What is the cost of the search’
The cost of search time, energy and money spent by consumers who learn of a product or service to buy. Search costs include the costs of time and energy spent searching for the time and energy that could be spent on other activities – and maybe the money spent on travel between stores is exploring various options to acquire the research data or refer to a specialist to acquire advice.
Breaking down the ‘cost of search’
The cost of search tend to be higher for expensive goods because it makes more sense to spend time, energy and perhaps money to study how to obtain the most reliable and affordable car than he does how to get the tastiest and most affordable sandwich. The consequences of a bad decision on buying an expensive item much more than those for inexpensive goods.
Thanks to the Internet, buyers face lower search costs for almost everything they want to buy today than it was a couple of decades ago, because now users can obtain quick, accurate information about the products and services without even leaving the house.
Prices for identical or similar goods in different stores and places for various reasons. The fact that the same product can be bought for the same or lower price, as a rule, gives enough incentives for the search. However, if the product is purchased infrequently, attempt to check the price of every trip to the store may outweigh the benefit of spending less. Thus, promotions and advertisements for a specific product increases the incentive of the consumer to the results. This change in incentives leads to an increase in the traffic category, which, from the point of view of the owner of the shop is desirable.
Factors the cost of the search
Search costs are divided into external and internal costs. External costs include the monetary costs of acquiring information and costs time in the search. External costs are not under the control of the consumer. However, the decision to bear the expenses at the discretion of the consumer. Internal costs include the mental effort given to implementing search, sorting the incoming information and use it in context with existing knowledge. Internal costs are determined by the ability of consumers to search, and this in turn depends on intelligence, knowledge, education and training.
The network is expected to reduce the costs of search. For example, Electronic Commerce was predicted to cause disintermediation as search costs become low enough for end-consumers to incur them directly instead of using the retailers to do it for them. This, in turn, will lead to lower prices and reduce the differences between the prices of quotations of different vendors.