Replying to reviews is part of managing your reputation. People reading your profile see how you treat customers, good day or bad day.
Good reviews
Thank them by name, mention what they liked if you can, and keep it short. Don't copy and paste the same reply on every review.
Bad reviews
Stay calm. Say sorry for the experience, don't argue, and offer to make it right offline. The reply is really for the next customer reading it.
Reply fast
The sooner you reply, the better it looks. That's hard when you're running a business, which is why the RankOne Managed plan handles review monitoring and professional responses for you.