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August 14 2012

January 09 2012

The hidden language and "wonderful experience" of product reviews

How do reviews, both positive and negative, influence the price of a product on Amazon? What phrases used by reviewers make us more or less likely to complete a purchase? These are some of the questions that computer scientist Panagiotis Ipeirotis, an associate professor at New York University's Stern School of Business, set out to investigate by analyzing the text in thousands of reviews on Amazon. Ipeirotis continues to research this space.

Ipeirotis' findings are surprising: consumers will pay more for the same product if the seller's reviews are good, certain types of negative reviews actually boost sales, and spelling plays an important role.

Our interview follows.

How important are product reviews on Amazon? Can they give sellers more pricing power? Ipeirotis: The reviews have a significant effect. When buying online, customers are not only purchasing the product, they're also inherently buying the guarantee of a seamless transaction. Customers read the feedback left from other buyers to evaluate the reputation of the seller. Since customers are willing to pay more to buy from merchants with a better reputation — something we call the "reputation premium" — that feedback tends to have an effect on future prices that the merchant can charge.

What are some of the most influential phrases?

Panagiotis Ipeirotis: "Never received" is a killer phrase in terms of reputation. It reduced the price a seller can charge by an average of $7.46 in the products examined. "Wonderful experience" is one of the most positive, increasing the price a seller can charge by $5.86 for the researched products.

How can very positive reviews be bad for sales?

Panagiotis Ipeirotis: Extremely positive reviews that contain no concrete details tend to be perceived as non-objective — written by fanboys or spammers. We observed this mainly in the context of product reviews, where superlative phrases like "Best camera!" with no further details are actually seen negatively.

Can a negative review ever be good for sales?

Panagiotis Ipeirotis: It can when the review is overly negative or criticizes aspects of the product that are not its primary purpose — the video quality in an SLR camera, for example. Or, when customers have unreasonable expectations: "Battery life lasts only for two days of shooting." Readers interpret these types of negative comments as "This is good enough for me," and it decreases their uncertainty about the product.

What is the effect of badly written reviews on sales?

Panagiotis Ipeirotis: Reviews containing spelling and grammatical errors consistently result in suboptimal outcomes, like lower sales or lower response rates. That was a fascinating but, in retrospect, expected finding. This holds true in a wide variety of settings, from reviews of electronics to hotels. It's even the case when examining email correspondence about a decision, such as whether or not to hire a contractor.

We don't know the exact reason yet, but the effect is very systematic. There are several possible explanations:

  • Readers think that the customers who buy this product are uneducated, so they don't buy it.
  • Reviews that are badly written are considered unreliable and therefore increase the uncertainty about the product.
  • Badly written reviews are unsuccessful attempts to spam and are a signal that even the other good reviews may not be authentic.

What's the relationship between the product attributes discussed in reviews and the attributes that lead to sales?

Panagiotis Ipeirotis: We observed that the aspects of a product that drive the online discussion are not necessarily the ones that define consumer decisions to buy it. For example, "zoom" tends to be discussed a lot for small point-and-shoot cameras. However, very few people are influenced by the zoom capabilities when it comes down to deciding which camera to buy.

This interview was edited and condensed.

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September 23 2011

Top Stories: September 19-23, 2011

Here's a look at the top stories published across O'Reilly sites this week.

Cooking the data
Open data and transparency aren't enough: we need True Data, not Big Data, as well as regulators and lawmakers willing to act on it.

BuzzData: Come for the data, stay for the community
BuzzData looks to tap the gravitational pull of data, then keep people around through conversation and collaboration.

At its best, digital design is choreography
In this brief interview, Threepress Consulting owner Liza Daly tackles a question about formatting content for browser publishing. She says for design to succeed, authors, artists and developers must work together.

Five digital design ideas from Windows 8
Microsoft's Metro interface offers plenty for digital book designers to study. The best part? Whether or not Microsoft actually ships something that matches their demo, designers can benefit from the great thinking they've done.

The problem with deep discount ebook deals
Joe Wikert says publishers should move away from one-product deep discount campaigns and start thinking about how to build a much more extensive relationship with customers.

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The problem with deep discount ebook deals

This post originally appeared on Joe Wikert's Publishing 2020 Blog ("What Good Are Ebook "Daily Deals" & Other Deep Discounts?"). It's republished with permission.

Kindle Daily DealI admit it. I check Amazon's Kindle Daily Deal every day. Every single day. Why? As a publisher I'm curious to see what they're offering and as a consumer I don't want to miss out on a great deal. (In the spirit of full disclosure, at O'Reilly Media we offer an ebook or video deal of the day too. In fact, our program was in place long before Amazon started theirs. Everything I'm about to say below pertains not only to Amazon's program but O'Reilly's and everyone else's as well.)

As a publisher I worry about the mindset we're reinforcing that content needs to be deeply discounted to garner customer attention. Amazon started this thinking by pricing so many Kindle editions at $9.99 even when they took a loss on each sale. And now the Kindle Daily Deals are often priced at $1.99-$2.99 or less, so the effective discounts off digital list price are 80-90% or higher.

You might ask, "what's the harm"? After all, brick-and-mortar retailers of all shapes and sizes have offered deep discounts as a way of getting the customer into the store. That's why a grocery store sells a gallon of milk at a loss and hopes that you'll pick up several other profitable items between the dairy section and the checkout counter. And that's the problem.

When I go to the grocery store I always wind up buying something more than what I went in for but that never happens when I buy online. I find I'm willing to let more items catch my eye in a physical store than an online store, so impulse buys are the norm for me in a physical store. When I'm online I'm much more of a destination shopper. I have something in mind. If I find it at the right price I buy it and nothing else.

