Pricing - The Power Of Comparison

THE POWER OF COMPARISON

On the Internet, there are several different tools customers can use to comparison shop for just about any kind of product or service, all within a matter of seconds or minutes. Among the Web's largest comparison shopping sites in the early 2000s was mySimon. The company's service was powered by intelligent agent technology created by one of the company's founders. According to mySimon, "by using the power of next-generation intelligent agent and advanced parallel search technologies, mySimon automatically combs Web merchants' sites for product and price information and presents it so that it is easy to read and sort. mySimon's proprietary Virtual Learning Agent (VLA) technology takes a unique approach to create mass quantities of intelligent agents that mimic human behavior and can be 'trained' to extract specific information from any merchant Web site."

At mySimon.com, consumers could shop for products in many categories from more than 2,000 different sellers, and then make actual purchases at a seller's Web site. In addition to listing prices for new items sold by leading e-tailers, search results could include products listed in online classified ads and online auctions. Details about the availability of items and the merchants who sold them also were available. In late 2000, mySimon announced expanded capabilities that gave more power to consumers and extended the Internet's reach to the physical retail world. The company made it possible for consumers to access mySimon from a variety of wireless devices including personal digital assistants (PDAs), wireless phones, and radio-modem-powered handheld devices from eLink.

Another company that gave consumers the ability to comparison shop was NexTag—an online marketplace where both companies and individuals consumers went to buy and sell both new, used, and reconditioned items. As with mySimon, NexTag allowed visitors to search for an item in one of several different categories. However, buyers also could "choose from name brand retailers, small stores, or individual sellers and between new or used versions of the same item." The prices listed on the site included sellers' taxes and shipping costs, and reviews from other users were available to assist shoppers in the decision-making process.

Sites like mySimon and NexTag helped to create a challenging atmosphere for companies engaging in e-commerce. One of the ways companies sought to gain an advantage in a marketplace where competing on price alone became difficult was to focus more on the buying experience they delivered to customers, including the aesthetic appeal of their Web sites and site personalization options. Focusing on hard-to-compare items and services was another strategy used by online sellers. While the prices of some items (including stocks, cameras, and books) can be compared quite easily, others (such as houses, even within similar price ranges and geographic areas) are harder to compare side-by-side. In general, the more variables involved with a product or service purchase, the harder it is for consumers to engage in comparison shopping, and the more room companies have to levy higher prices.

Online, traditional seller-established pricing is similar to its counterpart in the offline world in that every product or service has an associated market range within which businesses must stay when they set prices. Some ranges are wider than other, allowing for varying degrees of markups. The trick for many retailers is finding the highest price the market will bear without affecting demand. This can be accomplished more easily online because feedback on the Internet is both immediate and measurable. Conducting analyses into consumer reactions to pricing is also much cheaper online. Companies don't have to wait weeks or months to analyze sales reports or have retail staff physically adjust prices on store shelves. E-commerce allows them to monitor sales and make price adjustments electronically. Companies must be careful how they test prices, however, because consumer dissatisfaction can result when identical items are sold for different prices to different customers. This is one potential pitfall for e-commerce companies, especially those that take a dynamic approach to pricing.