The article “Amazon Rival Adopts Customer Recommendation Scheme” describes the recent actions of The Nile, an online bookstore similar to Amazon.com.  The site is targeted toward people in Australia and Asia.  The Nile will use software from Avail Intelligence to create customer recommendations, similar to the feature on Amazon.  With this “word-of-mouth” technology, users of The Nile will be able to find new books that may interest them.  The new technology will also allow for recommendations to be made in real time, ensuring that customers will be referred to works that are relevant and up-to-date.  Preliminary tests conducted by The Nile demonstrate that customer recommendations are correlated with increased sales.

The customer recommendation technology used by The Nile takes advantage of some of the ideas from information cascades.  Recommendations are made by people who know about a certain product; this information has the potential to be very helpful for those who do not know much about the product.  Thus, customers use the information from recommendations when making their decision about whether or not they should buy a product—the information from other people’s choices is instrumental for users who are considering buying a product.  A recommendation validates the decision to buy a product, which may explain the increased sales that The Nile experienced in its preliminary tests; customers could be more confident that the product was reliable and worthwhile if it was recommended by someone else.  Recommendations reflect information cascades in that customers use information from other people’s choices to make their own decisions.

There are further implications from customer recommendations.  Some customers may be seen as more trustworthy since they may recommend many products that others like.  These trustworthy customers may acquire more influence; people may rely on recommendations from the trustworthy customers more than they do for other recommendations.