Learning and the Value of Information : The Case of Health Plan Report Cards

Click stream data provides information about the sequence of pages viewed by a visitor as they move through a web site. A valuable facet of this data is the navigation or web path the user has chosen to traverse the web site. This path reflects a user's goals, which we use to predict a user's potential to purchase. One application of path analysis is to predict which users are likely to make a purchase as they browse through the web site. An online retailer could use path analysis to improve the design of their web site and better target customers. In our research we propose a dynamic multinomial probit model to predict the path that a user will take through a web site. Our model is formulated with a hierarchical Bayesian framework to account for consumer's observed and unobserved heterogeneity. Additionally, our model incorporates a mixture process whose multiple states are governed by a hidden Markov switching model to capture within user heterogeneity. Results show that more promotional messages on a page, removing the presence of price information on a page, and reducing the number of hypertext links can positively affect the purchase conversion rate of users who are surfing but these changes can negatively impact visitors who are purchase oriented. Therefore, online retailers should use different marketing mix tools, web design, and navigation paths to target the right customers at the right time to bolster their purchase conversion rates.