Don't discount the factors leading to product choice
Although there are many tech-savvy mechanisms aimed at broadening online shopping choices, they often rely on data that do not provide the full picture. Simply put, the problem is that online consumers may not consider or explore every available product alternative. The EU-funded project 'The effect of on-line product search on the market structure of consumer durables' (SEARCHSTRUC) examined the underlying search process leading up to an actual purchase. Investigations into the effects of search on competitiveness and consumer outcomes revealed that preferences, uncertainty and search cost drive consumer search. A project-developed empirically estimable model was applied to a specific product to answer questions on market structure and competition. One finding was that estimated levels of price sensitivity are considerably higher than those emerging using a typical model of choice. Findings in this area have important implications for how marketers, industrial organisation economists and antitrust policy workers conduct pricing analyses. Another experiment using a joint model of costly consumer search and choice decisions further underlined the importance of accounting for the search stage. This model can help manufacturers make decisions regarding the adoption of a new feature in its product line management. Other SEARCHSTRUC activities produced knowledge on the use of search data for studying demand. Two consumers who choose the same product may do so for different reasons. Knowing more about these reasons will help estimate consumer heterogeneity in markets with durable goods. This is critical for assessing the competitiveness of markets as well as price sensitivity. Ongoing work involved the creation of a dataset of individual search activities. The focus is on a specific product (a durable good) and searches across time, products and online retailers. Initial results point to search outcomes being highly predictive of consumer choices. Expected findings will impart new information on consumer activity in the search environment, and have implications for the future design of search engines. SEARCHSTRUC research fills a void in the literature, which often focuses solely on choice data or ignores underlying search-theoretic primitives. Thanks to this project, a better understanding of search behaviour will have major implications for organisations' marketing strategies.
Keywords
Online shopping, consumer search, market structure, durable goods, search preferences, price sensitivity, marketing
