Why A Bad Review Is Good For Business--Seriously

Online reputation management, or trying to make your company look better than it actually is, is the topic du jour in corporate boardrooms.

Research like this 2005 study from the London School of Economics suggests a better company reputation leads to better sales -- and who doesn't want that?

But as I was researching reputation management for my latest book, someone told me corporate America had it all wrong. Not that it's wrong to want a better reputation, but that a bad review can have a positive effect on a company, too.

This piece of contrarian advice came to me by way of Nicole Yelland, the brand manager for a company called Livio Radio, which develops Internet radio applications.

"Reviews are something that we're pretty passionate about at Livio, especially when it comes to listening to the feedback," she told me.

With so many companies looking to online reputation management as an opportunity to whitewash their reps, Livio goes the other way. It seeks out negative reviews because they give the company an opportunity to create a better product.

Yelland says she understands the obsession with positive reviews. Even if it's a little unhealthy.

It's exciting to see brands realizing the importance of online ratings and going the extra mile to get a positive online review. Truthfully, consumers need those reviews too.

I personally haven't bought anything in years that I didn't look at ratings for first either on my computer or using a shopping app on my phone.

However, It's important for retailers, manufactures and service providers to realize that a bad review can be just as powerful, if not more.

For example, here's a Livio reviewer who didn't like the product and said as much on CNET, our sister site.

The Livio Radio is a great idea that need better features and upgrades for the cost of it. From my point of view and as a business person I think they need to get better software and updates for it.

I would like it to have a better reception from a wireless network, in my case I have problems with it. Also need audio adjustments like Bass and Trebel because each person want different adjustment of audio, also need to solve the buffering problem.

Need a sleep timer and better backlight adjustments for the sleep time. In general is a good idea that need attention for the good of the business and customers. Thank you and good luck.

"When we get a negative review or even a post about a functionality being problematic, it's great because we're able to fix it immediately and go back to that specific consumer to thank them while letting them know we've addressed the previous issue," says Yelland.

For example, the original Livio Radio featuring Pandora was developed with three internal alarm clock options. But customers said it wasn't enough, and they sounded off on Amazon and Facebook about the alarm clock deficit.

"So we upped it to five alarm clocks and let our customers know," says Yelland. "The positive response that originated from a complaint was overwhelming and allowed us to establish a relationship of trust and respect with our customers."

More recently, Livio Radio's Car Internet Radio iPhone application had been getting a lot of requests from Android users on Facebook and Twitter - they wanted one, too. They're getting it this week.

"In short, negative feedback is great for organizations who are willing to listen, change, respond -- and most importantly, thank those who offered the constructive criticism."

Too often, online reputation management is about lying to protect your company and its profits. Turns out the truth -- even a painful truth -- can be even more powerful.

Christopher Elliott is a consumer advocate, syndicated columnist and curator of the On Your Side wiki. He also covers customer service for the Mint.com blog. You can follow Elliott on Twitter, Facebook or his personal blog, Elliott.org or email him directly.
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