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Internet shoppers beware: Websites change product prices depending on a customer's purchase history - and even where they live
PUBLISHED: 11:12 GMT, 3 November 2014 | UPDATED: 12:18 GMT, 3 November 2014
For years, websites have been criticised for carrying out hidden - and in some cases - underhand techniques to lure in customers.
And despite a number of high-profile reports, involving sites such as Amazon and Staples, a new study has revealed many of these personalisation methods are still taking place.
Researchers examined prices across 16 different retailers and found that some show different prices to different users based on where they live, whether they’re searching on a PC or phone, and even based on what they have paid for items previously.
Scroll down for video
Researchers from Northeastern University in Boston studied prices on ten major US retailers and six hotel and rental car sites including Walmart, Home Depot and Expedia. They discovered evidence of price discrimination and steering, based on a user's location of browsing history
It is not known whether the practice is a worldwide phenomenon or whether the results observed in the study are confined to businesses in the US.
‘People have a mental model of shopping that is based on experiences from brick-and-mortar stores,’ explained Christo Wilson, assistant professor of Computer and Information Science at Northeastern University on The Conversation.
‘Many people assume this same mental model of shopping applies just as well to e-commerce websites. However, as we are discovering, this is not the case.’
In 2010, Amazon’s chief executive Jeff Bezos admitted an experiment, in which the site charged different users different prices for the same DVD, was ‘a mistake.’ It’s a practice known as price discrimination or price differentiation.
In 2012, the Wall Street Journal revealed Staples was charging users different prices based on their geographic location.
It also reported that travel retailer Orbitz was showing more expensive hotels to users browsing from Mac computers, known as price steering.
To see if these practices are still being used, and how extensively, Assistant Professor Wilson and his colleagues examined ten major US retailers along with six hotel and rental car sites.
This included Best Buy, CDW, HomeDepot, JC Penney, Macy’s Newegg, Office Depot, Sears, Staples, Walmart, Cheaptickets, Expedia, Hotels.com, Orbitz, Priceline and Travelocity.
They then recruited 300 people to run product searches on the 16 sites.
The researchers paired each of these real users, who each had their own real, browser history, with an automated browser that ran the same searches at the same time as the real users, but did not store any cookies.
By comparing the search results shown to these automated controls, and to the real users, they identified a number of cases of personalisation.
‘We saw price steering from Sears, with the order of search results varying from user to user,' said the study.
Researchers examined ten major US retailers along with six hotel and rental car sites. They then recruited 300 people to run product searches on 16 sites. Cheaptickets (pictured) presented different results to guests (top), and unadvertised 'Members Only' prices to logged-in users (bottom)
This chart reveals which sites showed products with different prices. A desktop user searching Home Depot, for example, typically received 24 search results, with an average price per item of $120 (£75). Mobile users received 48 search results, with an average price per item of $230 (£143)
‘[And] we saw price discrimination from Home Depot, Sears, Cheaptickets, Orbitz, Priceline, Expedia, and Travelocity, with product prices varying from user to user.’
To figure out what, in particular, was being used to personalise results, the researchers conducted a second experiment, using fake accounts.
They tested personalisation using a range of browsers, including Chrome, Firefox and Internet Explorer as well as different platforms, including Windows, OS X, iOS and Android.
They also tried searching for deals while logged into an account, and as guests.
Using one account, the researchers booked cheap hotels and rentals cars, while the other booked more expensive rooms and cars.
‘Our fake accounts uncovered many different personalisation strategies employed by sites,’ said the researchers.
For example, Travelocity reduced the prices on 5 per cent of hotel rooms shown in search results by around $15 (£9) per night when searched for on iOS or Android.
Cheaptickets and Orbitz gave unadvertised ‘Members Only’ discounts of about $12 (£7.50) per night on 5 per cent of hotels rooms to users who were logged in to their accounts on the site.
Meanwhile, Expedia and Hotels.com used what marketers and engineers call ‘A/B tests’ to steer certain users towards more expensive hotels.
By dividing visitors into different groups, companies are able to use these tests to see how users respond to new website features and algorithms.
In this case, for example, visitors to Expedia and Hotels.com were randomly assigned to groups A, B, or C based on the cookies stored on their computers, said the researchers.
Users in groups A and B were shown hotels with an average price of $187 per night (£116) while users in group C were shown hotels with an average price of $170 per night (£106).
Home Depot served almost completely different products to users on desktops versus mobile devices.
