How online sales firms such as Amazon, Expedia steer shoppers toward higher-priced options

Posted Nov. 09, 2014, at 6:29 a.m.

Amazon took more than a little heat in 2010 when it came to light that the company was charging different shoppers different prices for the same DVDs. The practice, called price differentiation or price discrimination, was a way online retailers could make some extra money by personalizing the results of consumers’ online searches.

In 2012, the Wall Street Journal reported that Staples was charging different prices according to customers’ geographic location. The newspaper also said Orbitz showed browsers from Mac computers more expensive hotel options than people using PCs.

The negative reaction was predictable, and some observers thought companies would stop. They did not, according to researchers at Northeastern University.

The academic folks wondered how widespread the price discrimination and steering were, what customer information companies use in the process, and how much prices change when e-commerce websites personalize search results and/or prices.

The researchers collected the search results of consumers using their own browsers. They compared those with an automated browser running the same searches simultaneously but without storing cookies, the little information packets that show what websites computers have visited.

They studied 16 online retailers and travel sites. They found that Cheaptickets, Expedia, Home Depot, Orbitz, Priceline, Sears and Travelocity practiced price discrimination. They said Sears also did some price steering and that the order of search results varied from one shopper to another.

There’s a whole industry that’s grown around online searches; because every consumer’s search pattern is unique, the researchers were unable to say which factors trigger personalization.

They did come up with some interesting findings when they looked at which browsers (Chrome, Firefox, Internet Explorer) and platforms (Windows, OSX, iOS, Android) were used. They also considered whether shoppers were logged into a user account and their history of purchases.

The researchers created one fake account to book low-priced hotels and rental cars, and another for expensive hotel rooms and rental cars. They found that Expedia and Hotels.com use a marketing strategy called A/B tests to steer some users toward pricier hotels. Visitors were assigned to groups A, B or C depending on the cookies saved on their computers. Searchers in groups A and B were shown hotels costing $187 per night on average, and users in group C saw hotels averaging $170 a night.

Home Depot showed different products to consumers using desktop computers and mobile devices. Searching by desktop usually yielded 24 search results with an average item costing $120. From a mobile device, that same search would bring 48 results with each item costing $230 on average.

The researchers say they spoke with officials of Orbitz and Expedia who confirmed the findings of the study. However, they did not offer any explanation for the reasons they design their sites the way they do.

An executive at Orbitz said that company and Cheaptickets offer members-only deals on hotels. The executive took issue with the researchers’ conclusion that price discrimination was “anti-consumer,” and that assertion was taken out of the final draft of the report. (While not illegal, the practice is at the very least annoying.)

Among the researchers’ recommendations: comparison shop, using your normal desktop browser, a private browser window and a mobile device. Since cookies help create customer profiles, deleting those cookies might give you less biased search results. Or, with cookies enabled, leave an item in your shopping cart without buying; a competitor may cut the price to lure you.

You also can use a price tracker, such as camelcamelcamel.com, which tracks an items pricing history on Amazon.

As noted above, this industry is evolving and innovating, so in the future other factors may trigger personalization. You can read the Northeastern study on the university’s website, www.ccs.neu.edu/home/cbw/pdf/imc151-hannak.pdf.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

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