f you’ve ever asked people you know for their thoughts about a future purchase, you’re not alone. One study from Nielsen researchers found that 92% of survey respondents trust product endorsements from family and friends.
Folks trust strangers, too — a 2018 survey reported that 82% of consumers read online reviews.
Does that translate into more sales for companies that offer online review functionality on their retail websites? It does, says Assistant Professor of Information Systems Ni Huang, who tested an in-site review system on customers of an e-commerce retailer. She found that the system served as an effective word-of-mouth (WOM) marketing tool that boosted sales and profits once customers saw a critical number of reviews on a product page.
Online review systems may be a standard now, but even Huang admits they can have unintended consequences.
On the plus side, such systems allow companies to gather customer feedback and provide additional product information, Huang says. Review systems also facilitate WOM marketing because customers share their experiences and preferences with others online. Those opinions can be both positive and negative, though, and previous research has shown that “negative WOM in the system can outright damage a product or website’s reputation,” Huang and her research colleagues wrote in a paper covering their experiment.
The reason is “social learning,” which holds that people learn by watching other people. Social learning can boost or depress sales, and its impact isn’t limited to the risk of negative comments. It’s also related to the number of comments themselves.
“The quantity of the comments on your product pages affects whether people choose to purchase or not,” Huang says. If the customer sees only a few comments in your word-of-mouth system, “the customer might infer that the product is unpopular,” she adds. If that product is unpopular, maybe it’s unworthy, too, and would-be customers may shy away from buying it.
f you’ve ever asked people you know for their thoughts about a future purchase, you’re not alone. One study from Nielsen researchers found that 92% of survey respondents trust product endorsements from family and friends.
Folks trust strangers, too — a 2018 survey reported that 82% of consumers read online reviews.
Does that translate into more sales for companies that offer online review functionality on their retail websites? It does, says Assistant Professor of Information Systems Ni Huang, who tested an in-site review system on customers of an e-commerce retailer. She found that the system served as an effective word-of-mouth (WOM) marketing tool that boosted sales and profits once customers saw a critical number of reviews on a product page.
Online review systems may be a standard now, but even Huang admits they can have unintended consequences.
On the plus side, such systems allow companies to gather customer feedback and provide additional product information, Huang says. Review systems also facilitate WOM marketing because customers share their experiences and preferences with others online. Those opinions can be both positive and negative, though, and previous research has shown that “negative WOM in the system can outright damage a product or website’s reputation,” Huang and her research colleagues wrote in a paper covering their experiment.
The reason is “social learning,” which holds that people learn by watching other people. Social learning can boost or depress sales, and its impact isn’t limited to the risk of negative comments. It’s also related to the number of comments themselves.
“The quantity of the comments on your product pages affects whether people choose to purchase or not,” Huang says. If the customer sees only a few comments in your word-of-mouth system, “the customer might infer that the product is unpopular,” she adds. If that product is unpopular, maybe it’s unworthy, too, and would-be customers may shy away from buying it.
Huang uncovered evidence of this phenomenon in a recent field experiment. She and a few colleagues created two versions of a working e-commerce site — one with the WOM system and one without — then randomly directed some 47,000 website visitors to one or the other version over a three-week study period. Each customer faced the same condition — a site with a WOM system or one without — for the entire three-week experiment.
After analyzing user behavior on the two versions of the site, the researchers found that, as expected, there was a higher likelihood that users on the WOM system would add an item to their shopping carts. They also discovered that a lack of comments did depress sales, as they suspected it would. When there were no comments on a product page, the WOM system’s presence decreased the likelihood that someone would add that product to the shopping cart. The point at which the WOM system flips from negative to positive as a customer conversion aid was four comments, assuming all comments were neutral or positive, which was the case in this study.
The rise in add-to-cart activity and subsequent sales in the experiment equated to an 11.36% increase in the site’s conversion if the e-commerce retailer permanently implemented such a system. That lift would translate into more than
$1 million more in annual revenue.
Based on her experiment results, Huang thinks managers of e-commerce sites that don’t have WOM systems should consider implementing one. She also says that website managers who deploy such a system should observe it and quickly boost comment numbers.
“I would encourage website owners to seed content,” she says. “After the customers make purchases, send them a reminder email to review their purchases.” Also, Huang suggests encouraging customers to post questions on the word-of-mouth system, which allows the website to monitor and reply to those questions. Another trick: When customers do pose questions, reach out to other customers, and invite them to post an answer. That increases customer engagement overall.
When negative comments do appear, Huang says website owners can — and should — jump in to address them.
It may take some extra site-management effort, but Huang’s research shows an in-site WOM system can have a big payoff. Her experiment was done on a working e-commerce website in cooperation with the site’s owner, and it took only three weeks for the number of comments on this site to begin making a positive impact. “Based on our experiment’s outcome, our collaborating firm implemented the WOM system at full scale,” Huang and her colleagues note in their paper.
— Betsy Loeff