Abstract
Online retailers often face the decision on whether they should implement a word-of-mouth (WOM) system on their websites. Some retailers opt not to have an in-site WOM system (e.g., Tiffany.com and Tjmaxx.com ), whereas others implement and manage an internal WOM system (e.g., Amazon.com and Macys.com ). According to a new study in Information Systems Research, authors Ni Huang (Arizona State University), Tianshu Sun (University of Southern California), Peiyu Chen (Arizona State University), and Joseph M. Golden ( Collage.com ) conducted a randomized field experiment to examine how implementing an in-site WOM system from ground zero influences customer conversion in an online retailing website. Their results demonstrate that implementing an in-site WOM system can be a double-edged sword to the online retailing website. Specifically, the impact of a WOM system implementation on customer conversion is moderated by WOM volume, such that its effect is positive above a threshold of volume and negative below the threshold. Additionally, the researchers find that WOM valence reinforces the impact of a WOM system on customer conversion. These results offer important implications for the hundreds-of-billion-dollar online retailing industry on the implementation and management of online WOM systems.
E-commerce firms often face the decision on whether they should implement a word-of-mouth (WOM) system on their websites. An in-site WOM system can potentially boost customer conversion by conveying signals and information about product popularity and quality. However, implementing such a system might also have unintended consequences, hindering product sales because of the lack of control over WOM volume and content. This study examines how implementing a WOM system (through social media integration) on an e-commerce website affects customer conversion in the two stages of the consumer purchase funnel, namely, adding a product to the cart and placing an order. Identifying the causal effect of WOM system implementation is challenging because e-commerce websites usually make their decisions based on private information about the potential impact of the system and may have simultaneously implemented other initiatives that could confound the effect. As a result, we conducted a randomized field experiment in collaboration with a large e-commerce website in the United States by testing two versions of a web page: one with a WOM system (treatment) and one without (control). We find that the impact of a WOM system implementation on customer conversion is moderated by WOM volume such that its effect is positive above a threshold of volume (measured by the number of comments) and negative below the threshold. Additionally, we find that WOM valence reinforces the impact of a WOM system on customer conversion. These results suggest that a social-learning mechanism is in play. Furthermore, our results show that the impact of a WOM system mostly occurs at the consideration stage in the upper purchase funnel (adding a product to the cart) rather than at the evaluation stage in the lower funnel (placing an order). Our study not only contributes to research on online system design but also offers practical implications for implementing and managing WOM systems on e-commerce websites.
