Small businesses have always known the importance of word of mouth. Many successful businesses have been built on word of mouth referrals, and many have been killed by bad word of mouth.

But now the landscape is changing, making word of mouth more important than ever – only now, that word of mouth is being communicated on the Internet.

People – your customers – are turning to the Internet as their primary source of information on products and services. Instead of opening the yellow pages of their phone book, they turn to Yahoo or Google. And in addition to websites and listings for local businesses, they are finding ratings and reviews!

Sites like Amazon.com and ePinions pioneered product rating systems. In some categories, these ratings have become essential to a product’s success: more than 60% of consumer electronics purchasers report that they consult online ratings before making a purchase decision!

Ratings have also become common is a few other business categories, such as restaurants and hotels.

But the online ratings explosion is just starting; Internet entrepreneurs are demonstrating that virtually anything can be rated online.

RateMyProfessors.com, launched in 1999, allows college students to rate – well, professors. The site has accumulated over 3 million ratings, and has spun off another site, RateMyTeachers.com, aimed at high school and elementary students.

ApartmentRatings.com has the most comprehensive database of apartment ratings, with almost 250,000 reviews. RateMDs.com was formed to allow patients to rate their doctors. ClubRatingz.com, allows patrons to rate nightclubs and bars (perhaps while recovering from hangovers?)

Rating sites are even risking the wrath of the legal profession: LawyerRatingz.com provides attorney ratings and reviews.

All of these sites feature a fair share of rants and raves. Many of the comments are semi-coherent ramblings, often typed with CAPS LOCK down. But surprisingly, over time and with enough ratings, a fairly accurate picture emerges. Some reviewers provide well-thought reviews and useful information. And the sites are being visited and read!

The ratings phenomena may not have reached your industry or your community, but it probably will. So what can you do about it?

First, be aware of ratings sites. Use a search engine to look for rating sites in your area and business. (Search for things like landscaper ratings in Pittsburgh or hair salon reviews in Sacramento.) You may find that your business is already listed on a rating site. If it is, make sure that the basic listing information (business name, location, website) is correct, and if not, contact the site operator. If your business is not listed, see if there is a way to add your listing. Do not pay for this service! Legitimate rating sites are not supported by the businesses being rated! (However, a few sites offer enhanced “listings” for a small fee. Consider paying for this if the site seems to be well run and has a lot of traffic.)

Check the rating sites regularly. You might actually get some good information on how customers see your business, and where you need to make improvements.

Encourage your patrons to rate your business. Satisfied customers will give you good ratings. (Don’t try to “flood” a rating site with bogus reviews; many of these sites use algorithms to detect the source of ratings, and may even remove businesses that try to cheat.)

If you get a bad review, there’s probably not much you can do about it. The rating and review sites are on solid legal ground, and most will not remove bad reviews. However, some sites have a mechanism for responding to a review, so be sure to ask about this. If nothing else, you can submit your own review and calmly refute the complaints of other reviewers. Be careful to stay calm and professional, and not get into online debates that can damage your credibility.

In the end, business success is still based on word of mouth – but now more people are listening.

For a great list of business and professional rating sites, visit The Ratingz Network at www.Ratingz.net

For more information about rating and review websites, visit the Rating and Review Professional Association at RARPA.org.

I’ve recently spent quite a bit of time looking at online reviews on the many online rating sites. I’ve noticed some interesting patterns.

First, the ratings don’t follow a “normal” distribution, in which most of the ratings fall in the middle. Instead, there tend to be clusters of high ratings and low ratings… often for the same product or service. This really isn’t surprising: people are most likely to write a review if they feel very strongly about something.

The high ratings generally extol the features or services provided, often at a low price. Stepping back, it really is remarkable how good products have become. It’s clear from the reviews that most people are very happy with most of their purchases.

But things get very interesting when we read the negative reviews. Some are complaints about features or product quality… but a large number are complaints about service. If a product breaks or fails in some way, the purchaser is unhappy. But if the manufacturer or seller does not provide prompt, courteous, and satisfactory service, the buyer becomes really angry – and that’s when the very negative reviews get written.

This carries over to the offline world as well. Very few people go out of their way to tell their acquaintances about a product that wasn’t very good. But if someone has a bad experience getting the product fixed, they will go to great lengths to tell everyone they can about the terrible service they received.

The lesson here is simple: take customer service seriously! When a customer has a complaint about a product, he is already unhappy. You as a business have an opportunity to turn him into a happy (or at least satisfied) customer, or into a very angry ex-customer.

Four simple things will head off becoming a “bad service” story:

1. Respond quickly
2. Respond courteously
3. Work with the customer. It’s true that customers are sometimes unreasonable, and you can’t always give the customer what he would like. But be very clear that you are willing to work with the customer to arrive at a fair solution.
4. Follow up to be sure that customer’s problem is resolved.

Providing reasonable service is pretty simple – it’s amazing more companies don’t do it.

Learn more at the Rating and Review Professional Association.