How Retailers Use Personalized Prices
hbr.org
hbr.org
Then retailers will attempt to bring legal challenges against them for breaking terms of service, that will be interesting...
I'm thinking of scenarios where if two different browsers visit the same page, they'll get shown different prices depending on their cookies etc. In that case, a third-party site can't really "route you" to a lowest available price, they have to help you make the purchase from the right browser environment.
What's old is new again, I guess.
Travel agents were never on the side of the consumer. If you asked travel agents who they perceived they were working for, they'd tell you it's the airlines. This is not just my opinion; in travel industry magazines, articles, etc., this definitely was their stance. They'd choose flights for you that were most profitable for themselves and/or the airlines (and those two factors coincide nicely). Even pre-web, I almost always found a better prices by phoning the airlines directly if I wanted to spend the time.
Resources like Zagat were helpful but could only get you so far.
In pre internet days if you were flying to far away places like India or Vietnam where your local airline didn't offer service, you would have no resources available for finding or arranging flights, hotels, or other transport. That's where a travel agent was helpful.
These types of travel agents still exist but they’re generally specialty travel, adventure travel, etc. companies that handle a combination of group trips with guides and private trips with or without guides. Besides the big global ones there are many that concentrate regionally and/or in a particular type of activity.
When travel agents were local shops, like a local boutique clothing shop, it would seem they had a lot to lose and not that much to gain by working against their customers interests.
In short I wouldn't say "never".
A "meatspace" analogue from 50 years ago would be wearing a disguise to avoid discrimination, for example a woman dressing up in a coat/hat/fake mustache to avoid getting ripped off at the car dealership.
Are there reasons why this wouldn't work?
I am curious what would the legal challenge be if dynamic pricing on the sell side is considered acceptable?
Indeed, this seems to me to be no different than a form of reselling.
Look at our system now. Big capital can move their tax headquarters to Ireland, its service center to India, its manufacturing to China. Hell, they can now even import low wage workers to the EU and US on visas if it will give them an advantage.
But good luck to any consumer trying to buy products at the same prices sold in these same places (e.g. pharmaceuticals). Even digital goods like games, music, and movies are priced differently, but consumers can never take advantage of currency arbitrage as companies ban VPNs, track IPs, restrict payments by the address of credit cards, etc.
Indeed, corporations are now considered people in the US, which more or allows allows then legislate away any perceive threats to the rigged system.[1]
[1] https://www.theatlantic.com/politics/archive/2015/06/raisins...
An analogy I'm thinking of is, imagine the website has a box that asks you to input your age, then it shows you your price. If you put in a number over 40, the price will be higher. Now you can just put in a number under 40 and get a lower price, but their response would be to make it against their terms of service to "lie" about your age.
Similarly, they will equate using "someone else's cookies" to lying and claim it is morally wrong and illegal and against their TOS. Even though what they're doing is discrimination.
Here's the real problem:
1. modern shopping sites are built haphazardly without structure;
2. a typical page load time is 10-20 seconds for many (most?) shops.
1. matters because you cannot build a simple crawler. This is because sometimes, the brand is in the title, the description is in the brand, and the gender is in the quantity, which itself is in the photo as a pixellated image...
You must load the entire page and figure out where the attributes are in a smart way. You can do this today with headless chrome, in the old days with Selenium, etc.
... which brings us to 2. A mainstream, regionally-dominating shop, particularly any that adopt the marketplace model (Amazon, Taobao, etc.) may have as many as 20 million products. Given 2., good luck refreshing this price list in a sane time, even if you crack the attribute extraction.
If by some miraculous feat you solve these issues you now have to product match an inventory of billions of listings, most of which are misspelt, missing attributes (brand, etc.), and use photos that even a human could not match by sight. Think how hard it is to find exactly what you want on eBay...
The only way is to get the data directly from the retailers. Assuming they will give it to you, you end up with the same problem of feed poisoning that you have with marketing.
That sounds very exaggerated, are you quoting this range from actual data?
For a sanity check the first two shops that came to mind loaded in <3 seconds (guitarcenter.com, nike.com)
Researchers found that black women were getting cars sold to them at a much higher markup than white men. I doubt that is because they were getting profiled as wealthier.
Not just limited to fashion here... electronics, tickets for inconvenient travel time, food, etc.
