E-commerce goes places with word-of-mouth

For online retailers, word-of-mouth recommendations are a powerful channel for pushing sales. They are cost-effective, wide reaching and credible. By Dr Subho Ray.*

Believe it or not, we are living through an e-commerce revolution in India. According to estimates by the Internet & Mobile Association of India (IAMAI), the e-commerce (business-to-consumer, or B2C) industry is expected to be worth Rs2,300 crore in 2006-07 - a 95 per cent leap from the current Rs1,180 crore.

Online retailers have to do some active marketing to attract users, and persuade them to revisit. What they need is a combination of offline (TV, print, outdoor) and online (web advertising, search engine marketing) marketing methods.

One of the effective ways in which online retailers can promote their products is through the word-of-mouth recommendations by other users. The importance of this method can be gauged by the result of a recent survey of Internet users and their shopping habits by IAMAI. According to the survey, 93 per cent of respondents said they would recommend a product or service available online to other users.

Who is recommending online
% of respondents recommending products and services online, according to age group (base: 1,382)
Source: IAMAI Survey

The survey also found that 20 per cent of online shoppers recommended products `very frequently', while 46per cent recommended them `frequently'. This is something that online shopping sites should take very seriously, simply because word-of-mouth is so effective and low cost. What's more, people tend to take recommendations by people they know and trust seriously and the chances of them acting on that advice are very strong indeed.

A 2004 Forrester / Intelliseek study found 'recommendations from others' and even 'consumer opinions online' significantly outranked TV, radio, print and online advertising. As further proof, you only have to look at the fact that 31% of the respondents to the IAMAI survey said they found a shopping site because someone had recommended it to them and 18per cent bought on a particular site because of a recommendation.

Why do you shop on a particular website?

Base 1493

An online shopping site should have a lot of information to help users make purchase decisions. 48per cent of the respondents believed product comparisons were an important feature whilst shopping online and said sites should have a variety of different products and brands that cover the entire price spectrum. The site should be user-friendly, secure and, last but not least, it should deliver what's been promised, and on time. Remember that word-of-mouth works both ways. Don't deliver and the bad news will spread fast.

There are other ways of creating online communities to bring more users into the loop. 52 per cent of the respondents in the study believed consumer reviews were an important feature whilst shopping online. Most shopping websites create a community for their shoppers where users can exchange information on products.

A rating system by buyers for products and vendors is also extremely useful. Feedback mechanisms allow users to rate each vendor (positive or negative). User comments are also posted for each vendor, which allows shoppers to find out how reliable a seller is. Since the feedback comes from people who have actually purchased the products, it enjoys high credibility. Online shopping sites that do their own selling can also use this sort of a feedback mechanism to convince consumers to shop there.

Electronic gadgets are among the hottest-selling items on the net, so it comes as no surprise that the IAMAI survey found that the largest number of respondents (54 per cent) recommended them to other people. Coming next on the list of most recommended products is consumer durables (45 per cent), followed by books (40 per cent) and apparel (37 per cent).

The internet is the perfect medium for word-of-mouth promotion; it's a tool no online retailer can do without.

* The author is president, IAMAI.