An Investigation of Free Product Sampling and Rating Bias in E-Commerce

Free product sampling has increasingly become a popular promotional strategy, and served as a new mechanism of product review generation in e-commerce. We empirically analyze how a product’s engagement in free product sampling affects the product’s review rating, and also examine important contingent factors of product pricing and product popularity. Using a rich data set from Taobao.com and multiple identification strategies and estimation methods, we find that engaging in free product sampling increases product rating by 1.1%. We argue that it is consumers’ reciprocal behavior of giving higher ratings as a return to retailers’ beneficial actions that causes rating bias. We further find that the bias would be larger with higher original price, but smaller with higher price discount and higher product popularity. Our empirical findings provide important contributions to the literature on product sampling and word-of-mouth, and offer critical managerial implications to online retailers, rating system designers, and consumers

The Effects of Online Incentivized Reviews on Organic Review Ratings

As online reviews become a major factor in the consumer decision-making process, firms have started seeking ways to create and leverage reviews to help achieve their marketing objectives. One productive strategy to generate reviews is to incentivize or reward customers to write reviews. While such a strategy certainly augments the number of reviews, it naturally raises questions of how unbiased such reviews are, and how such a bias, if it exists, affects potential customers. Complicating the issue further, such incentives can be provided by either the vendor or the platform, which may affect the nature of bias. To understand the marketing value of such reviews, this research examines the effects of online incentivized reviews on subsequent organic reviews. First, we investigate whether incentivized reviews are biased compared to organic reviews. Specifically, we find that vendor – initiated incentivized reviews are more favorable whereas platform – initiated incentivized reviews are more critical. Second, we study how incentivized reviews affect future organic review ratings. The findings suggest that vendor (platform) – initiated incentivized reviews reduce (increase) the subsequent organic review ratings. Moderating effects of helpfulness of incentivized reviews and product type are significant. These findings offer important insights about the effectiveness of incentivized reviews

Software Marketing on the Internet: the Use of Samples and Repositories

This paper examines one of the most important marketing strategies by software producers on the Internet. That is whether to offer free samples and if so, whether to list the samples on shareware repositories. I show that firms with higher value products have a greater incentive to offer free samples but are more reluctant to do so if they are well known, and even when they do are less likely to be listed on shareware repositories. I then proceed to use four types of Probit-based models to corroborate the findings from the theoretical model.Shareware; Software; Internet; Distribution; Intermediation; Directory; Repository; Advertising; Brand; Reputation; Asymmetric Information; Search; Sample

Recommender Systems

The ongoing rapid expansion of the Internet greatly increases the necessity of effective recommender systems for filtering the abundant information. Extensive research for recommender systems is conducted by a broad range of communities including social and computer scientists, physicists, and interdisciplinary researchers. Despite substantial theoretical and practical achievements, unification and comparison of different approaches are lacking, which impedes further advances. In this article, we review recent developments in recommender systems and discuss the major challenges. We compare and evaluate available algorithms and examine their roles in the future developments. In addition to algorithms, physical aspects are described to illustrate macroscopic behavior of recommender systems. Potential impacts and future directions are discussed. We emphasize that recommendation has a great scientific depth and combines diverse research fields which makes it of interests for physicists as well as interdisciplinary researchers.Comment: 97 pages, 20 figures (To appear in Physics Reports

Regulating the Raters: The Law and Economics of Ratings Firms

Consumers and producers frequently rely on product ratings, such as college rankings, restaurant reviews and bond ratings. While much has been written about the structure of ratings in particular industries, little has been written on the general structure of different ratings industries and whether government intervention is typically needed. This paper begins that inquiry by examining the market structure of different ratings industries, and considering the circumstances under which firms that provide ratings should be regulated. The issue is particularly timely in light of recent calls to rethink the regulation of media ratings and credit ratings. We find that ratings firms in different industries share several common features. For example, most ratings firms operate in highly concentrated markets. Some factors that could make ratings markets more concentrated include economies of scale, benefits from having a single standard, and general agreement on what should be measured. We also find that most ratings firms determine their own testing standards and methods, although some industries have self-governing oversight bodies that offer their own accreditation standards. While the government regulates firm entry for a few ratings industries, this is relatively rare. The vast majority of ratings firms are unregulated. We analyze the question of regulation using an economic framework that focuses on the viability and effectiveness of a proposed policy. Despite the finding that many ratings industries are concentrated, our analysis suggests that market forces generally appear to be an effective mechanism for providing consumers and producers with useful ratings. In most cases, such markets do not require government intervention. Moreover, in industries characterized by rapid technological change the government is likely to do more harm than good by intervening. As an alternative to government regulation, voluntary industry oversight bodies may be effective in improving communication between the parties and in improving transparency in rating procedures.