Wednesday, November 30, 2005

The Effect of Word of Mouth on Sales -- Online Book Reviews report: Implication for libraries

Beverly, Library director of Sugargrove Public Library, alerted me to this PDF report from Yale School of Management, on "The Effect of Word of Mouth on Sales: Online Book reviews" (see also the blog post at
... examines the effect of consumer reviews on relative sales of books at and Barnes They find that 1) reviews are overwhelmingly positive at both sites, but there are more reviews and longer reviews at, 2) an improvement in a book's reviews leads to an increase in relative sales at that site, and 3) the impact of 1-star reviews is greater than the impact of 5-star reviews.

After I read the report, I wondered how the findings apply to libraries. For instance, do the conclusions apply directly, i.e. if libraries create or participate in online community content (like book blogs) then would that lead to increase in library usage?

I think the findings do apply to some extent. In fact, they do lend support to a survey (from a convenience sample) that my colleagues conducted for our Fiction Advisory Service.

One question in our survey was "How do you decide what to read?" Respondents were asked to choose from a list:
O Browse in the library
O Browse in the bookstore
O Read reviews in library information boards / website
O Read reviews in local and/or international newspapers
O Read reviews in general magazines / current affairs periodicals
O Read reviews on websites other than the library’s
O Discussion amongst your book club members
O Friend’s recommendation

Our preliminary findings showed the order of influence as follows:
  1. Browsing in the library
  2. Browse in the bookstore
  3. Friend’s recommendation
  4. Read reviews on websites other than the library’s
  5. Read reviews in local and/or international newspapers
  6. Read reviews in library information boards/ website
  7. Read reviews in general magazines/ current affairs periodicals
  8. Discussion amongst your book club members

We learnt that the most common way of choosing a book was by browsing. Reviews were also significant to patron’s reading decisions, the most trusted being word-of-mouth reviews from friends. Reviews in other websites was a close second, followed by reviews in libraries and their websites.

When I match our findings to the Yale report, I'm even more confident that starting the High Browse Online book blog is a step in the right direction for our public libraries.

BTW, if any library (who provides Fiction Advisory service) is interested in exchanging survey results or sharing your experiences, I'd love to hear from you.

More notes and comments from the Yale report below:

The paper's main sections as follows:
1. Introduction - P. 3
2. Data - P. 5
3. Model Specification - P. 10
4. The effect of reviews on sales - P. 13
4.1. Cross-Sectional Analysis - P. 13
4.2. Differences-in-differences Analysis - P. 17
(Then I'm not sure what happened to sections 5 & 6 'cos it skips to section 7)
7. Conclusion - P. 21
Tables - P. 23
References - P. 29

The introduction (pages 3 & 4) reviews possible reasons "to suspect ex ante that creating a forum for community content could be a poor strategy" (for sales):
First, it is not clear why users would bother to take the time to provide reviews for which they are not in any way compensated.

Second, competing retailers can free-ride on investments in recommender systems; there is nothing to stop a consumer from utilizing the information provided by one website to inform purchases made elsewhere.

Third, by providing user reviews, a site cedes control over the information displayed; unfavorable reviews may depress sales. Of course, this may be less of a threat to a retailer that sells many different brands as opposed to a manufacturer. Similarly, since interested parties can freely proliferate favorable reviews for their own products, positive reviews may not be credible and may not function to stimulate sales.

Last, online user reviews may not be useful, and may not stimulate sales due to the sample selection bias that is inherent in an amateur review process. That is, a consumer only chooses to read a book or watch a movie if she perceives that there is a high probability that she will enjoy the experience.

In the presence of consumer heterogeneity, this implies that the pool of reviewers will have a positive bias in their evaluation compared to the general population. Thus, positive reviews may simply be discounted by potential buyers.

The above could easily be the very reactions to the idea of a library creating a Book Review Blog/ forum/ discussion group/ mailing list, especially if it's unmoderated. Of course the findings of the paper suggests otherwise (i.e. that it's good for sales). It might even give greater impetus for libraries to create or participate in online community content.

Other highlights from the report:
P. 4: Our econometric analysis is designed to answer the question: if a cranky consumer posts a negative review of a book on but not on, would the sales of that book at fall relative to the sales of that book at

Findings (p. 5): Our findings suggest that reviews tend to be very positive on average, especially at We show that the addition of new favorable reviews at one site results in an increase in the sales of a book at that site relative to the other one. We find some evidence that an incremental negative review is more powerful in decreasing book sales than an incremental positive review is in increasing them. Our results on the length of reviews suggests that consumers actually read and respond to written reviews, not merely the average star ranking summary statistic provided by the websites.
Still on P. 5: Sub-section concludes that "Regardless of the interpretation of the length results, the results do seem to suggest that customers read and respond to the review content at each site. However, longer reviews do not necessarily stimulate sales."
P. 19: "Thus an increase in the number of reviews at Amazon relative to continues to improve sales at Amazon relative to"*
* The way I see it, it could mean that with more people visiting than BN, it therefore resulted in more sales for

And the final conclusions from the report (p. 21):
We find that customer reviews tend to be very positive at both sites and that they are more detailed at Amazon.

This evidence suggests that customer word of mouth affects consumer purchasing behavior at two Internet retail sites.

Our evidence however, stops short of showing that the retailer profits from providing such content. Further, and more interestingly, our results show that customers certainly behave as if the fit between customer and book is improved by using reviews to screen purchases.
** Could the implication be that getting library reader's reviews would help suggest better fit in reading needs for other readers? As I said, our survey result seems to support this finding.

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  1. The High Browse Book Blog is a step in the right direction. With regards to the Yale research, one simply needs to see how Amazon's review system was once exploited to realize how the study was even more valid.

    Anonymous reviews can be a major problem. In an accident on Amazon Canada, reviewers' identity were revealed and some were found to be authors of their own books, giving themselves 5 star reviews to jack sales up. While one review might not make a major impact, it clearly shows a possible exploit if a gang of reviewers got together to write beautiful reviews for their books (likeness to Googlebombing).

    I realized this was why Amazon now has that "Real Name" tag attached to a reviewer to give him/her more credibility. This is one reason why I like identifying myself on my blog rather than be anonymous... to build credibility.

    On a related note, word of mouth has always had the strongest impact in marketing. Substituting real-world word of mouth on the Internet, we think of emails and IMs from friends. However, we also sometimes trust such reviews as almost equivalent to word of mouth. Depending on how the review process works (e.g. transparency), the influence it has over users would vary.

    This is something I'm close to releasing a survey on, except that I'm comparing blogs to word of mouth. And don't worry, this survey is going to a closed sample group, not to the rest of the blogosphere. I'll try to share my results, though it's going to take a while. :)

  2. Thanks for sharing that, Kevin. I'd like to add that simply publishing a blog or posting book reviews doesn't guarantee that Word of Mouth publicity will happen for the library. An important factor would be how we connect with the target community, like proactively seeking those communities, leaving meaninful comments, writing in personable styles etc. Wonder if your study touched on those aspects from the customer's point of view.


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