• Video
  • 5 mins
  • Level 1: Introductory

Weighing up the options: How comparison sites power the consumer

Updated Friday 5th December 2008

Dr. Gabriel Reedy explains the positive impact price comparison sites have had on the consumer

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Copyright The Open University

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Why are price comparison sites a good use of technology?

 

Dr Gabriel Reedy: The history of price comparison sites actually comes from sites like Travelocity and Expedia. These were early travel sites dating from the late 1990s and, of course, the thing that they allowed was consumers could plug in their dates and times of travel and the route that they wanted to go and it would present you with a list of all the airlines, for instance, that flew that route on those days, and you could decide which one you wanted to choose based on price, based on the airline you liked to fly.

 

Now this was something that was never available before to consumers so it presented them with a tremendous amount of information that they could then make their decisions based on.

 

The interesting thing here is that philosophers of technology in the kind of mid 20th Century talked about a future where computers would act as our agents. They would go out into the World and try and collect as much information as possible, bring it back, process it and present it to us for choices so that we could make the decision based on all the information that was available.

 

So the really interesting thing is that now the predictions of those philosophers in a way have come true in price comparison sites that we have today. Because even though we might not have personal jet packs or meals in a pill or robot cleaners or flying cars for that matter, what we do have is we have these computerised agents that we can personalise and they’ll go out and find all the information that we need.

 

Why do some companies hide their identities when setting up price comparison sites?

 

Dr Gabriel Reedy: The idea that companies need to hide their identity when setting up a price comparison site is really only a partial representation of the reality of what consumers are looking for when they’re shopping online. There is this sense that actually if you present your information to the consumer in a way that it seems like it has integrity about it and that you’re presenting the fullness of the information, actually consumers will really appreciate that and might look on your brand more highly.

 

There’s a small insurance company in the US that, several years ago, started doing an advertising campaign associated with a new website. They said come to us and we'll help you compare prices on your car insurance. We want to give you the cheapest price that you can find. And every one of their adverts, there was a tag on that said we want to help you find the cheapest price, even if it's not from us. Consumers went to the website and found a listing of many different car insurance companies and again, sometimes, the sponsoring company wasn’t at the top of the list. But what the company found was that because consumers trusted that the information they were given was actually accurate, in many cases they felt a kind of bond with the company and said oh actually I kind of trust these people, I think they’re giving me a fair deal. Actually I might want to be a customer of theirs. So in the end they were getting customers even when they weren't the cheapest option.

 

How is consumer behaviour different when shopping online?

 

Dr Gabriel Reedy: Well we know when consumers shop online that they do some of the same things that they do when they’re shopping in the real world. So, for instance, consumers report that they really enjoy the search, the kind of hunt for the product that they’re looking for at the best price. This is quite similar to what you hear people say when they’re talking about their real world shopping experiences. But also this idea that customers shop on price alone isn't really true. They value privacy, security and the overall sort of experience that they’re going to get from the shop in some ways even more so than price.

 

A good example of this is Amazon.com and their marketplace programme. So several years ago when Amazon started the marketplace, this is a programme where if I make widgets, I can put one up on Amazon’s marketplace and try and sell it for the best price that I can, then I pay a small fee to Amazon for the privilege of doing that.

 

There was a big row within the company about whether or not this was a good idea, because after all, shopping online, consumers didn’t have the same sorts of barriers that you have when you’re shopping in the real world. Sometimes travelling long distances to reach a shop, sometimes comparing having to travel so that you compare one shop against another to get the best price. And so, effectively, Amazon was setting itself up as a price comparison site within the company. People argued that this was going to mean the downfall of Amazon. In fact that it was going to negatively impact the bottom line because obviously people would buy the cheapest price that they found even if it wasn’t from Amazon, if it was from one of these marketplace shops.

 

What they found actually was that people really valued the shopping experience in Amazon so much, and the fulfilment experience. So they knew they were getting what they ordered. They knew it would be delivered in a certain amount of time. They had the sort of experience working with Amazon that they knew it was going to be a good overall shopping experience. And actually in the end Amazon ended up having a much higher level of sales than they had before, and even if a customer did go with one of these marketplace shops, Amazon got a kickback, so it worked out well in the end.

 

This video extra has been produced for Price Comparison Sites: Deal or No Deal which was broadcast on Friday 5th December at 19:00 on BBC TWO.

Check out what Martyn Hocking thinks in Saving time and pennies...

 

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