Measuring the Value of Recommendation Links on Product Demand

Forthcoming in Information Systems Research

48 Pages Posted: 2 Feb 2017 Last revised: 8 Nov 2018

See all articles by Anuj Kumar

Anuj Kumar

University of Florida - Warrington College of Business

Kartik Hosanagar

University of Pennsylvania - Operations & Information Management Department

Date Written: June 11, 2018

Abstract

Recommending substitute products on focal products’ pages on an e-commerce website can impact product sales in two ways. First, the visibility of a product as a recommendation on other products’ pages may increase its exposure and result in a greater number of its page views. Second, visibility of substitute products on the product’s page may cannibalize its own sales while resulting in greater exposure for the substitute products. The net impact of these opposing effects is unclear. We conduct a randomized experiment on a fashion apparel retailer’s website to answer the following questions: (1) What is the causal value of recommendation links from a product to its recommended products in terms of the additional sales for both the product and its recommended products, and (2) how does the value of a product’s recommendation links vary based on its network characteristics, such as its PageRank and the strength of its relationship with neighboring products. We find that due to recommendation, on average: (1) daily number of product page views increased by 7.5 percent and (2) conditional on a product’s page view, its sales decreased by 1.9 percent and the sales of its recommended substitutes increased by nine percent. On average, recommendation links of a product result in an 11 percent gain in total sales of the product and its recommended substitutes. However, these gains are not evenly distributed among all products. We find that while number of page views for a product are positively affected by the number and strength of its incoming links, its sales (its recommended products’ sales) conditional on its page view are negatively (positively) affected by the strength of its outgoing links. We conduct policy simulations to highlight how retailers and producers can apply this knowledge by engineering the recommendation network through sponsored links.

Keywords: Product recommendation network, electronic commerce, randomized field experiment, sponsored product advertising, average treatment effect

Suggested Citation

Kumar, Anuj and Hosanagar, Kartik, Measuring the Value of Recommendation Links on Product Demand (June 11, 2018). Forthcoming in Information Systems Research. Available at SSRN: https://ssrn.com/abstract=2909971 or http://dx.doi.org/10.2139/ssrn.2909971

Anuj Kumar (Contact Author)

University of Florida - Warrington College of Business ( email )

337 STZ WARRINGTON COLLEGE OF BUSINESS
GAINESVILLE, FL 32611-0001
United States
3522730587 (Phone)

Kartik Hosanagar

University of Pennsylvania - Operations & Information Management Department ( email )

Philadelphia, PA 19104
United States

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