Many internet retailers offer their customers advanced technology features to enhance the shopping experience, such as search functions and recommendation systems. However, how do these technologies influence consumers’ shopping behavior? Does the way these consumers use these technologies influence sales or their purchasing patterns?
Information systems, such as search and recommendation technologies are used to enhance the customer experience, by reducing the steps required to come to a preferred product. Furthermore this systems help the consumer to discover products that they would not have sought out otherwise. In the consumer journey, the consumer passes the “information search” stage before the stage of “alternative evaluation” and “purchase”. And during this information search, consumers first try to activate prior knowledge, before acquiring external sources. There are two types of products: products that are displayed in a company’s advertisement, also called promoted products; or products which are not displayed in any advertisement, called non-promoted products. Some consumers search for a specific product, with an exact name. This is called “direct search”. Some consumers do not know where they are looking for and type just a word, like “dress”, this is called “non-direct search”. Consumers who look for a product with a direct search often used their prior knowledge.
Interesting to see, is that consumers who use direct search influence online sales, however, they only affect promoted products. This indicates that consumers who are encountered with promoted products through advertisements, use that prior knowledge to directly search for the products to purchase it. Furthermore, direct search is negatively related with non-promoted products. Furthermore, recommendation systems positively influence online sales, for both types of products. However, the recommendation system works stronger in categories with many products, than in categories with a few products. An explanation might be, it is likely that consumers lack prior knowledge of a large proportion of the product assortment and therefore find provided recommendations more beneficial. An unexpected finding is that non-direct search has no influence on consumers’ purchase behavior.
These findings are interesting for internet retailers, but it proves that it is beneficial to invest in advanced technology features, such as search and recommendation systems because this will lead to higher levels of sales. Furthermore, if online retailers want to increase sales via search systems it is suggested to also promote products because otherwise the tool only enhances the customer experience.
An example that successfully adopted these technology systems is Amazon. Amazon is one of the largest online retailers in the world that sells almost everything. Another advanced technology feature that Amazon uses is collaborative filtering systems, where the consumers get information about what other consumers bought after buying a particular product: “Consumers who bought this product also bought this…”. Unfortunately, this study has not included this technology feature. However, no worries, other research has proven that these systems also increases the diversity and amount of products purchased by a consumer (Lee and Hosanagar, 2015).
However, findings from this paper still show the importance of investments in information technologies, as it influences consumers purchase behavior. Furthermore internet companies are continuing to develop more sophisticated search and recommendation systems, which is a good trend.
De, P., Hu, Y.J. and Mohammed, R.S. (2010) ‘Technology Usage and Online Sales: An Emperical Study’, Management Science, 56, 11: pp. 1930-1945.
Lee, D. and Hosanagar, K. (2015) ‘People Who Liked This Study Also Liked: An Emperical Investigation of the Impact of Recommender Systems on Sales Diversity’, available online from: https://papers.ssrn.com/sol3/papers2.cfm?abstract_id=2603361 [14 February 2017].