The Consumer Online Purchase Decision: A Model of Consideration Set Formation and Buyer Conversion Rate Across Market Leaders and Market Followers

The ease of customer search and therefore comparison shopping online has received a lot of attention. While there is sufficient empirical evidence that the expected result of bertrand price competition does not necessarily occur, firms have still attempted to minimize search across other sites. For example, firms have tried to prohibit information gathering “spiders” from scanning their web pages. On the other hand, some firms have taken the opposite strategy, and have chosen to show competing firm options on their site as a direct comparison. In this study, we examine the formation and effect of consumser search sets, or “consideration sets” on the consumer purchase decision. In addition, we contrast the differing effects of consideration sets on market leaders and market followers. In so doing, we find that while searching across market leaders is not detrimental for market followers, searching across market followers is somewhat detrimental for market leaders. This result suggests that strong market leaders should increasingly employ online service, such as personalization, in an attempt to increase loyalty and decrease search.