Why are reviews important for a business: what the data says

Your customers come by word of mouth, the product works, and the page that would hold your reviews is empty or close to it. So why are reviews important for a business that is already getting by? Because the people who have not heard of you yet decide in a different way from the ones who have. They see a listing, a star rating and a count before they see your pricing page, and they use those three things to decide whether to read any further.

This post gives the figures behind that, each traced to a page you can open, and then what to do about it this week. It also says what reviews will not fix and what the rules forbid, because a page that only sells the idea is not much use to someone with a business to run.

What reviews do for sales, in figures that trace to a study

The clearest numbers come from the Spiegel Research Center at Northwestern University, which published How Online Reviews Influence Sales in 2017. Four of its findings matter to a business deciding whether reviews are worth the effort:

• The purchase likelihood for a product with five reviews is 270% greater than for a product with no reviews.

• The marginal benefit of more reviews begins diminishing rapidly after the first five.

• For a higher-priced product the conversion rate increased 380%; for a lower-priced one, 190%.

• Marking reviewers with a verified buyer badge improves the odds of purchase by 15%.

The first five reviews do most of the work, and the more you charge, the more a review is worth

Read the shape of those findings rather than the exact percentages. The study measured product pages, so a software company, an agency or a shop should take from it that the first few reviews move a buyer more than the next fifty, that the price of what you sell raises the stakes, and that a review a reader can trust (a verified one) is worth more than one they cannot. Two of the four ranking pages we could read (podium.com, digitalnrg.co.uk) repeat survey percentages instead; none of the four cites this study, and it is the figure we print here because it is the one we could open and check.

There is a limit inside the same study, and it is a useful one. Purchase likelihood peaks at ratings between 4.0 and 4.7 and then begins to fall as the rating approaches 5.0. A business that dreads its first four-star review is dreading the wrong thing. A perfect score with nothing critical in it reads as curated, and a 4.6 with a three-star review about a slow export, answered by the owner, reads as a real company.

Why are Google reviews important for a business? Being found

For a business that serves customers in a place or an area, reviews also decide whether you appear at all. Google's own page, Tips to improve your local ranking on Google, says local results are ranked on three things: relevance (how well your profile matches the search), distance (how far you are from the searcher) and prominence (how well-known you are). On prominence it says the factor is "also based on info like how many websites link to your business and how many reviews you have", and, in its own words, "More reviews and positive ratings can help your business's local ranking."

Two things about that sentence. Google says "can help", and publishes no weight, so nobody can tell you that twenty more reviews move you from fourth to first. And distance is one of the three factors and you cannot change it. Of the other two, the same page says relevance comes from complete and detailed business information on your profile, and reviews feed prominence, which is the one a business can keep working on month after month.

The same page says that replying shows customers you value their feedback and that "Positive reviews and helpful replies can help your business stand out." A reply is cheap, it is visible to every later reader, and in Google's words it helps your business "stand out". For a software company that sells to the whole world from one website, the local pack matters less; for it, reviews work through the pages a buyer reads before signing up, which the next section covers.

Trust: why a stranger believes a review before your homepage

Every ranking page we could read calls it social proof, and the idea is simpler than the phrase. Your homepage is a claim made by someone with something to sell. A review is a claim made by someone with nothing to sell. A buyer who has never met you weighs the second one more, and will keep doing so however good your copy gets.

That is also the difference between a testimonial and a review, and it matters to how much trust each one earns. A testimonial is chosen by the business, so the reader knows the unflattering ones were left out. A review is left by the customer and the business does not pick which ones show. The trust comes from the reviews you would not have chosen: the three-star one with a fair complaint, answered. An agency with twelve reviews, two of them lukewarm and both replied to, is making a stronger claim than one with six glowing testimonials on its own site.

Feedback you can act on: a worked example

The podium.com page that ranks for this query says reviews "provide insight into customer satisfaction", and none of the four pages we read shows what that looks like on a Tuesday. Here is the version a business can run. Say a software company has collected 40 reviews over six months. Someone reads all of them once and tallies the themes:

The figures are an example, not a measurement, but the method is the point. Forty reviews read one at a time are forty opinions; the same forty tallied are three decisions. Onboarding comes first because it is the most-mentioned complaint and the cheapest to fix (a setup guide and a first-week email). The export goes on the roadmap with nine reviews as its evidence, which is a better case than any one customer's request. The price complaints get a reply that names the plan those reviewers missed. And the support team gets told, with the count, that eleven people took the trouble to say so.

The routine that turns reviews into decisions, in the order that keeps it short

Run the tally monthly and the themes start to move. The onboarding count should fall after the guide ships, and if it does not, the guide is not the fix. That is the one thing reviews give a business that a survey does not: the customer chose what to say, so the themes are the ones that matter to them and not the ones you thought to ask about.

How important are reviews for a small business?

More important than for a large one, and for a reason in the figures above. The Spiegel finding that the benefit diminishes after the first five reviews means a shop with twelve reviews is not far behind a chain with four hundred on the thing that moves a first purchase. The count still matters where a buyer compares two businesses side by side, and Google names it as one input to prominence, but the gap between zero and five is the one a small business can close in a month.

The other reason is that a small business has fewer places to be found. A chain has a brand people already search for. A three-person agency or a two-year-old software company has a listing, a rating and whatever the first page of results says about it, and reviews are most of what that page says.

What reviews will not fix

Asking for reviews does not rescue a product people dislike. It gets you more honest reviews, faster, which is the point and the risk at once. A business that knows its onboarding is broken should fix it before it asks its last fifty customers what they think.

Reviews cost time, and the time is a person's, not a tool's. Someone has to ask, someone has to read, and someone has to reply, in the business's own voice, to the ones that need it. Software can send the requests and put every review in one inbox, but a reply written by a template reads like one, and the reader it was meant for can tell.

And negative reviews will come, whatever you do. The useful question is not how to stop them but what the rules let you do about them, which is less than many owners assume.

What the rules forbid: the FTC rule on fake reviews

In the United States the Federal Trade Commission announced a final rule on fake reviews and testimonials on 14 August 2024, codified at 16 CFR Part 465 and effective 60 days after its publication in the Federal Register. The rule lets the agency seek civil penalties against knowing violators. It prohibits six practices:

Six practices the FTC rule bans, in the order the Commission lists them

1. Fake or false consumer reviews, consumer testimonials and celebrity testimonials, including reviews generated by AI that misrepresent a reviewer's experience.

2. Buying positive or negative reviews: compensation or an incentive conditioned on what the review says.

3. Insider reviews and testimonials from a company's officers, managers or employees without a clear disclosure of the connection.

4. Company-controlled review websites presented as independent.

5. Review suppression: unfounded legal threats, intimidation or false accusations used to get a negative review removed.

6. Misuse of fake social media indicators, such as bought followers or views.

Three of those catch businesses that did not think of themselves as cheating. Rewarding a review only if it is positive is banned; rewarding every review, whatever it says, is a different question the rule does not settle in this press release. A founder reviewing their own product without saying so is an insider review. And a lawyer's letter sent to make a fair one-star review go away is suppression. This is the rule as published, not legal advice, and a business outside the United States has its own rules to read.

The next step for your business this week

Decide where your reviews will live, then ask your next ten customers. Everything above follows from having the first five reviews in one place a buyer can find, so that is the whole of this week's job. If you want software to send the requests, watch every site you are listed on and put the replies in one inbox, the reputation and review management software listing compares the tools on the same twenty rows: whether they send requests by SMS and email, reply from one inbox, surface sentiment and theme insights, and flag fake reviews for removal, among others. The wider software categories index holds the rest.