Do we really buy ‘top-rated’ deals online? New research may surprise you
Key Takeaways: The position of a product in a website ranking (i.e. Amazon or Expedia) does influence how consumers search, but in many cases, it does not have an additional effect on their actual purchase decisions; online product rankings reduce the consumer costs associated with searching for a service or product; and consumers save money because of their reduced search costs even if their choice was not high in the online rankings they examined.
CATONSVILLE, MD, July 11, 2018 – Anyone who shops online is familiar with those 'top-rated' products or services that rise to the top of their search on e-commerce intermediary sites like Amazon or Expedia. So, do those rankings really help those products or services get sold?
According to a new study, the answer is, "yes" and "no."
Raluca M. Ursu, of the Stern School of Business at New York University, conducted the research for the study, "The Power of Rankings: Quantifying the Effect of Rankings on Online Consumer Search and Purchase Decisions," which is published in the July edition of INFORMS journal Marketing Science.
The study found that products with high online rankings have a causal effect on what consumers search, but those rankings do not necessarily affect purchase decisions directly. Search intermediaries like Amazon and Expedia use rankings to influence purchases but only secondarily to their search decisions. The article emphasizes the importance of optimizing the search process, distinguishing it from assumptions that consumers are likely to make purchase decisions solely on a product's or service's high rankings.
In conducting her research, Ursu analyzed rankings and search data from a field experiment at Expedia, where she sought to clarify the causal effect of rankings on consumer search and purchase decisions. She then sought to quantify the effect of rankings on consumer search costs, and in the end, to show how rankings built on her research model's estimates can benefit consumers in the future.
"Constructing relevant rankings requires understanding of their causal effect on consumer choices," said Ursu. "For search intermediaries like Amazon and Expedia, measuring the causal impact of the ranking and separating it from the intrinsic quality of the product ranked, allows them to place relevant products at the top of the ranking, rather than ones that were chosen more frequently merely because of their past rank."
"This helps consumers find better-matching products more quickly, which in turn, benefits the search intermediary (Amazon or Expedia) through increased conversions and a higher probability of repeat visits."
More consumers than ever are shopping online, and as they do, e-commerce sites are working to enhance and optimize the online shopping experience through the use of model predictions based on optimal search order, data patterns, and data sets that use randomized control experiments to reveal the causal effect of variables of interest.
Consumers may notice this when intermediary sites inform them that, "Customers who bought this item also bought…" or "People who searched for this item also searched for…"
"The search for a product or a service can be very costly in terms of time and money for any consumer," said Ursu. "That is where online search intermediaries have found their greatest value, helping to efficiently match consumer needs with the most relevant product or service they are seeking. The goal of this research is to help identify the factors that can be used by intermediaries to provide even greater consumer benefit in the future."
The full study is available at https://pubsonline.informs.org/stoken/default+domain/MKSC-PR-07-2018/full/10.1287/mksc.2017.1072.
About INFORMS and Marketing Science
Marketing Science is a premier peer-reviewed scholarly marketing journal focused on research using quantitative approaches to study all aspects of the interface between consumers and firms. It is published by INFORMS, the leading international association for operations research and analytics professionals. More information is available at http://www.informs.org or @informs.
http://ow.ly/nmM330kTYsX <h4>Related Journal Article</h4>http://dx.doi.org/10.1287/mksc.2017.1072