Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Facebook recommendations could be worth millions of euros

03.06.2013
Study confirms online sales are enhanced by social recommendations and determines the actual value of "Likes"

When online retailers display customer recommendations next to their product descriptions, it can significantly increase the sales of these. This is the conclusion reached following a study undertaken by academics at Johannes Gutenberg University Mainz (JGU) and the Technische Universität (TU) Darmstadt.

They conducted an experiment in cooperation with an online mail order company to determine whether product recommendations by customers have an impact on other customers' buying behavior. For this purpose, first-time visitors to the online shop www.spiele-offensive.de in early 2013 were randomly assigned to one of two possible groups.

The treatment group was directed to product pages displaying social recommendations in a similar form like the thumbs-up "Like" button used by Facebook or the '+1' button used by Google+. No such customer recommendations were shown on the pages to which the members of the control group were directed. Following the four-week test phase, the shop registered an almost 13 percent higher rate of sales in the case of the group exposed to recommendations in comparison with the control group.

"We were actually able to identify significant differences in buying patterns," explained Dr. Jörn Grahl, Assistant Professor at Johannes Gutenberg University Mainz. Together with Professor Franz Rothlauf (also JGU) and Professor Oliver Hinz of the TU Darmstadt, Grahl discovered that the better sales figures were primarily attributable to the fact that visitors tended to spend more time searching on the sites with recommendations. There is a 22 percent greater chance that a visitor to an online shop will buy something if web pages display recommendations than if they do not. "This means that by displaying social recommendations such as 'Likes' companies acquire more new customers," concluded Grahl. "It appears that recommendations actually counteract some of the uncertainty that new customers initially experience when visiting a site."

All sorts of rumors abound on the Internet about how much a Facebook "Like" is worth. The recent study, entitled "How do social recommendations influence shopping behavior? A field experiment," looks at this aspect. It concludes that a "Like" can play two roles in online commerce. A "Like" is an indicator of the quality of a product, so that good products receive more recommendations than others. A "Like" also generates additional sales. It is very difficult to separate these two effects. "Despite the fact that 'big data' is currently seen as the solution to all problems, it doesn't really help us in this case," claimed Professor Oliver Hinz of the TU Darmstadt. "What we required here was an experimental methodology and not just vast amounts of data. Our approach has actually allowed us to determine the value of a 'Like'. And it has also become apparent that social recommendations and the 'Likes' represent valuable intangible assets for businesses and companies."

By way of an example: if a visitor to an online shop sees that a total of 300 other customers have given a "Like" to products on that site, the study claims that that visitor is likely to spend an average of 6 euro cents more – a highly significant increase in sales that is solely attributable to the display of recommendations. "This means that a 'Like' has an intrinsic value," specified Professor Franz Rothlauf. Though the value of a "Like" is only a few cents, such small amounts can very quickly add up to a considerable sum in an online shop. If the fact is taken into account that the online social network Facebook gathers a billion "Likes" in just a few days, it must be concluded that social recommendations and "Likes" have significant macroeconomic relevance.

The study was carried out in collaboration with Happyshops, a medium-sized online mail order company that operates twenty different shops online. Used for the purpose of the investigation was www.spiele-offensive.de, an online shop selling board and party games.

Publication:
Jörn Grahl, Franz Rothlauf, Oliver Hinz
How do social recommendations influence shopping behavior? A field experiment.
http://www.emarkets.tu-darmstadt.de/forschung/working-paper-series/

Further information:
Dr. Jörn Grahl
Professor Franz Rothlauf
General Business Economics and Business Informatics
Gutenberg School of Management and Economics
Johannes Gutenberg University Mainz
D 55099 Mainz, GERMANY
phone +49 6131 39-27209
fax +49 6131 39-22185
e-mail: grahl@uni-mainz.de
http://wi.bwl.uni-mainz.de/grahl.html.en

Professor Oliver Hinz
Electronic Markets
Technische Universität (TU) Darmstadt
Hochschulstr. 1
D 64289 Darmstadt, GERMANY
phone +49 6151 16-75221
fax +49 6151 16-72220
e-mail: hinz@wi.tu-darmstadt.de
http://www.emarkets.tu-darmstadt.de/team/prof-dr-oliver-hinz/

Petra Giegerich | idw
Further information:
http://www.uni-mainz.de/presse/16465_ENG_HTML.php

More articles from Studies and Analyses:

nachricht Europe’s Demographic Future. Where the Regions Are Heading after a Decade of Crises
10.08.2017 | Berlin-Institut für Bevölkerung und Entwicklung

nachricht Scientists reveal source of human heartbeat in 3-D
07.08.2017 | University of Manchester

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Fizzy soda water could be key to clean manufacture of flat wonder material: Graphene

Whether you call it effervescent, fizzy, or sparkling, carbonated water is making a comeback as a beverage. Aside from quenching thirst, researchers at the University of Illinois at Urbana-Champaign have discovered a new use for these "bubbly" concoctions that will have major impact on the manufacturer of the world's thinnest, flattest, and one most useful materials -- graphene.

As graphene's popularity grows as an advanced "wonder" material, the speed and quality at which it can be manufactured will be paramount. With that in mind,...

Im Focus: Exotic quantum states made from light: Physicists create optical “wells” for a super-photon

Physicists at the University of Bonn have managed to create optical hollows and more complex patterns into which the light of a Bose-Einstein condensate flows. The creation of such highly low-loss structures for light is a prerequisite for complex light circuits, such as for quantum information processing for a new generation of computers. The researchers are now presenting their results in the journal Nature Photonics.

Light particles (photons) occur as tiny, indivisible portions. Many thousands of these light portions can be merged to form a single super-photon if they are...

Im Focus: Circular RNA linked to brain function

For the first time, scientists have shown that circular RNA is linked to brain function. When a RNA molecule called Cdr1as was deleted from the genome of mice, the animals had problems filtering out unnecessary information – like patients suffering from neuropsychiatric disorders.

While hundreds of circular RNAs (circRNAs) are abundant in mammalian brains, one big question has remained unanswered: What are they actually good for? In the...

Im Focus: RAVAN CubeSat measures Earth's outgoing energy

An experimental small satellite has successfully collected and delivered data on a key measurement for predicting changes in Earth's climate.

The Radiometer Assessment using Vertically Aligned Nanotubes (RAVAN) CubeSat was launched into low-Earth orbit on Nov. 11, 2016, in order to test new...

Im Focus: Scientists shine new light on the “other high temperature superconductor”

A study led by scientists of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science in Hamburg presents evidence of the coexistence of superconductivity and “charge-density-waves” in compounds of the poorly-studied family of bismuthates. This observation opens up new perspectives for a deeper understanding of the phenomenon of high-temperature superconductivity, a topic which is at the core of condensed matter research since more than 30 years. The paper by Nicoletti et al has been published in the PNAS.

Since the beginning of the 20th century, superconductivity had been observed in some metals at temperatures only a few degrees above the absolute zero (minus...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Call for Papers – ICNFT 2018, 5th International Conference on New Forming Technology

16.08.2017 | Event News

Sustainability is the business model of tomorrow

04.08.2017 | Event News

Clash of Realities 2017: Registration now open. International Conference at TH Köln

26.07.2017 | Event News

 
Latest News

Nagoya physicists resolve long-standing mystery of structure-less transition

21.08.2017 | Materials Sciences

Chronic stress induces fatal organ dysfunctions via a new neural circuit

21.08.2017 | Health and Medicine

Scientists from the MSU studied new liquid-crystalline photochrom

21.08.2017 | Materials Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>