Comparing the price of apples to apples

The Internet has promised consumer goods price transparency for some time now. Although much progress has been made since the nineties and early 2000s, many consumers still buy relatively homogeneous and widely available products at a far higher price than necessary. A quick glance at a few (Dutch) price comparison sites tells us that price differences may vary up to 80% depending on retailer selection.

No doubt, price is not the only thing that defines a product and non homogeneous (as perceived by consumers)  products will be selected based on countless more factors than solely price. Say you'd compare your first diner at a restaurant with your SO; this experience could never truly compare to a similar restaurant without those connotations. Many emotional factors are deployed and, yes, you probably need food to 'survive' but restaurant visits are primarily emotional experiences. Perhaps the newly found spot is nicer, fancier, trendier, and all this in a much better value to price ratio. However, this experience can never replace these great shared memories you created with your SO.

Let's compare apples with apples.

I am talking about low involvement products that you'd definitely like to have someday, but if that day isn't this week it won't keep you up at night. Not a 'habitual' purchase either. Let's say you'd like to buy an e-reader. A great product, but you could postpone this purchase with ease.

After shortlisting, you considered several product variables like screen size, quality, storage, and its ability to process your favorite e-reader format, you made up your mind and determined the Sony PRS-350 is your winner. After running a few price queries through Google you will select a suitable retailer (based on product price, perceived retailer quality and perhaps simply proximity).

Let's zoom into the price considerations of a potential Sony e-reader buyer. Many offline and online retailers are available who sell this crafty piece of technology. Any purchaser understands he or she will buy at retailer price (+ margin) and will select a (known) retailer based on this price. Rarely, transaction costs are considered in these decisions because most of this particular price stack is invisible (in terms of awareness).

Transaction costs consist of 1) search and information costs, 2) bargaining costs and 3) enforcement costs. Enforcement costs are perhaps the least because, certainly in the Netherlands where I live, they are fixed by an extensive legal framework that is applied to any consumer instantly.

Search and Information costs + Bargaining costs are invisible costs in the price stack that are mostly overlooked, whether offline or online. Paid by most consumers in full and mostly they'll do this unaware.

Combining these search and bargaining cost factors within small and flexible consumer 'pacts' open up limitless possibilities for lower prices and great deals.