Online Sales Soar When Products Reach a Popularity 'Tipping Point'

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Online Sales Soar When Products Reach a Popularity 'Tipping Point'

10/10/2010
To take advantage of a herding instinct that can multiply online product sales, retailers need to discover a product's popularity 'tipping point.' Once a product reaches this best-seller threshold, many more consumers are likely to purchase it.

Oxford University researchers analyzed 100 million app installations by Facebook users over two months in 2007. The researchers could observe on an hourly basis the rate at which 2,700 apps were installed by 50 million Facebook users.

The study concluded that social influence played a key role in an app's adoption. Facebook friends were notified if one of their online friends adopted a new app, and all Facebook users could see a list of the most popular apps "globally" as well as among their own circle.

The study showed that once an app had reached an adoption rate of 55 installations per day, its popularity soared significantly. Typical apps were installed by an average of 1,000 users, but the most popular app, "Top Friends," was adopted by 12 million users—nearly one-fifth of the entire Facebook population.

"Users only appear to be influenced by the choices of other users above a certain level of popularity, and at that point popularity drives future popularity," said senior researcher Dr. Felix Reed-Tsochas, from Oxford's Institute for Science, Innovation and Society at SaÏd Business School. "Below this threshold, the effects of social influence are imperceptible."

Many retailers, including Amazon.com and Netflix, encourage customers to rate and review products. These types of customer measurements could potentially create a snowball effect if a product reaches its optimal popularity point. Retailers would need to monitor products' online popularity to determine where their tipping points lie. If retailers could then take action once that point was reached, trumpeting the product's already-established acceptance by others, the multiplier effect could create a best-selling item for the retailer.