Observational Learning to Promote Mid-Tail Products
This project investigates how to promote products with social cues (e.g. observational learning) instead of price discounts. A particular focus is on showing how observational learning can be used as a tool to selectively promote products in the mid-tail area.
In an increasingly crowded marketplace, physical retailers need new innovative ways of promoting products to their consumers. Online e-commerce retailers have utilized to great effect popularity measures like observational learning (OL); consumers use the most popular product as a useful heuristic for infrequently bought items like electronics. However, adopting such techniques to repeated purchases in physical grocery retailing remains difficult: an analysis of 1-year receipt data of our retailer partner showed that OL would promote products consumers already routinely buy, which helps neither consumers nor the retailer. In a novel approach to OL, rather than presenting only the current popularity of a product, we present an alternative metric – the sales velocity – that exposes increasingly popular products in the mid-tail rather the most popular ones. Physical retailers could thus use sales velocity as a cost-effective marketing tool for mid-tail products.
We are currently running online studies that examine to what extent the presentation of a product’s popularity information could influence a consumer’s purchasing decision, as a proof of concept for a field deployment in a physical store.
In an online study, we showed that sales velocity (operationalized by the sales rank) has a significant effect on intention to buy, reversing even participant preferences for a more popular product. For retailers, the study demonstrated the persuasiveness of the sales velocity metric, and for researchers, it addressed a large gap in OL research, which previously ignored the velocity dimension of OL. This first result implies that non-monetary promotions like popularity can be effective, and furthermore, with the right framing, they can also nudge consumers to the different classes of products along the long tail of sales.