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 Faculty of Management, Economics and Social Sciences

Size Matters: Why Smaller Businesses Receive More Positive Online Reviews

Large companies like Starbucks and McDonald's tend to receive more negative online reviews on platforms such as Yelp compared to their smaller competitors. But are their customers actually less satisfied? An international research team from the University of Cologne, Bielefeld University, and Tulane University has investigated this question in a new study.

Two people sitting in front of a laptop. The woman is pointing at the screen the man is looking at the screen, smiling. There are some 5 star ratings, likes, and comment emojis loating around in the whole picture.

Online reviews—such as star ratings in product reviews—are often more positive for smaller businesses than for larger ones, and this is only partly related to customer satisfaction. This is the key finding of a recent joint study conducted by researchers from the University of Cologne, Bielefeld University, and Tulane University in New Orleans. The research team, led by Dr Jan Klostermann from the Marketing Department at the Faculty of Management, Economics, and Social Sciences at the University of Cologne, analysed consumer reviews on Yelp, Amazon, X, and Instagram for thousands of companies. Through multiple experiments, Jan Klostermann, Anne Mareike Flaswinkel, Chris Hydock, and Reinhold Decker found that as company size increases, online ratings tend to decline—even when the actual quality of the products and customer satisfaction remain the same.

For example, among American burger chains, In-N-Out Burger—a relatively small company—had an average star rating of 4.03, whereas Chick-fil-A, a significantly larger company, had an average rating of only 3.36. "If we assume that Chick-fil-A was the same size as In-N-Out, our study suggests that its star rating would be expected to rise to 4.06," says Jan Klostermann. Thus, the difference between these competitors can be entirely attributed to the difference in company size.

Through various experiments, the research team demonstrated that this difference in ratings can largely be explained by the way individual consumers decide whether or not to share their experiences in the form of an online review—a decision that is strongly driven by empathy. Consumers are more likely to share positive experiences with smaller businesses while withholding negative ones. In contrast, they tend to show less empathy towards larger companies, giving them less incentive to help by sharing a positive experience or holding back a negative one. This selection process explains why larger businesses tend to receive more negative reviews on average.

However, smaller companies do not always benefit from this effect. They risk losing their "empathy advantage" if they fail to meet their responsibilities regarding environmental, social, and governance (ESG) criteria—such as fair wages or sustainability. When smaller companies were associated with such issues, their online ratings became disproportionately more negative.

Since online reviews are a crucial source of information for purchasing decisions, the study carries important implications for consumers. There is a risk that they may make suboptimal choices when comparing ratings between companies of different sizes. While consumers generally have a good sense of a company’s size, they may not be aware that reviews tend to be more positive for smaller businesses.

From a business perspective, the study highlights that analysing customer feedback may lead to misleading conclusions. A large company, for instance, might assume—based on the negative impact of company size on online ratings—that its offerings are inferior to those of a smaller competitor and that its customers are less satisfied, even if the actual quality is similar or superior. Likewise, a company that grows over time may observe a decline in ratings and mistakenly conclude that customer satisfaction has decreased, when in reality, the change in company size itself is driving the shift.

In their analysis, Jan Klostermann, Anne Mareike Flaswinkel, Chris Hydock, and Reinhold Decker further found that larger companies can mitigate this effect by responding more frequently to reviews, thereby increasing consumer empathy. For instance, they could strategically comment on online reviews or directly engage with consumer tweets. "Ultimately, the key lies in how much empathy the response conveys," says Jan Klostermann. “The more compassionate, specific, and personal the response, the better.”

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