The Strategic Use of Consumer Search Cost*

Through their communications mix, firms make decisions that have implications for the ease with which consumers can search for product information. A common intuition is that firms would like to make information easily available to consumers, but choose not to because facilitating consumer search is costly to them. The main result of this paper counters this intuition – firms may not want to make consumer search easy, even if it is costless for them to do so. I identify two reasons why firms will choose to make search hard for consumers. First, firms can soften price competition by differentiating themselves on the basis of consumer search cost, even if consumers don’t differ in their disutility of search. Second, firms have an incentive to take advantage of consumer optimism. It is shown that the reduced cost of providing information in new electronic channels such as the Internet does not necessarily imply that firms will aid consumers in their search for information. Some of the marketing implications of this result are: The Internet may not develop into a smorgasbord of vendor provided information; firms can use the existence of multiple channels to ease price competition; the fact that stores have low service might not be related only to cost pressure.