
Skeptical? Consider this finding from Harvard Business School (HBS):
- 92% of people hesitate to do business with companies with less than four out of five stars.
92% — that means fewer than one out of 12 customers tolerate a less than stellar reputation. The good news is that you have the power to control your dispensary’s reputation. And if you do it right, you’ll be rewarded handsomely!
The ROI of investing in reputation management is impressive. The same HBS study found that if you boost your online ratings by one star, you will increase revenue by 5 to 9%. In this article, we’re going to run through the numbers so you can see for yourself exactly how much money your reputation is costing or earning your dispensary.
Three other findings from the HBS study to keep in mind:
- The effect of reputation is primarily driven by independent establishments (or small chains).
- The market share for chains has declined significantly as Yelp market influence has expanded.
- Consumers respond more strongly when a rating contains more information.
Harvard’s findings suggest online consumer reviews have replaced conventional benchmarks that influence reputation.
[Consumer response to a restaurant’s average rating is affected by the number of reviews and whether the reviewers are certified as “elite” by Yelp, but is unaffected by the size of the reviewers’ Yelp friends network]
You’d think the hardest part of managing your dispensary’s reputation would be getting reviews, right? Nope. Or dealing with unhappy customers who leave negative reviews. Wrong again. Remarkably, those are two of the easiest components of reputation management.
The hardest part of managing your dispensary’s reputation might surprise you:
It’s quantifying and proving the ROI of reputation management and reviews.
And we’re not gonna tell you proving ROI of reputation management isn’t difficult. It is. But it’s also absolutely essential. We’re going to break it down so you can see how easy it actually is.
If you don’t monitor the ROI of reputation management, internal stakeholders and external competitors will steal the credit for the efforts you invested. Internal stakeholders need to prove their value. When they’re successful, they can maintain their budgets and advance in the organization. When they fail, they risk losing their budgets, or worse. They risk advancing in the organization and job security.
However, if you do it right and prove the ROI of your efforts, you can make a clear case for management. If your efforts not only pay for themselves but show you’re a profit center, management (or investors) will continue to invest in you.
You may be thinking: “Ok, that’s great. But where do I start? How do you show positive ROI from reputation management?”
Two words: marketing attribution.
Marketing attribution identifies what actions your customers take — touchpoints or events — that are responsible for the goals and outcomes you’re basing your success on. After you’ve identified these actions, you’ll need to assign values to those actions to accurately quantify ROI. To assign values, you’ll need a marketing attribution model (MAM).
Attribution models will help you determine what each touchpoint gets credit for while allowing you to optimize and spend your marketing dollars more efficiently.
To create a MAM, you’ll need to do the following:
The first thing you’ll need to do is create a list of all the touchpoints your dispensary customers engage with during their customer journey. Examples of touch points include visiting your:
- Your page on Facebook
- Reviews on Google or Yelp
- Online menu
Creating an extensive touchpoint list allows you to know what’s working and what’s not working.
Here’s what that would look like:
Last Channel Get ALL Credit
First Channel Get ALL Credit
All Channels Get EQUAL Credit
All Channels Get PARTIAL Credit
Is a touch point high-value, medium-value, or low-value? If after engaging with a touchpoint (e.g., your online menu or a positive review) they make a purchase, that’s a high-value touchpoint. If they take no-action nor does a touchpoint inspire them to take further action, it’s low-value. Everything else falls in the middle.
Let’s keep the math simple. Let’s say you spend $100 on banner ads to drive traffic to your cannabis dispensary’s website. Your average order is $50. From that $100, you get five orders ($250). The value of that touchpoint is [Total Orders] $250 minus [Expenses] $100, which equals $150. Your benchmark may not always be direct orders, though. It could also be the number of new subscribers to your SMS marketing program or another important goal.
Optimize each campaign. Now that you’ve got attribution data and the value of each touchpoint, you can optimize. You can make a case to expand your budget if a specific channel is profitable because you know exactly how much your return is going to be.
