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December 17, 2004

It really isn't about price.

David Young, on his Branding Blog has this interesting post pointing to an MIT Sloan School of Management Study that shows slightly more than half of consumers are willing to pay more for a product (while shopping online) if it comes from a well-known vendor.

The study, which ran from early 2003 to early 2004, monitored 10,000 searches by shoppers looking for books that were among the 100 most popular titles. The searches took place on, an Internet comparison-shopping service that lists several dozen retailer offers at a time. The listings include pricing and shipping information, product ratings and more.

Researchers chose to monitor book shoppers because the products they buy are exactly the same.

"We went in thinking a book is a book," Erik Brynjolfsson, director of the center for e-business at Sloan, said Wednesday. "But we found out that people care a lot about who they buy from, even if what they're buying is a commodity."

Fifty-one percent of the shoppers scrolled down from the lowest priced books at the top of the list to the better-known retailers, paying several dollars more to buy their tomes from a vendor they knew. The hardcover books monitored in the study cost an average of $42.

Of course price made a difference to many, given that 49 percent of the shoppers bought the lowest-priced book. But Brynjolfsson and his fellow researchers expected closer to 100 percent of the shoppers to choose to pay the least possible for the same product.

"The vicious price competition predicted (on the Internet) by retailers and economists is not what we found," Brynjolfsson said.

The lesson from the study, according to Brynjolfsson, “Don't think that price is all the consumer will care about.”

What should we take away from this study?  Remember, it is not always about price.  It is about trust, competence, and convenience.


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