A desktop user searching Home Depot typically received 24 search results, with an average price per item of $120 (£75).
In contrast, mobile users receive 48 search results, with an average price per item of $230 (£143).
Many personalisation techniques are based on cookies. Cookies are small files stored on a user's computer or phone, filled with data about that particular person. They are used to set prices and show adverts, for example. Cookies are also used by sites such as Netflix (pictured) to personalise what films and shows are prioritised
Products were also 41 cents (25p) more expensive, on average, for Android users.
‘Initially, we assumed the sites would not personalise content, given the extremely negative PR that Amazon, Staples, and Orbitz received when earlier cases were revealed,’ continued the researchers.
‘To our surprise, this was not the case. Unfortunately, the business logic underlying much of this personalisation remains a mystery.
‘None of the discounts we located in our experiments were advertised on sites' homepages, so the deals do not appear to be part of marketing campaigns.’
Orbitz and Expedia confirmed the researcher’s findings, but did not explain why their websites are designed in this way.
Travelocity confirmed it offers deals for mobile users, with the goal being to motivate them to use the site more and install the Travelocity app.
‘What is clear from our study is that price discrimination and steering on e-commerce sites is becoming more prevalent, and more sophisticated,’ added Assistant Professor Wilson.
‘As a user, it’s almost impossible to know if the prices you are being shown have been altered, or if cheaper products have been hidden from search results.’
The researchers advise searching for products in a desktop browser, or using a private or incognito browser window on a PC or mobile browser.
This means companies don’t know what sites and products have previously been searched for, or how much users paid for items. It also means they don’t know what platform is being used to search the sites.
‘Companies are constantly experimenting with new personalisation techniques, so in the future, an entirely different attribute may trigger personalisation,’concluded the researchers.
‘Ultimately, we hope that our study will encourage companies to be more transparent about how they personalise prices and search results.
‘Rather than using opaque and creepy algorithms to secretly alter content, companies could stick to the kinds of real-world incentives that shoppers already know and love, like coupons and sales.’
Read more:
- Researchers studied prices on ten retail and six hotel and rental car sites
- When using a mobile, Travelocity prices were 5% cheaper than on a PC
- Cheaptickets and Orbitz gave unadvertised offers to logged in users
- Desktop user on Home Depot received 24 search results, with an average price of $120 (£75)
- Mobile users received 48 search results, with an average price of $230 (£143)
- These practices are known as price discrimination, and steering
- Affected sites confirmed results found in the study, but didn’t explain why
PUBLISHED: 11:12 GMT, 3 November 2014 | UPDATED: 12:18 GMT, 3 November 2014
For years, websites have been criticised for carrying out hidden - and in some cases - underhand techniques to lure in customers.
And despite a number of high-profile reports, involving sites such as Amazon and Staples, a new study has revealed many of these personalisation methods are still taking place.
Researchers examined prices across 16 different retailers and found that some show different prices to different users based on where they live, whether they’re searching on a PC or phone, and even based on what they have paid for items previously.
Scroll down for video
Researchers from Northeastern University in Boston studied prices on ten major US retailers and six hotel and rental car sites including Walmart, Home Depot and Expedia. They discovered evidence of price discrimination and steering, based on a user's location of browsing history
It is not known whether the practice is a worldwide phenomenon or whether the results observed in the study are confined to businesses in the US.
‘People have a mental model of shopping that is based on experiences from brick-and-mortar stores,’ explained Christo Wilson, assistant professor of Computer and Information Science at Northeastern University on The Conversation.
‘Many people assume this same mental model of shopping applies just as well to e-commerce websites. However, as we are discovering, this is not the case.’
In 2010, Amazon’s chief executive Jeff Bezos admitted an experiment, in which the site charged different users different prices for the same DVD, was ‘a mistake.’ It’s a practice known as price discrimination or price differentiation.
In 2012, the Wall Street Journal revealed Staples was charging users different prices based on their geographic location.
It also reported that travel retailer Orbitz was showing more expensive hotels to users browsing from Mac computers, known as price steering.
To see if these practices are still being used, and how extensively, Assistant Professor Wilson and his colleagues examined ten major US retailers along with six hotel and rental car sites.
This included Best Buy, CDW, HomeDepot, JC Penney, Macy’s Newegg, Office Depot, Sears, Staples, Walmart, Cheaptickets, Expedia, Hotels.com, Orbitz, Priceline and Travelocity.
