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This is such an important validation of the effectiveness of social merchandising that, if we’d thought of it, we would have commissioned a market research firm to write this study for us.  But, even better, it’s actually a peer-reviewed article produced by a team of university marketing professors and published in the journal of the American Marketing Association, the Journal of Marketing Research.  It’s titled: Online Social Interactions: A Natural Experiment on Word of Mouth Versus Observational Learning.  (There’s also a nice write-up and interview with the lead author on Red Orbit.)

The findings are straight-forward: Online, as in the physical world, people are more likely to buy things that they see other people bought.  There’s no word of mouth here.  This isn’t about customer ratings and reviews.  This is just about seeing the purchases of other people.  The merchandising lessons are simple:

1. You can improve conversion rates by showing shoppers that other people have really bought a product (on the product detail page)
2. You can encourage consideration by showing the purchases other shoppers made (in your product discovery/recommendation/cross-sell merchandising)

The study looked at a period when Amazon put up and took down the “what other people bought” section on their digital camera products to see what effect having/not having this information had on sales.  Using these data,

The authors observe a herd behavior among consumers when the OL or sales information is positive, but surprisingly, they observe no herd behavior when consumers face negative OL or sales information.  [OL stands for “Observational Learning”, which in this case means “seeing what other people bought”.]

In other words: when shoppers saw that other people were buying a particular item, they became more likely to buy it.  But if an item didn’t have peer-purchase information, that absence didn’t hurt sales.  So you don’t need sales coverage for your whole catalog – show purchase information where you’ve got it, and don’t worry about it where you don’t.

Here are a couple examples of stores using tools that deliver the OL effect.  For lesson #1 (on the product detail page, showing shoppers that other customers are also buying the item), have a look at the 98 check-out comments on these shoes at GoJane (scroll past the Q&A).  For lesson #2 (showing products that other customers are buying to encourage consideration and cross-sell), have a look at the “See what your friends bought” tab on the right edge of the window here at emitations.  What effect do these tools have on you?  Does this sort of merchandising make you feel like buying?

If you want to take advantage of the OL effect to improve your sales, give us call.

For Yahoo! Stores

Join us and leading Yahoo Store services provider FastPivot for a webinar on:

Social Q&A for eCommerce

Tuesday, March 29, 2011 2:00 PM – 3:00 PM EDT

Register here

Question-and-Answer systems are one of the hottest topics on the social web. Now learn how to use Social Q&A on your store to increase conversions, bring past customers back, improve your SEO rankings, and drive fresh traffic from social networks.

The goodwill of your customer base is the #1 asset of your business. Don’t leave it locked away. Adding Social Q&A to your store can release this untapped goodwill to generate more sales by connecting your shoppers directly to your customers.  That’s what makes it “Social” – this isn’t just another customer service tool; this is a level of community engagement you’ve never seen before. Results include: – Shopper questions about popular items typically receive 3-6 answers from customers within 24 hours – 80% of these questions receive their first customer answer within an hour or two – 7% of past customers receiving a shopper question email return to the store to provide an answer – Shoppers who engage with Q&A convert at a massively higher rate – as high as 7X the baseline – Often  produces more user-generated-content (UGC) than customer reviews with attendant SEO benefits During the webinar we’ll walk you through a number of live examples of Social Q&A in action on Yahoo! Stores. Register here

Here is the conversion lift data for the larger sites using TurnTo for the last couple months.  We’re comparing the baseline conversion rate for the site to the conversion rate for shoppers who interacted with the TurnTo system at some point in their shopping path on the site.  The 2-7X lift factors we were seeing in the first couple months of the year are still evident.

These charts compare the conversion rate of shoppers who open the TurnTo widget to that of those who don’t on the largest sites in our network.

This will sound like self-promotional hyperbole, and I’m going to say it anyway.  When we started TurnTo a bit over 2 years ago, it was clear that the viability of the business hinged on delivering measurable, positive business results for the ecommerce sites we planned to have as customers.  But, of course, there was no way to know for sure what the numbers would look like without building a product and finding customers to really use it.  So we plunged in, built the product, brought merchant partners on board, gained experience, and put in place the systems to measure if we were really doing any good.  And today, in conjunction with three of our partner merchants, we announced some actual results.  So this is the self-promotional, hyperbolic part: it truly did not occur to me when we set out that we’d be able to deliver numbers this positive.  I thought if we would able to show a conversion effect of 10% or 20% we’d be doing pretty well.  And here’s the data from over the holidays for these three sites:

Conversion rate of shoppers who opened the TurnTo widget vs. the baseline (shoppers who didn’t):

• Jomashop.com (IR #209) Watches and luxury goods: 6 X the baseline (i.e. 500% higher)
• ChristianCinema.com, Christian-themed DVDs: 8X the baseline
• ePartyUnlimited.com, gifts and party supplies: 8X the baseline

To be sure, we know we’ve got a lot more measurement work to do before we fully understand the effect the TurnTo system is having on shopping behavior.  But still, after 2 years, it’s very nice to be able to announce numbers like these.

Optaros’ “Social Ecommerce Ebook” makes for great reading if you are trying to optimize the performance of your ecommerce site.  You can download it here.

They make the points that: 1. higher levels of shopper engagement on retail sites drive improved business performance, and 2. social commerce tools are a powerful way to drive engagement.

A couple highlights:  From the Harvard Business Review Article, “In Ecommerce, More is More“, they cite,

The majority of managers we spoke to in our global study told us they believe that a broad array of information diverts attention from the core offerings. But we found it helps customers search for solutions, invites them to think of all the ways the core products might add value to their lives, wins their loyalty, and entices them to buy. In fact, we found that exploiting consumers’ desire for engagement is the single dominant driver of superior shareholder value for e-commerce companies.

In the section titled “Making Shopping a Social Experience,” (p.44 on) they cite an article in the Wall Street Journal on the benefits of social shopping.  (The article features the positive results Teavana and Compsource are seeing from their TurnTo implementations!)  Their “Business Takeaway”:

People like to go shopping with others when shopping in person. With Facebook Connect and other social shopping applications, you can replicate this experience for your customers online.

The bottom line of their study (well, it’s actually more like the title): “Retailers Achieve Higher Conversion Rates Using Social Shopping.”

I had fun during the Internet Retailer Conference this week chatting with Ina Steiner, Editor of the AuctionBytes blog.  We covered a lot of topics in a short time.  She has posted the conversation as a podcast.  Enjoy.

Here’s the full article: http://bit.ly/14Wl0n

And here’s what they have to say about us: New York-based TurnTo Networks Inc., for example, which was launched in September, helps retailers link their customer accounts with social-networking accounts and email accounts using Facebook Connect and other tools. TurnTo charges retailers a percentage of the revenue from sales attributed to the system.

Tea retailer Teavana Corp. is a TurnTo client. Jay Allen, Teavana’s vice president of e-commerce, says the conversion rate—a measure of how many shoppers make purchases—for people who use the application is 20% higher than the rate for others, and their average orders are slightly more expensive.

TurnTo founder George Eberstadt says preliminary data for the company’s first 20 clients show that using TurnTo tends to increase conversion rates 20% to 50% and builds traffic to retailers’ sites. Some 700,000 new users, for instance, have come to computer retailer CompSource Inc.’s site through its TurnTo application since July. TurnTo is “a lot better than average” in terms of price per new customer compared with pay-per-click advertising, says Dean Bellone, CompSource’s president.