Consumers are always looking for the best possible deal on contemplated purchases.
The benefits of price advantages have proven to be a strong motivator for purchases. Practices such as seniors discounts, and getting an 11th coffee for free after purchasing 10 have become commonplace, almost traditional.
Technology has expanded the ability of retailers to change pricing on other criteria – a consumer’s address, past purchasing history or other personally identifiable information. This has expanded the capacity for personalized pricing, setting prices at a different level for each individual consumer, based on an estimation of what they are willing to pay.
A recently released investigative report by Consumers International concluded that personalized pricing is not inherently harmful to consumers, but that many current implementations are not being done “fairly, responsibly, and transparently, or with proper oversight.” CI recommends effective legal, institutional and social mechanisms to ensure it works to benefit all consumers.
Personalised Pricing analyzes the potential harms and benefits for consumers, based on the study across six countries. Although the expansion of personalized pricing has received greater attention from policymakers to ensure that consumer welfare is not harmed, the study found no data protection measures or guidelines specifically addressing personalized pricing.
A portion of the report is devoted to a case study of an online product available globally, Tinder Plus, a premium service offered by the Tinder dating platform. The study found strong evidence of personalized pricing in all six countries studied, but little transparency about the price-setting mechanism, nor how it is applied. It found that age appeared to be a significant factor in this particular algorithm. Consumer trust could be improved if there were “greater transparency and improved protections regarding the collection and use of their data, as well as greater transparency on the price-setting focus.”
The report includes recommendations for businesses and policymakers around transparency, consumer protection and empowerment and equality and anti-discrimination.
A 2017 Consumers Council of Canada report evaluated consumer attitudes around three different “types” of dynamic pricing. Traditional dynamic pricing such as seniors’ and volume discounts was viewed most favourably, but still fewer than 60% of consumers considered both methods to be fair. Only 40% of participants found loyalty programs to be fair to consumers. Technology-enabled supply and demand pricing, such as higher prices for baseball tickets featuring better opponents or Uber “surge” pricing, were viewed more neutrally. The tested examples were rated as “fair” by about 20 per cent of those surveyed and “unfair” by about 30 per cent.
The third form of dynamic prices in that study was the use of demographics, behavioural and personally identifiable information on dynamic pricing. In this area, the study found consumers had a much stronger negative reaction, because they were very suspicious of the benefits to them.