While online retailers may spend thousands annually on web advertisements, sometimes the most effective way to reach potential customers is also the most time-tested.
A recent study conducted by Wharton marketing professor David Bell found that offline factors like word of mouth and consumer location can still exert powerful influences over online purchasing behavior.
Bell analyzed consumer-generated data provided by three online-only retailers which respectively specialize in baby products, groceries and apparel.
Upon registering for membership with each online retailer, consumers were asked to select the means by which they had found the website — for instance, through a friend’s recommendation, keyword search or advertising — from a drop-down menu.
Bell then counted the number of customer responses within each category by zip code in order to attempt to explain variations as a “function of [each location’s] physical character.”
His findings revealed that three main factors determine the potency of word-of-mouth as an influence on purchasing activity online: the physical density of potential customers and the homogeneity and location of the community in which they reside.
“The physical density of customers is important because it gives people more opportunities to be talking to one another,” Bell said, adding that neighborhoods in which people share greater similarity in terms of education, age and background appear to encourage word-of-mouth advertising.
“People’s online decisions depend a lot on physical circumstances,” Bell said.
He added that “preference minority” customers — consumers looking for a product other consumers in a given location do not demand — are generally more inclined to shop online, as local offline retailers may lack incentive to meet their needs.
As a result, the internet provides ample opportunity for the “niche player” to access a massive market.
He emphasized that online retailers which focus primarily on selling a particular category of product may also be perceived as “specialists” which offer a wider selection of higher-quality merchandise, compared to their offline counterparts.
According to Bell, the most effective advertising strategies for small online firms center on “motivating customers to find other customers,” naming sites likegilt.com and ruelala.com as successful examples of the “invitation-only” model.
“Your own customers are better able to identify other customers, and if you become a customer because you were referred to through word-of-mouth, you’re more likely to engage in word-of-mouth yourself,” Bell said.
College sophomore Lauren Harding, who frequents websites run by Nordstrom’s, Neiman Marcus, Bloomingdale’s and other department stores not located in Philadelphia, joined dailycandy.com and ruelala.com after friends recommended them.
According to Harding, the daily e-mails she receives from both sites play a major role in influencing her purchasing decisions.
Nursing sophomore and regular online shopper Anna Huzar said word of mouth influences “many things in college — shopping included.”
“People have on new brands I want to check out all the time,” she said. “The easiest way is clearly online.”
The Daily Pennsylvanian is an independent, student-run newspaper. Please consider making a donation to support the coverage that shapes the University. Your generosity ensures a future of strong journalism at Penn.
DonatePlease note All comments are eligible for publication in The Daily Pennsylvanian.