Would love to hear what you think (currently in beta on fb messenger)
There's a Gmail trick to avoid it by using "+random_name" suffix but that is easy enough to circumvent. Disposable email IDs are banned from most sites and I never found it easy to integrate in my workflow. I have been pondering about building a service that acts as a mask to your real email ID, can be configured to forward emails to your real ID and can work with your personal domain name. I know some people who are running similar kind of setup here; a service might be helpful for those who don't might not want to go through the trouble.
It's not much more difficult to circumvent than gmail's +randomname but a little fuzzier. There's no way to know from the outside how many people are using each domain.
Edit: it's actually 600 aliases now: https://www.fastmail.com/help/account/limits.html
Just use onlinestore@example.fastmail.com and fastmail will make sure it arrives in your example@fastmail.com inbox.
It's completely hassle free.
But this will come in handy!
Sign up for fastmail. Integration is completely painless. https://news.ycombinator.com/item?id=15525512
Also, the plus thing isn't Gmail-specific, it's part of the email protocol.
A lot of services on the web want your phone number too; as a contact on the shipping label (often a required field), as part of the authentication scheme (out-of-band text messages with OTP codes to confirm certain actions), or as an account recovery option. A person's phone number is a unique numerical identifier that doesn't change often, if at all (in the EU you tend keep your mobile phone number when switching telco's).
http://www.npr.org/sections/thetwo-way/2012/06/26/155756095/...
The price paid by Linux users was almost certainly bumped up by Linux gamers explicitly trying to support game studios who supported Linux.
You wouldn't see the same thing with hotel rooms or most other products that weren't intimately tied to the OS itself.
This is presumably partly because customers appreciate that game studios see their chosen OS as a viable release target.
Likewise, I've noticed a similar behaviour with ads on youtube. If you always click the skip ad button, you'll always get the 15s unskippable ads, or 30s ads. But when I stopped for a while (because a lot of the channels I watch are solely supported by them), YouTube kept pushing the line until it was showing 5 minute ads for 10 minute videos. So now I skip them again to avoid the gradual creeping increase in ad length.
I very rarely get shown ads.
I ran AdBlock Plus for a while until I discovered that it runs as an open proxy, allowing anyone on the same wifi network as you to fetch content through your phone.
In combination with a VPN client that routes everything over the VPN, I considered that an unacceptable risk.
Custom pricing feels like buying from a shopkeeper with no price stickers. You expect to get charged according to what he judges you can afford. It removes the value of being able to rely on all the other customers to collectively decide if the price is fair or not. That means every customer has to individually evaluate every price which is a massive waste of effort.
This is one of the best things about living in the developed world: most things are bought without haggling. All of your most stressful and miserable transactions -- buying a car, booking a flight, tipping a server -- lack a fixed, public price. Dynamic pricing based on digital surveillance is a huge step backward.
What reseller doesn't buy tickets when you book? They get paid when you buy, why would they refuse to buy?
What a terrible article:
1) Its first example of "personalized pricing" isn't actually personalised: it was the result of an A/B test.
2) It says 'Outsize profits can be extracted from “top of the demand curve” customers' when, in fact, the top of the demand curve is normally when price is zero. The author seems to acknowledge this as they reference 'the downward sloping demand curve highlighted in Economics 101'.
3) The only convincing example given in the article is that of 'auto dealerships', which are the least typical retailers there are. People hate going to auto dealerships, but they love doing other types of shopping, in-person or online. Part of the reason is the personalized pricing (and process of haggling), but this has existed for many years, and the rise of the internet has actually made it easier for consumers, not harder, to get a reasonable deal.
4) "A key question is whether personalized pricing, on the web or in-store, is ethical." A better question would be 'How do retailers use personalized prices?'. That's the question I thought would be answered, given the title. The author's answer seems to be "Except for auto dealerships, they don't".
But this form of price discrimination is not personalised. It's the same as that achieved with coupons published in magazines.
I'm happy to be convinced otherwise, though. Let me know.
Right now, for a grocery store, that means they can put butter on sale that women will buy for Christmas cookie making, and market sprinkles and decorative sugar at higher prices (or with a coupon) to increase customer value. That MDA heart that you bought on Labor Day weekend helps assess the effectiveness of that sort of promotion.
I’m sure they’ll stay competitive in the future.
