What you pay for an online purchase may be different – higher or lower – than what someone else pays, according to researchersat Northeastern University.
The reason, they say, is the complex set of algorithms that produce search results based on users' profiles and past activity. That means one consumer searching for a product may be quoted a price that's different from the one a second consumer receives.
While the consumer believes she is simply looking for the best price on a laptop computer, for example, her online profile is being used by the e-commerce site to determine exactly what her price should be.
It would be like walking into a jewelry store where you frequently shop and asking the price of a ring. The sales clerk, before telling you the price, consults a file about you that includes your income, the neighborhood where you live and what products you've purchased in the past. Then the clerk gives you a price, which may not be the same as the price the next customer receives.
The research team, made up of computer science and information technology professors, studied 16 popular e-commerce sites. Ten of the sites were general retailers and 6 were hotel and car rental sites.
Price discrimination and steering
The objective was to measure two specific forms of personalization; price discrimination, in which a product's price is customized to the user; and price steering, in which the order of search results is customized to the user.
The practice of customizing prices does not appear to be uncommon.
"Overall, we find numerous instances of price steering and discrimination on a variety of top e-commerce sites," the authors wrote.
For example, the study found evidence of price customization on 4 of the general retailers and 5 of the travel sites. The price disparity, the researchers say, was often hundreds of dollars.
It was most common on travel sites, which isn't surprising since hotel rates and airline fares tend to fluctuate anyway. But travel prices generally vary, depending on supply and demand, not who is making the purchase.
Right about now you're probably wondering what websites were part of the study. The researchers did say which sites were not included. Popular sites like Amazon and eBay were excluded because they serve as online marketplaces. Apple, and companies like it, were left out because they only sell their own products.
Members get lower prices
The researchers say Cheaptickets and Orbitz used price discrimination by serving up reduced prices on hotels to "members." They say Expedia and Hotels.com steered a subset of users toward more expensive hotels.
Priceline personalized search results based on a user's history of clicks and purchases, but the researchers determined this wasn't price steering.
In fact, the study didn't turn up evidence of widespread price steering, but the authors say where they found it, the price swings were significant.
While all of this might sound unfair to consumers, Christo Wilson, one of the researchers, says neither he nor his colleagues are making a judgment about whether the practice is good or bad.
They stress that price discrimination – especially when part of a membership or loyalty program -- isn't necessarily a sinister plot to take advantage of consumers.
The issue, they say, is transparency. Discounts for members and preferred customers are an accepted practice in marketing. But the Northeastern researchers said this system is much harder to detect on e-commerce sites.
"I get this question from people all the time: 'How do I get the best price?' The truth is I don't have a good answer," Wilson said. "It changes depending on the site, and the algorithms they use change regularly.”
So good advice today might not be good advice tomorrow. Wilson says that when you buy online, you're at a disadvantage unless it's transparent.
Your safest policy is to do lots of price comparisons and not settle for the first price in the search string.