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.

Overview


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.

Selected Results

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.

Key stakeholders

Retailers

Working group