The Effect of Word of Mouth on Sales: New Answers from the Comprehensive Consumer Journey Data

32 Pages Posted: 11 Oct 2016  

Xiao Liu

New York University (NYU), Leonard N. Stern School of Business, Students

Dokyun Lee

Carnegie Mellon University - David A. Tepper School of Business

Kannan Srinivasan

Carnegie Mellon University

Date Written: September 30, 2016

Abstract

Online Word-of-Mouth has great impact on product sales. Although aggregate data suggests that customers read review text rather than relying only on summary statistics, little is known about consumers’ review reading behavior and its impact on conversion at the granular level. To fill this research gap, we analyze a comprehensive dataset that tracks individual-level search, review reading, as well as purchase behaviors and achieve two objectives. First, we describe consumers’ review reading behaviors. In contrast to what has been found with aggregate data, individual level consumer journey data shows that around 70% of the time, consumers do not read reviews in their online journeys; they are less likely to read reviews for products that are inexpensive and have many reviews. Second, we quantify the causal impact of quantity and content information of reviews read on sales. The identification relies on the variation in the reviews seen by consumers due to newly added reviews. To extract content information, we apply Deep Learning natural language processing models and identify six dimensions of content in the reviews. We find that aesthetics and price content in the reviews significantly affect conversion. Counterfactual simulation suggests that re-ordering review content can have the same effect as a 1.6% price cut for boosting conversion.

Keywords: Consumer Purchase Journey, Product Reviews, Review Content, Deep Learning

Suggested Citation

Liu, Xiao and Lee, Dokyun and Srinivasan, Kannan, The Effect of Word of Mouth on Sales: New Answers from the Comprehensive Consumer Journey Data (September 30, 2016). NET Institute Working Paper No. 16-09. Available at SSRN: https://ssrn.com/abstract=2848528 or http://dx.doi.org/10.2139/ssrn.2848528

Xiao Liu (Contact Author)

New York University (NYU), Leonard N. Stern School of Business, Students ( email )

New York, NY
United States

Dokyun Lee

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Kannan Srinivasan

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Paper statistics

Downloads
120
Rank
191,440
Abstract Views
314