Does sampling influence customers in online retailing of digital music?

Abstract

Online retailers have taken recourse to many smart marketing strategies to sell digital music. This paper investigates the strategic decisions of online vendors for offering different mechanisms such as sampling and online reviews of digital music to increase their online sales. In this research we seek answers to the following research questions (1) should online retailers offer sampling for experience goods such as music CDs; (2) under what circumstances is offering sampling more important than offering reviews. Our empirical study shows that online markets behave as communication markets, and consumers learn about product quality information both passively (by reading online reviews) and actively but subjectively (by listening to music sampling). Using data from Amazon.com, we empirically show that sampling is a strong product quality signal that reduces product uncertainty and attracts interested shoppers. Products with the sampling option enjoy a higher conversion rate (which leads to better sales) than those without it. Second, the impact of online reviews on conversion rate is lower for experience goods with a sampling option than those without. Third, when the uncertainty of the online reviews is higher, sampling plays a more important role because it mitigates the uncertainty introduced by online reviews. We believe this paper makes an important contribution by comparing and studying the interactions between two commonly adopted online marketing strategies (i. e., sampling versus online reviews) and provides important insights on which strategy is beneficial for vendors in the context of online selling of digital music. © 2009 Springer-Verlag.