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| Siva Viswanathan, Assistant Professor of Information Systems, Decision and Information Technologies, Robert H. Smith School of Business, University of Maryland |
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| In this article, the author, Siva Viswanathan, Assistant Professor of Information Systems, Decision and Information Technologies, Robert H. Smith School of Business, University of Maryland, describes a recent study that examines how tracking of consumers’ online infomediary usage can provide valuable insights into underlying consumer differences and help traditional firms craft better market segmentation and price-discrimination strategies. |
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Over the last few decades, developments in information technologies have dramatically increased the amount of information available to consumers. The Web, in particular, has emerged as the primary source of information for consumers in various product categories, and in industries as diverse as auto-retailing, brokerages, real-estate, mortgages, and insurance, among others. Most of this information is provided by third-party online information intermediaries (or infomediaries), who have not only established themselves as pivotal and trustworthy sources of information, but also led to the creation of new linkages with the potential to disrupt, and fundamentally change the dynamics of traditional business. The growth of online infomediaries has given rise to new and interesting information seeking behaviours, which has only recently begun to garner the attention of researchers. As consumers increasingly begin to rely on online infomediaries as their primary source of information, these online intermediaries provide traditional firms new avenues for segmenting consumers and formulating strategies based on their online behaviours – the analysis of which forms the primary focus of this study. In particular, this study examines differences in consumers’ online information seeking behaviours, and seeks to understand how firms can actively leverage this knowledge to devise effective marketing and pricing strategies.
The auto-retailing sector provides the research context for this study. Estimated
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at around a trillion dollars a year, auto-retailing is the biggest retailing sector in the US. While there are over 22,600 new car dealerships, the market is mostly fragmented and sales largely localised. In addition, the presence of franchise laws has helped strengthen the position of dealers in the retail value chain. Added to the lack of transparency in the pricing and purchase process, significant differences exist among cars in terms of performance and features as well as in the pricing strategies of dealers—making the car buying process a complex decision for most consumers. However, over the last few years, the advent of the Web, has led to the rapid growth of several online intermediaries (Online Buying Services) that have emerged to improve overall market efficiency through better information availability. These OBS (Online Buying Services) such as AutobyTel, Edmunds.com, Cars.com, not only serve as infomediaries providing information on various facets of the purchase, but also act a referral intermediaries by referring consumers to dealers.
As in other sectors, these online infomediaries typically provide price and product comparison information, enabling consumers to find the right product and negotiate better prices with dealers. Prior studies examining the implications of the increased availability of such information have typically found that the increased availability of price information leads to lower average prices in the market, resulting from greater price competition among sellers. In addition to price information |
