Not every online shopper gets the same offer -- Are cookies costing you money?

Have you ever found a great price online and recommended it to a friend, only to find that they could not bring up the same deal? Your friend may well have been cookied, a term I just made up for the ability of internet sites to customize prices on the fly according to the customer's shopping history.

What is an internet cookie? It's a small file put on on your computer by the site you are visiting to identify you, so that the next time you visit, it recognizes you and can build on your previous shopping history with new, customized offers. At the moment, my computer contains cookies from Youtube, Reuters, Amazon, AOL, and hundreds of other sites I've visited recently.

So what? you might ask. If cookies allow sites to feed me offers that match my interests, what's the problem? The problem is that internet businesses want to wring as much money out of you as possible, and if you're identified by a cookie as someone who has shopped there before, it knows what offers you've responded to. If you've proven yourself a tough sell, it might feed you its best price. However, if you've been an easy sell, as shown by your previous purchases, the price you receive might be higher. Think of it as bartering.

How widespread is cookie-based differential pricing? I spoke with Joseph Turow of the Annenberg Public Policy Center of the University of Pennsylvania and author of Niche Envy, who told me that this is one of the most closely held secrets in the internet marketing community. However, he suspects it is widely used.

Fortunately, you can fight cookie-based differential pricing very simply -- delete the cookies on your machine on a regular basis. Every browser offers this function; look under Tools or Preferences on your command bar.

This trend of differential pricing, called behavioral targeting, and how it affects the price you pay is a topic I'll delve into in more depth in later posts. Keep reading WalletPop for tips on how to counter behavioral targeting and get the best prices online.

If you'd like to take a peek at the cookies on your PC, for most Vista-OS machines you can find them by navigating to C:\Users\<username>\AppData\Roaming\Microsoft\Windows\Cookies\ and
C:\Users\<username>\AppData\Roaming\Microsoft\Windows\Cookies\Low\
Windows XP users will find cookies at - C:\Documents and Settings\<username>\Cookies\
Firefox users can add a View Cookie extension to their browser.
A question for the Mac and Linux experts out there; how would readers find the cookies on those platforms?