Many consumers consider the Better Business Bureau’s ratings as the definitive measure of good businesses. The BBB has been around for over a century and it’s played such an influential role in shaping advertising standards that quite a few people believe the BBB is a government organization and that it has legal authority, when in actuality it’s a private non-profit organization.
Many businesses pursue a BBB accreditation under the assumption that they have to, and they don’t understand the role that the BBB currently plays. If you’re considering BBB accreditation, here’s a breakdown of what that really means.
What Is The BBB?
The current iteration of the BBB is a business review and complaint mediation service that oversees various regional groups with the same goal. It isn’t a government organization and they don’t have any legal authority.
The BBB is composed of 112 individual regional bureaus, all of which are independently operated and funded through accreditation fees. At the top of the system is the national office, called the Council of Better Business Bureaus, which is located in Virginia. They determine BBB policy and standards, but they don’t directly manage the regional groups. Each region operates differently, offers different services, and charges different fees.
When they were founded in 1912, the BBB was a loose coalition of regional boards and watchdog groups that sought to regulate advertising practices. Over the years the nonprofit has operated under a variety of names, lobbied for different advertising standards, and has only recently metamorphosed into the company we know today. They haven’t always been focused on rating businesses and handling complaints, and their letter grade system is a recent invention.
The important thing to remember about the BBB, is that their funding comes almost entirely from the accreditation fees they charge businesses. It’s in their best interest to incentivize accreditation, and even though they claim to be impartial, they have a direct stake in the game. They keep the lights on by charging businesses for their services.
What The BBB Actually Does
At its core, the BBB is an extra-fancy version of yelp. If customers complain, you’ll be on there. If you want to resolve the complaints and improve your rating you’ll have to pay $300 or so per year for the privilege of responding to those complaints, with the added benefits of professional mediation services, entry into their business directory and networking events, and the right to use the century-old organization’s seal of approval.
The BBB’s primary selling point, of course, is its brand recognition. The BBB claims that their brand is recognised by 83% of consumers, and even if that number is inflated, that still means that a high BBB ranking can be a powerful marketing tool, especially when selling to older demographics.
Compared to other platforms, the BBB offers better tools for complaint management and helps businesses resolve negative complaints in a positive way. As long as the business makes an effort to positively resolve a situation to the BBB’s satisfaction (not the customer’s satisfaction), it won’t negatively influence the business’ BBB rating.
Compared to other review sites, the BBB maintains a well-moderated and pleasant portal for customer reviews. The bar for entry is significantly higher (businesses have to be at least one year old before they qualify), and it is possible to lose one’s accreditation due to bad advertising practices, but the end result is a more serious and focused platform.
What The BBB Doesn’t Do
The BBB has no enforcement abilities. It isn’t a government organization, which means that it can’t levy fines or force a business to respond to a complaint, and their mediation services are entirely voluntary. Businesses don’t need to be registered with the BBB in order to operate in their region, and joining the BBB offers no legal protection.
Many small businesses mistakenly believe that they need to pay for BBB accreditation in order to operate in their area, and that isn’t true. The BBB is a private organisation, and BBB accreditation, unlike local and regional business licenses, is primarily for the sake of appearances.
The BBB’s “power” comes from its significant social capital. They use their status to sway public opinion through articles, warnings, and ratings, typically for consumer benefit. As a century-old business that is recognised by many as the largest business rating organization in America, the BBB’s ScamWatch and other publications carry significant weight, and while the BBB has zero regulatory power, it makes up for it by influencing popular opinion.
Why The BBB Has A Bad Reputation
In 2010, the Los Angeles branch of the BBB supplied an A- certification to a shell organization named Hamas (after the terror group), sparking a media response that later found other examples of non-existent businesses purchasing favorable ratings from the organization. Similar reports have emerged concerning the Austin, TX, branch of the BBB charging a non-standard $70 mediation fee for complaints.
In 2013, the BBB expelled the Los Angeles branch from the organization, claiming that the LA branch violated national standards by charging businesses for A+ ratings. In response, the LA branch re-branded themselves as an independent organization and leveled their own claim that they were following BBB practices and that the BBB was persecuting them unfairly.
And while the BBB has managed to move past most of these issues, the company still faces recent legal disputes concerning the accuracy of their ratings and claims that they unfairly target non-accredited businesses.
The majority of the complaints that have been leveled against the BBB, though, have been at the regional level, not the national level. Despite the bad press generated in 2010 and 2013, the BBB has maintained their position that the regional bureaus in these cases were operating in violation of policy.
What Does This Mean For Service Businesses?
Ultimately, the BBB should be treated like any other review site; potentially useful, but not critical to business operation. It’s great for reputation management, as it allows business owners to resolve reviews entirely instead of simply responding to them and hoping the customer will change their mind, and their services are well-reviewed for a reason, but the full scope of their services is dependent on what region you’re in. Each region is managed independently, and as we’ve seen before, some regions are prone to a ‘pay to play’ approach.
For young businesses, don’t worry about it. Your business has to be a year old in order to qualify and your primary focus should be on developing your core customer base. For businesses that have been on the market long enough to qualify, base your decision on how highly your customers value the BBB. As an older organization, most of its brand recognition comes from older generations; if it’s something your customers care about, and it fits within your annual marketing budget, using the BBB to its full advantage won’t hurt your business. If your customers are young, they might be more likely to turn to other sources to verify their trust.
Businesses get hurt when their customers rely on the BBB and they ignore the complaints logged on the site. Unanswered complaints can tank a business’ rating, creating an uncomfortable situation where business owners feel obligated to pay the accreditation fee in order to respond to them. The BBB lives off those fees, and it can feel like your reputation is being held hostage at times. They’re not a perfect business, and like most review sites they’ve seen more than their fair share of controversy.
If you’re looking for a way to make your customers more confident in your services, or to create an air of authority and authenticity, a BBB accreditation might help. It’s valued among older consumers as a sign of trustworthiness, and it’s an easy way to get a marketing edge over your competition. As long as you approach it with its history in mind, the Better Business Bureau can be a great tool.