So I've now bought three or four of the Kindle Daily Deal titles but they were all bought alone as single-title transactions. Each day when I check the Daily Deal I'm greeted by plenty of other products and offers on Amazon but I don't bother with any of them.

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You might still say the deal is good for both Amazon and that day's publisher/author. I'm not so sure. One way of measuring that would be monitoring how long the discounted title continues to sell through at higher levels after the discount ends. I don't have any statistics to prove this (since Amazon doesn't share the data) but just watching Amazon's Kindle bestseller list tells me the Daily Deal titles typically stick around the top 5 or so for another day or two and then pretty much disappear from the top 25-50. Maybe they're still selling at a higher rate than they did pre-promo but if that's the case you'd think Amazon would be playing that up with publishers and authors. I haven't heard a word from them about it.

Meanwhile, the Amazon program is causing me to change my behavior, but not in a good way. I used to take a closer look at the Amazon home page for other campaigns but now I pretty much check the Daily Deal and head out. To make matters worse, one of the recent Daily Deal titles was one I paid full price for several months ago. That one left a bad taste in my mouth all day.

I should point out that I'm a fan of discounts and promotional campaigns ... as long as they lead to something more meaningful than a one-and-done transaction. So why not make these deals part of some membership program? There are a lot of directions that could head in. For example, if I buy five books at regular price I get the sixth one of my choice for only $0.99. Or what if the Amazon Daily Deal was always priced at $2.99 to $4.99 but if I'm a Prime member I get it for $0.99 cents? In that model the general public still gets a deal (albeit not as deep a discount as today) but customers are encouraged to join a membership program that should lead to even more purchases down the road.

That's all I'm asking for. Let's get away from these one-product deep discount campaigns and start thinking about how to build a much more extensive relationship with our customers.

P.S. Again, since O'Reilly offers an ebook deal-of-the-day program I'm going to see if I can grab our head of online, Allen Noren, to join me in a TOC podcast where we can talk further about our results, what works, what doesn't, and how we might want to think about tailoring it for the future. Stay tuned for more details on that podcast interview.

Associated photo on home and category pages: Bullring - Selfridges lit up in the evening - Sale by ell brown, on Flickr

March 29 2011

For publishing, traditional sales info is the tip of the data iceberg

DataArt.jpgIn this month's issue of Wired, Kevin Kelly interviewed author James Gleick about his new book "The Information." At one point in the interview, Gleick talked about the perception of data on a universal scale:

Modern physics has begun to think of the bit — this binary choice — as the ultimate fundamental particle. John Wheeler summarized the idea as "it-from-bit." By that he meant that the basis of the physical universe — the "it" of an atom or subatomic particle — is not matter, nor energy, but a bit of information.

While data as the basis for the universe will likely remain the subject of scientific debate, data is rapidly proving to be the basis of successful business models. A recent GigaOM story touched on the increasing volume of data being generated in relation to the publishing landscape:

For Barnes & Noble, the data they are dealing with is exploding. It's a big, rapid change: They have 35 terabytes of data currently, but expect 20 terabytes in 2011 ... The challenge now for book sellers is to merge the dot-com website, mobile devices, and brick-and-mortar stores for a seamless experience.

Where do publishers go to gather this data, and what do they do with it once it's in-hand? I turned to Kirk Biglione, partner at Oxford Media Works for answers. In an email interview, he offered up practical ways to gather and use the sheer amount of data being generated. He also noted that traditional sales channel data, while important, is just the tip of the iceberg.

For publishers, what are the most important types of data generated?

Kirk BiglioneKirk Biglione: All forms of data are important: traditional sales data, web data, data from interactive apps, and market research data. As publishing goes digital, publishers are being inundated with new types of data. The challenge is making sense of it all and understanding how different metrics relate not only to the bottom line, but to intangibles like consumer experience.

What are the best sources to use for gathering this data?

Kirk Biglione: Traditional sales channel data is still very important, but there are quite a few new sources of data that publishers will want to consider:

Web analytic reports. These provide huge amounts of data on how a publisher's website is performing. For publishers who sell direct via their websites, web analytics provide valuable insight into critical metrics like conversion and shopping cart abandonment. Also, publishers who sell direct are in a position to collect a wealth of customer data that likely isn't available through traditional sales channels.

Search analytics — a variation on web analytics. Publishers will want to consider both on-site and off-site search analytics:

  1. Off-site: How are users finding your website? What keywords and phrases bring them to your site? Are you reaching the desired audience by ranking for the best phrases? Questions like these will likely lead smart publishers to perform a competitive search engine optimization analysis (which produces even more data).
  2. On-site: What are users searching for once they get to your website? Very few websites actually record on-site search phrases for later analysis. It's a shame because search logs reveal quite a bit about customers and their intentions.

In-App analytics. How frequently are customers using your app? How long are their sessions? What time of day? Which features are they using the most? Which features are they not using at all? This is the kind of consumer usage data that is impossible to collect from print (or traditional ebooks, for that matter).

Social networks. These can provide valuable data on consumer engagement.

What are practical ways publishers can make use of this data to monetize, adapt, and market products?

Kirk Biglione: Some examples using the data sources above:

  • Search analytics can be used to optimize a publishers website for better ranking in organic search results. That will lead to lower search marketing costs, increased discovery, and presumably more sales.
  • Web and on-site search analytics can be used to improve a website's information architecture, help consumers find what they're looking for, and eliminate barriers to completing online purchases.
  • In-app analytics can be used to develop better digital products by providing publishers with insight into which app features consumers value the most.

Top photo: Data, Information, Knowledge, Wisdom 0.1, by Michael Kreil on Flickr


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