And from what I know, that’s less about survival, and more that they can’t expand horizontally anymore, and the new owners (the Albrechts both died in the past years) also want to expand vertically into other market segments.
Supermarktblog documents these changes quite well, IMO.
https://www.supermarktblog.com/2017/10/02/aldi-nord-in-renov...
I think the "charity bundling" concept is just for P.R. The company presents the big check at the end of the campaign, and the public then credits the company, even if the company itself contributed nothing beyond a little (deductible) personnel time.
The Ronald McDonald House perfected that mechanism. Some retailers used to do the same with pooling customer MDA donations, then showing up to the telethon with a big check... with the company name on it.
With personalisation I wonder if they go as far as telling you how hot it feels for me as opposed to how hot it is.
A new facet on the old games.
In fact they are finding the lowest prices, then trying to maximize the amount you pay for it.
Disgusting.
"We find you the lowest price (that we think you'll actually purchase)".
FTFY?
1. Scientific experiment to determine the price. With enough customers, it's possible to determine optimal price level using scientific method. Vary the price and see how it affects demand and discover what customers are willing to pay.
2. Divide customers into segments, and apply scientific pricing into segments. Segmenting can be heuristic based on devices used and behaviour.
3. Personalization comes last. It's segmentation in the finest level. If user be identified, his social networks analyzed etc, it's possible to model his behaviour and determine users price sensitivity and how the user perceives value. Triggering purchase decision can be personalized. For some people showing generated review or rating helps to make a decision, for some you need to show purity values (images of people in white clothes in the sun), for some you must indicate that they are able to "win" over the seller. Access to the mobile gaming data with in app purchases is massive leg up in personal profiling. Data from mobile gaming can be used to experiment and model personal behaviour and personality.
I guess you could look at similar products but if you're targeting a new market entirely, you might have no assurances that your assumptions are correct.
Pricing was advanced field even before the internet. Everyone doing it should first study pricing at least few days to get a feel and ideas and to know what kind of pricing methods to use and how to determine the initial price and how to change it.
Airline yield management -- which includes both setting the price buckets for different fare classes, and deciding which flights/routes get allocated certain numbers of seats in different fare classes -- is a dark art.
And in case someone happening by is confused by that, I'm not talking about economy class versus first class here. In the US, for example, there may be a dozen or more different fare classes which all book the same type of seat in the same cabin of the same aircraft, but which have different prices attached to them. This is the source of a lot of (inaccurate) advice to do things like booking tickets on certain days of the week or at certain times to try to get the lowest price. Airlines dynamically allocate and re-allocate differently-priced fare classes to flights all the time, and unless you really really know what you're doing, have time (which isn't free) to spend on it and pay (which also isn't free, obviously) for a service that lets you scan inventory by fare class, you're not going to reliably get the lowest price.
For example, by my count currently American has 14 fare classes which initially book into the economy cabin (and with different rules about how and whether they upgrade to a different one), Delta has 15, and United has 17. These vary by level of discount, restrictions on change/refund, who they're offered to (Delta has some which are known to be explicitly a "we only use this to indicate a fare where we're trying to price-match another airline on the same route", for example, and all three have fares for things like government and military travel), etc. and price differently.
But, by and large, they're still not "personalizing" pricing. Instead they are basing pricing on factors like demand, destination, whether you're doing a Saturday stay (business travelers wont, so they'll charge more), how close you are to departure, etc etc.
Plus they're now tweaking their frequent flier programs as a way to encourage people not to buy the "absolute cheapest" fare available.
I recently booked a delta flight from sfo to San Juan, connecting in jfk. Got off in jfk and "missed" my flight. Saved over $1000 versus buying a ticket on the same flight from sfo to jjfk.
Airlines don't much care for that, and are known to shut down frequent-flyer accounts or take other punitive actions against you if you do that.
Going to a McDonald's, I noticed their menu boards went displaying children's meals or value items during my last visit - looking around the window and floor ads, I did see mention of discount items available but nothing in the menu-board slideshow.. Didn't think of asking at the time, thought it was odd, now I have come to realized they were gaming me for higher sales items.
Now will stick to establishments with printed menus and non-video menu boards.
PG&E does offer equal payment plans, where you pay the same amount every month, but they still track usage and bill/credit you every year for the difference between their estimate and your reality.