A recent survey on consumer beliefs found that approximately two-thirds of the respondents believed that companies were required, by law, to charge every consumer the same price on their Web site. Further, almost three-quarters believed that airline ticket pricing provided via Web sites was required to be the lowest price available.
Both nice thoughts, but certainly not true.
Seasoned travelers are accustomed to checking airline pricing from a variety of sources. They may use the Web to research general pricing and seat availability from both specific airline sites, as well as aggregators like Expedia.com, and then compare that with the pricing provided by an agent over the phone. Depending on the day, or sometimes the hour or minute, any one of those sources could be the lowest.
The airlines will tell you that this situation is dictated by their complex pricing methodology and the fact that they deal with a limited supply of "inventory" per flight. But is that really true? And how does this relate to general consumer sales or even businesses selling to other businesses?
It is common practice for businesses to have varying price lists to distinguish, say, distributors from retailers, or even their highest volume customers from their "regular" customers. In fact, accounting applications are designed to facilitate this type of model. They even allow for exception pricing to the level where you could assign each customer a separate price for every item you sell.
With consumers, prior to the growth of department stores in the mid-1800s, haggling in the marketplace was a normal aspect of the purchase. But with the ever increasing amount of merchandise items and large number of employees at department stores, standardization of pricing became a necessity. Now, as indicated in the survey mentioned above, many consumers seem to believe that it is a legal right.
Yet, ever increasing numbers of organizations are interacting with consumers differently based on information they know about them. For decades, financial institutions have based mortgage and credit card interest rates on historical information. In more recent years, even the local supermarket has begun utilizing past purchase information (tracked by the customer's frequent purchase card) to make special discount offers on the customer receipt. Some are experimenting with handheld computers that may direct shoppers to special offers and discounts, targeted specifically to them, while they walk the aisles.
The increasing availability of technology and information collection has certainly played a major role in pricing. However, not every experiment has met with success. A few years back, Coca-Cola©, following the theory of supply and demand, investigated using vending machines that would increase the price as the thermometer rose. Coke drinkers were outraged.
Amazon.com® received some bad press in 2000 when it was discovered that some customers were charged different pricing for the same item. Yet, this is the same type of pricing system that airlines and supermarkets are engaging in everyday.
So what should we expect in the future? While you probably will not find companies going out of their way to publicize the methods they use to personalize their pricing, many people agree that it is probably the wave of the future.
Whether it is through special offers made only to "never purchased before" customers or pricing that reflects what discount level has generally resulted in a purchase by this person in the past, "personal pricing" is here to stay.
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