Here’s what you need to look for:
- Lost Revenue: How much money have you lost because of negative reviews. You’re not going to be able to determine an exact figure. After all, most customers won’t let you know why they no longer patronize your dispensary. An estimate based on industry data is fine (see below).
- Earned revenue: This metric refers to how much money you earn from positive reviews or comments you receive on review sites, social media sites, etc.
Moz, one of the top SEO sites, assessed the risks business face from negative reviews. Here’s what they found:
- One Negative Review: Your business risks losing as many as 22% of customers if just one negative article is found by users considering buying your products.
- Two Negative Reviews: You risk losing 44.1 percent of customers if you have two negative results
- Three Negative Reviews: If there are three negative articles that come up after a prospect searches on you, your business risks losing an astounding 59.2% of would-be customers.
- Four or More Negative Articles: Translates to losing up to 69.9% of your prospective customers.
Let’s quantify those figures for a dispensary:
Y = X / (100 – X)
X refers to the average percentage of customers you risk losing. Y refers to what percentage more customers you could have had.
For this example, let’s use three negative results. Using the data from Moz, we know that just three negative results equal a loss of 59.2% of customers from your business.
Here’s what the formula would look like:
Y = 59.2 / (100 – 59.2)
With just three negative results, you would have had 145% more business. Holy cow! That’s a lot of Benjamins. See why reputation management is so important? This dispensary is leaving a lot of money on the table. Interestingly, the same dispensary used in the example has stellar reviews on Google. Clearly, they need to pay a lot more attention to Yelp, because not all their customers are going to use Google.
Once you plug in more specific data, like conversion rates an average order value, you can determine exact dollar figures.
Let’s shift to the more positive: how positive reviews boost your bottom line.
In order to do this right, you’ll need to pull the following metrics:
- Average Order Value
- # of Transactions (Yearly)
- Time Customers Stay with Business
- Total Number of Visitors Per Month (Website and In-Store)
- Conversion Rate
Now let’s add sample data for a dispensary. Again, we’ll use easy numbers to make the math easy. You can (and should) calculate using your own numbers.
- Order Value: $50
- Average # of Transactions (Yearly): 10 transactions
- Time Customers Stay with Business: 10 years
- Total Number of Visitors Per Month (Website and In-Store): 1000
- Conversion Rate: 15%
[Average Order Value] * [Average # of Transactions (Yearly)] * [Average Time Customers Stay with Business]
$50 * 10 * 10 = $5000
The lifetime value (based on this model) is $5000.
That’s a single customer. Now let’s look at the numbers based on total customers:
[Total Number of Visitors Per Month] * [Conversion Rate]
1000 * 15% = 150 customers.
Now let’s look at how that translates to revenue:
[Total Number of Customers Per Month] * [Lifetime Value]
150 * $5000 = $750,000
$750,000 in projected revenue. Not bad.
But, wait there’s more!
It doesn’t stop with getting great reviews. If you use reviews strategically, you can move mountains.
- According to Revoo (as shared by Econsultancy), businesses who display reviews experience an 18% increase in sales.
- Another study conducted by Northwestern’s prestigious Spiegel Research Center analyzed 122,000 reviews including 57,000 from anonymous buyers and 65,000 verified buyers. They found prominently displaying reviews resulted in an increase in conversion rates by 270%!
Pretty impressive, isn’t it?
- Displaying reviews can increase conversion rates by 270% (Spiegel Research Center)
- Displaying reviews can boost sales by 18% (Revoo, Econsultancy)
Bottom line: Developing and implementing an online reputation management program focused on online reviews is a no-brainer. There’s a carrot and stick at play here. If you don’t focus on your online reputation, the cost to your business can be immense — so immense, it can crush your business. But if you do pay attention to reviews and implement a sound strategy, the financial rewards make the investment well worth your time, effort, and monetary investment.
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