Savvy Shopping: Understanding How Online Retailers ‘Personalise’ Their Prices

Savvy Shopping

Have you ever visited a website to check the price of an item and wondered, “Am I getting the best deal?” Or has a friend told you they were able to snag a certain product at a discount, but when you go to purchase it, the price is higher? Or maybe you’ve visited a site at work, then returned to the site later to make a purchase from home only to find that the price has changed.

Turns out, you might be on to something. Researches from Northwestern University in Boston, MA, took notice as well. In their study ”Measuring Price Discrimination and Steering on E-commerce Web Sites,” a group of researchers explored the complex and changing world of online pricing and e-commerce sales tactics.

The Price Is Right… Or Is It?

By surveying retail, car rental, and hotel booking sites, this study reveals how companies use Big Data to steer consumers towards preferred purchases and customise the prices of these purchases based on factors like operating system, mobile use, location and whether you are a returning user with a login.

Overall, the research experiments did not show ubiquitous price steering or price discrimination across all sixteen e-commerce sites. But there were enough examples of these practices to give the researchers pause. For instance: If a potential buyer is not logged-in as a member of popular travel-booking web sites Orbitz or Cheaptickets, that person may be charged an average of $12 more each night of the stay.

In another example, researchers found that booking site Travelocity priced hotels for users on Apple’s mobile iOS operating system about $15 lower than those using other operating systems. Researchers hypothesised that the huge growth in mobile users may be the reason for this discount. Travelocity may be trying to incentivise purchases from this growing population of customers.

And this type of personalisation is not limited to travel sites. Home Depot shows not only more search result options to iOS users, but actually show entirely different results to those tethered to a computer. According to the study, “On most days, there is close to zero overlap between the results served to desktop and mobile browsers.” Further, the options shown to Home Depot’s mobile users were more expensive products, thus encouraging those on smartphones to spend more money.

The researchers concluded that they “found cases of sites altering results based on the users’ OS/browser, account on the site, and history of clicked/purchased products.” They also concluded that two travel sites “steer users towards more expensive hotel reservations.” They also pointed out that algorithms can be changed at any time; therefore, companies that previously did not engage in these practices may soon be testing the waters. And we shouldn’t expect a lot of transparency when they do.

Modern Coupon Clipping

So, for now, the solution to finding the best options from online retailers and booking sites may be to test the purchase on a variety of platforms. Check it out on a PC at your office that’s running Windows, as well as your Mac back home, your iPhone running iOS, and your friends’ Android mobile phone. Even better: ask a friend or family member living in another part of the country to check the same product or hotel, since location also factors into the price steering. Sure, it sounds like a lot of work, but this might well become the online version of extreme coupon clipping.

This approach to savvy online shopping will only become important as our collective participation in e-commerce grows. Cyber Monday, the designated day for online shopping after the brick-and-mortar shopping that takes place on Black Friday, saw a large uptick in 2013, with online shopping rising 21 percent over the previous year.

Online shopping has grown at a faster rate than in-person retail, but it’s still a small slice of the overall shopping picture. As our online shopping rate continues to increase along with mobile usage and in-app purchases (worldwide, over 5 billion people will have mobile phones by 2017), these pricing strategies could proliferate.

Perhaps at the heart of this study is the question of transparency. Consumers are accustomed to witnessing price discrimination in the grocery store line every day. If one shopper brought in a coupon for a loaf of bread and another did not, one person would pay more for the bread. But that coupon is public: it’s available to most, if not all, potential consumers.

In the case of online shopping’s price discrimination and price steering, the discounts are not transparent or obvious to consumers. Instead, they are based on algorithms and standards known only to the company. Consumers must be savvy enough to know that these behind-the-scenes price manipulations can occur. So there you have it. We’re still a couple weeks away from Cyber Monday, so consider yourself warned.

Daniel Faris is a graduate of the Writers Institute at Susquehanna University. He has a wealth of experience writing about technology - particularly where the tech world intersects with politics and policy. He is a regular contributor for the London School of Economics & Political Science as well as Humanist Magazine.