Corporate Eye

Importance of Customer Geography to Internet Retailers

online shoppingThere is no question about the fact that internet retailers have the capability to reach new customers and clients that are far beyond the grasp of traditional brick and mortar establishments. Yet, despite the fact that anyone with access to the world wide web can reach an internet retailer, two recent papers published by the Wharton School of the University of Pennsylvania suggest that traditional methods of advertising and marketing are still important in growing an internet retailer’s brand. These methods include local word-of-mouth recommendations and even consideration of where customers live and in what conditions they are living.

The research papers, authored by Wharton marketing professors David R. Bell and Leonard Lodish, as well as Yonsei University professor Jeonghye Choi, found that despite the internet’s worldwide appeal and access, locality still matters. When researchers compared the effects of online word of mouth recommendations and reviews on shoppers and the effects of offline word of mouth recommendations and reviews on shoppers, they found that offline recommendations tended to sway customer shopping habits more. Notably, this result was not only found in cases where the offline recommendation came from a trusted individual customers tended to be more swayed through offline word of mouth recommendations than online ones no matter who the recommendation came from. Customers buying from online vendors tended to buy more from those that have been recommended to them by people living nearby. This means that in the end, it all comes down to locality and geography.

Customers are more willing to trust the recommendations of someone who lives in their immediate area because they feel that they are experiencing similar living conditions, therefore the recommendation holds more clout. On the other hand, if they receive a recommendation from a trusted individual living in another part of the country, they will still give the recommendation strong thought, but not as much as they would if that recommendation had come from a next door neighbor. This is because the other individual lives far away, thereby making the purchaser feel as if the recommendation may not work out in the same way for the both of them because they experience different lifestyles and environments. This means that online recommendations are the least influential because not only are these reviews coming from strangers, but they are also coming from strangers who seem to only exist on the internet and therefore are not local at all.

One way that internet retailers can take advantage of this finding is by adding one extra little feature onto their customer reviews and recommendations: a location identifier. Some retailers have already done this, asking customers to identify where they live when leaving a review so that potential new customers looking through the reviews may be more influenced by the reviews if they happen to be from the same area as the reviewer.

Another thing for internet retailers to keep in mind is that the buying habits of customers vary from region to region. Retailers could find a wealth of new customers in areas where these customers are the minority. For example, if a town’s population is largely comprised of elderly residents, yet there is a sizeable amount of younger residents living there as well, Internet retailers could directly target these consumers. These consumers would likely latch onto an internet retailer because brick and mortar retailers in that area would cater only to the majority population, excluding the minority consumers. Retailers can research the demographics of specific areas and buy specific search keywords in places that have a trove of promising potential clients. This way, when potential customers in that area conduct an internet search for a particular product, retailers can ensure that their business will pop up in the search results.

Overall, retailers could benefit greatly from paying attention to where current and potential new customers live. This way, they can boost their brand reputation through localized product recommendations as well as tap into a wealth of new customers through localized keyword purchases. Though the internet is a decidedly global dominion, it still pays to think local.

This guest post is contributed by Olivia Coleman, who writes on the topics of online colleges and universities. She welcomes your comments at her email id: olivia.coleman33

The research papers are here:
Traditional and IS-enabled Customer Acquisition for an Internet Retailer: Why New Buyer Acquisition Varies over Geographies and by Method (PDF)
Local Preference Minorities and the Internet (PDF)

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