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The Gold Standard for a Five-Star Reputation

By Tim Bailey

The website Yelp.com now hosts over 71 million reviews and has 135 million visitors monthly. Much like TripAdvisor and Amazon, Yelp is proving that today's consumers whole-heartedly embrace online reviews and ratings. More importantly, these online reviews are impacting the success of companies. According to a study conducted by Michael Luca, an assistant professor at Harvard Business School, in the restaurant industry, "a one-star increase in a Yelp rating leads to a five to nine percent increase in revenue." The difference between a one-star and five-star online reputation can now be the difference between failure and success in attracting customers in this transparent and wired-world.

The Attraction to Reviews
Online ratings and reviews are a critical resource for consumers. Recent studies find that as much as 80 per cent of the population will consult online reviews prior to a purchase.
The human species has always sought "security in numbers" and the importance of customer reviews is not surprising. There is enormous power in group dynamics. Groups provide reassurance, security and trust for individuals, whether that group be a tribe, organization or community.
The online world is similar. Today's connected economy allows consumers to consult with "like groups" before making a purchase. A car shopper can read reviews from customers that already own that make and model. This allows a car shopper to use information from customers that already own the vehicle when deciding on a "best-suited" purchase. The collective opinion of a group has tremendous influence on individuals and the connected world has simply made groups more easily accessible.

Earning the Fifth Star
The world of online reviews is not "all negative" as many believe. In the case of Yelp, 39% of reviews are five-star compared to only 13% that are one-star. The secret lies in understanding what it takes to deliver a five-star experience to today's customers. It is what Disney calls the "Magic," or in the case of The Ritz Carlton, it means providing the "Gold Standard" for each customer. A high-quality product and high-quality service falls into the three-star and four-star world today. Bundling that product and service with an exceptional customer experience advances the meter further. The final ingredient for a five-star reputation is adding an element of "surprise and delight" for each customer. That is the "wow" element that transforms customers into champions.

The Gold Standard
Hiring, training and empowering employees and managers is critical to a five-star reputation. Front-line employees at The Ritz Carton are provided with 300 hours of training in their first year and 120 hours of training each year after. "Putting on the Ritz" customer experience is not left to chance, but is rather a discipline that runs deep to the core of the company. The Ritz-Carlton has developed a training manual that describes over 1,000 different scenarios that might go wrong in a guest's experience, along with solutions on how to recover. Employees and managers are taught that anyone who receives a customer complaint "owns" that customer complaint until it is resolved. Front-line employees are empowered to spend up to $2,000 to address a customer issue without authorization and managers can spend up to $5,000. These are just a few examples of how the Ritz-Carlton creates such a differentiated customer experience. But even greater than the "service recovery" techniques in place at The Ritz, is the fact that all employees are trained to anticipate the unspoken needs of guests to create moments that are unique, memorable and most importantly, personal. These are the "surprise and delight" moments that have made the brand iconic.

Customer Opinions Trump Marketing
The Ritz-Carlton was founded before the era of online reviews; however the company has long known that its brand reputation comes from past customers. Obsessed customer focus has placed companies like the Ritz-Carlton in a better position for today's world of transparency and online reputation.

"For the first time in business history, aggregate opinions of quality can trump brand, marketing and advertising spend," according to author Bill Tancer. Highly rated brands are commanding a premium in the market. That is the reason leading companies continue to direct increasing resources towards customer care, as it has become an even more critical component of brand marketing and advertising in this customer-empowered world. Enchanted "word of mouse" customers become online brand champions and home builders that deliver a "five-star experience" will continue to rise above the falling stars of the competition.

Tim Bailey is Division President of Avid Ratings Canada, a leading provider of customer loyalty research and consulting to the home building industry. Through the Avid system, industry-leading clients improve referrals, reduce warranty costs, and strengthen their brand. He can be reached at tim.bailey@avidratings.ca.



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