E-Retailers Depend on the Kindness of Consumers; Online retailers can encourage word-of-mouth advertising by appealing to consumers’ benevolence.

Posted: August 15, 2013

Matt Palmquist

E-Retailers Depend on the Kindness of Consumers

Want to get online consumers to spread the word about your e-commerce site? Dial back on extrinsic rewards like mileage points or gift certificates, and start appealing to consumers’ desire to do good and help their fellow shoppers.

Those are the results of a new study that examined how companies can elicit electronic word-of-mouth (e-WOM) to build customer loyalty. Previous studies have largely focused on how reading the complaints or compliments of other customers can affect the attitudes of visitors to a site, but this paper looks at e-WOM from the perspective of the people making the comments.Unlike in offline retail environments, there are ample opportunities for online shoppers to weigh in on their purchases—through blogs, message boards, social media networks, third-party review sites, or company-sponsored Internet communities. Although the faceless, or even anonymous, nature of online communication emboldens both positive and negative viewpoints, most e-commerce operations encourage their consumers to produce e-WOM as a means to attract potential customers, help them find information, and form a more powerful brand image. (For example, a 2003 paper found that Amazon’s more robust online community gave it a leg up in sales over Barnes & Noble.)

The authors of this paper surveyed 257 online consumers about their Internet shopping habits, attitudes, and e-WOM participation. The most surprising finding was that these consumers reported being far more motivated to post complaints or compliments about their online shopping experience out of intrinsic, benevolent emotions than to get some kind of reward. In line with previous research that has found external compensation can weaken people’s inherent motives, the authors suggest that e-commerce sites may want to play down bonuses in favor of advertising e-WOM participation as “kind” or “helpful” behavior.

Here’s another reason to emphasize the cooperative aspect of e-WOM: The analysis showed that social identity plays a large role in people’s desire to give feedback. Accordingly, managers should ensure that their e-WOM feedback tools aren’t limited to one-on-one communication between the company and consumers, but also allow users to engage with other customers and forge social bonds with each other.

The authors recommend installing an e-WOM system that enables customers to post richer media, such as pictures or videos, that can enhance the interaction between shoppers and increase their sense of personal identity. The more people identified with an e-commerce site’s brand image or product focus, the more they participated in online discussions. Hence, giving customers customizable options and a high degree of site interactivity should afford them more opportunities to navigate and use the e-commerce platform. For example, customers should be encouraged to respond to other customers’ plaudits or criticisms about the company, the authors write.

“Loyal customers are recognized as those who believe themselves to be important to other customers on the site,” the authors conclude. “Thus… the installation of an e-WOM system that allows customers to easily interact with others must be one of the key success factors of the loyalty program of an e-commerce site.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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