THE IMPACT OF ONLINE RECOMMENDATIONS AND CONSUMER FEEDBACK ON SALES

Pei Yu Chen, Jungsun Yoon, Shin-yi WU

Research output: Contribution to conferencePaperpeer-review

255 Scopus citations

Abstract

Quality uncertainty and high search costs for identifying relevant information from an ocean of information may prevent customers from making purchases. Recognizing potential negative impacts of this search cost for quality information and relevant information, firms began to invest in creating a virtual community that enables consumers to share their opinions and experiences to reduce quality uncertainty, and in developing recommendation systems that help customers identify goods in which they might have an interest. However, not much is known regarding the effectiveness of these efforts. In this paper, we empirically investigate the impacts of recommendations and consumer feedbacks on sales based on data gathered from Amazon.com. Our results indicate that more recommendations indeed improve sales at Amazon.com; however, consumer ratings are not found to be related to sales. On the other hand, number of consumer reviews is positively associated with sales. We also find that recommendations work better for less-popular books than for more-popular books. This is consistent with the search cost argument: a consumer’s search cost for less-popular books may be higher, and thus they may rely more on recommendations to locate a product of interest.

Original languageEnglish (US)
Pages711-724
Number of pages14
StatePublished - 2004
Externally publishedYes
EventInternational Conference on Information Systems, ICIS 2004 - Washington, United States
Duration: Dec 12 2004Dec 15 2004

Conference

ConferenceInternational Conference on Information Systems, ICIS 2004
Country/TerritoryUnited States
CityWashington
Period12/12/0412/15/04

Keywords

  • digital word-of-mouth
  • feedback mechanism
  • Recommendation system
  • search costs
  • virtual community

ASJC Scopus subject areas

  • Computer Networks and Communications
  • Computer Science Applications
  • Information Systems

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