How Do Recommender Systems Lead to Consumer Purchases? A Causal Mediation Analysis of a Field Experiment

Abstract

The findings underscore the important role of consumers’ consideration sets in mediating the positive effects of recommender systems on consumer purchases. Practical strategies can be developed to facilitate the formation of the consideration sets. For example, to reduce consumers’ search costs and cognitive efforts, online retailers can display the recommended products in a descending order according to the predicted closeness of consumers’ preferences. Online retailers can further indicate the predicted closeness scores of consumers’ preferences for the recommended products. Given such a placement arrangement, consumers can quickly screen the recommended products and add the most relevant alternatives to their consideration sets, which should facilitate consumers’ shopping process and increase the shopping satisfaction. The findings also suggest that a larger consideration set due to the use of recommender systems could induce consumers to buy. Yet, it is difficult for consumers to manage many alternatives when the consideration set is very large. To facilitate consumers’ shopping process, online retailers need to consider strategies and tools that help consumers manage the alternatives in the consideration set in a better-organized manner and facilitate the comparison across the alternatives.