Nowadays, consumers are using the internet as a source of information on products and prices before purchasing a product offline. Price comparison sites (PCS) provide and compare numerous retailers on the most detailed level. These sites can possibly influence price evaluations by consumers in the offline setting. When all this information is available to consumers, it gets extremely important for retailers to ensure consumers buy their products since it is relatively easy to find the better option quickly. Therefore, retailers need to revolve their business models around the consumers, in order to stay ahead of the competition and prevent to lose clients due to the internet.
Literature suggests that consumers may prefer higher priced, well-known retailers which have the impression of being able to fulfill non-contractible benefits such as delivery time (Smith and Brynjolfsson, 2001). Moreover, price comparison sites usually show ratings for retailers to signal quality. Commonly, when there is consensus in user feedback, this can reduce consumer suspicion and thereby increase purchase intentions (Benedicktus et al. 2010). However, it is unclear whether this also applies to the ratings provided by PCS.
This paper investigates how offline price evaluations are affected by price comparison sites by conducting three different studies, of which study 1 will be discussed extensively and study 2 shortly. In the first study, it is investigated if consumers’ price evaluations are affected by reference prices on price comparison sites as well as the retailer ratings. The authors also consider price validity and retailer quality inferences as mediating factors. Price validity means how genuine and obtainable a certain price is in the market. To test these questions, consumers were shown the search results from a price comparison website regarding heart rate monitors. Information included a list of multiple retailers, their prices for the heart rate monitor and the corresponding retailer ratings. Next, participants had to rate the attractiveness of another offer price for the same product and their opinion on price validity and retailer quality. Besides, participants were informed that ratings are composed from customer reviews and that ratings thus reflect customer experiences. The findings suggest that consumer’s subsequent price evaluations are particularly influenced by retailer ratings from price comparison sites. There is a mediation effect from price validity, but that is not the case for retailer quality perceptions. Study 2 finds that consumers are able to gather important information from the PCS search results and can assess distribution characteristics (price level and frequency), which shows that the use of these PCS prices as reference prices is relatively complex.
The study thus finds that consumers use PCS prices as reference prices when they evaluate prices in stores. Retailers that have favorable ratings on PCS serve as a measure in price evaluation for highly rated offline retailers. Offline retailers should consider the prices that occur frequently on PCS searches when setting in-store prices, since these prices highly influence offline price evaluations.
Benedicktus, Ray, Michael Brady, Peter Darke and Clay Voorhees (2010), “Conveying Trustworthiness to Online Consumers: Reactions to Brand, Consensus, Physical Presence, and Suspicio,” Journal of Retailing, 85 (4), 310–23.
Bodur, H. O., Klein, N. M., & Arora, N. (2015). Online price search: impact of price comparison sites on offline price evaluations. Journal of Retailing, 91(1), 125-139.
Smith, Michael and Erik Brynjolfsson (2001), “Consumer Decision-Making at an Internet Shopbot: Brand Still Matters,” Journal of Industrial Economics, 49 (December), 541.