They then recruited 300 people to run product searches on the 16 sites.
The researchers paired each of these real users, who each had their own real, browser history, with an automated browser that ran the same searches at the same time as the real users, but did not store any cookies.
By comparing the search results shown to these automated controls, and to the real users, they identified a number of cases of personalisation.
‘We saw price steering from Sears, with the order of search results varying from user to user,' said the study.
Researchers examined ten major US retailers along with six hotel and rental car sites. They then recruited 300 people to run product searches on 16 sites. Cheaptickets (pictured) presented different results to guests (top), and unadvertised 'Members Only' prices to logged-in users (bottom)
This chart reveals which sites showed products with different prices. A desktop user searching Home Depot, for example, typically received 24 search results, with an average price per item of $120 (£75). Mobile users received 48 search results, with an average price per item of $230 (£143)
‘[And] we saw price discrimination from Home Depot, Sears, Cheaptickets, Orbitz, Priceline, Expedia, and Travelocity, with product prices varying from user to user.’
To figure out what, in particular, was being used to personalise results, the researchers conducted a second experiment, using fake accounts.
They tested personalisation using a range of browsers, including Chrome, Firefox and Internet Explorer as well as different platforms, including Windows, OS X, iOS and Android.
They also tried searching for deals while logged into an account, and as guests.
Using one account, the researchers booked cheap hotels and rentals cars, while the other booked more expensive rooms and cars.
‘Our fake accounts uncovered many different personalisation strategies employed by sites,’ said the researchers.
For example, Travelocity reduced the prices on 5 per cent of hotel rooms shown in search results by around $15 (£9) per night when searched for on iOS or Android.
Cheaptickets and Orbitz gave unadvertised ‘Members Only’ discounts of about $12 (£7.50) per night on 5 per cent of hotels rooms to users who were logged in to their accounts on the site.
Meanwhile, Expedia and Hotels.com used what marketers and engineers call ‘A/B tests’ to steer certain users towards more expensive hotels.
By dividing visitors into different groups, companies are able to use these tests to see how users respond to new website features and algorithms.
In this case, for example, visitors to Expedia and Hotels.com were randomly assigned to groups A, B, or C based on the cookies stored on their computers, said the researchers.
Users in groups A and B were shown hotels with an average price of $187 per night (£116) while users in group C were shown hotels with an average price of $170 per night (£106).
Home Depot served almost completely different products to users on desktops versus mobile devices.
A desktop user searching Home Depot typically received 24 search results, with an average price per item of $120 (£75).
In contrast, mobile users receive 48 search results, with an average price per item of $230 (£143).
Many personalisation techniques are based on cookies. Cookies are small files stored on a user's computer or phone, filled with data about that particular person. They are used to set prices and show adverts, for example. Cookies are also used by sites such as Netflix (pictured) to personalise what films and shows are prioritised
Products were also 41 cents (25p) more expensive, on average, for Android users.
‘Initially, we assumed the sites would not personalise content, given the extremely negative PR that Amazon, Staples, and Orbitz received when earlier cases were revealed,’ continued the researchers.
‘To our surprise, this was not the case. Unfortunately, the business logic underlying much of this personalisation remains a mystery.
‘None of the discounts we located in our experiments were advertised on sites' homepages, so the deals do not appear to be part of marketing campaigns.’
Orbitz and Expedia confirmed the researcher’s findings, but did not explain why their websites are designed in this way.
Travelocity confirmed it offers deals for mobile users, with the goal being to motivate them to use the site more and install the Travelocity app.
‘What is clear from our study is that price discrimination and steering on e-commerce sites is becoming more prevalent, and more sophisticated,’ added Assistant Professor Wilson.
‘As a user, it’s almost impossible to know if the prices you are being shown have been altered, or if cheaper products have been hidden from search results.’
The researchers advise searching for products in a desktop browser, or using a private or incognito browser window on a PC or mobile browser.
This means companies don’t know what sites and products have previously been searched for, or how much users paid for items. It also means they don’t know what platform is being used to search the sites.
‘Companies are constantly experimenting with new personalisation techniques, so in the future, an entirely different attribute may trigger personalisation,’concluded the researchers.
‘Ultimately, we hope that our study will encourage companies to be more transparent about how they personalise prices and search results.
‘Rather than using opaque and creepy algorithms to secretly alter content, companies could stick to the kinds of real-world incentives that shoppers already know and love, like coupons and sales.’
Read more:
