Once upon a time, buying a plane ticket was simple. No matter when you bought it, the price from Toronto to Vancouver on a given airline was always the same. Now, prices can vary widely from day to day.
But it’s not just plane tickets anymore: online retailers are frequently changing their prices, and not only by the day. According to experts, prices might change by the hour, or because of what the competition is doing, or even based on who is visiting the website.
As online retail gets more sophisticated, retailers are starting to use information about their customers to vary the price, deals and products you see while visiting a site. It’s called dynamic or targeted pricing and according to one academic, it’s common now and will soon be everywhere.
“I believe it is widely practiced,” said Jeff McGill, professor of management science at Queen’s University’s Smith School of Business. “Companies don’t brag about it of course. They practice it but they don’t often want to talk about it.”
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Christo Wilson, assistant professor of computer and information science at Northeastern University in Boston, studied the practice in 2014. The researchers recruited 300 real-world users and got them to test various e-commerce sites. Then, they tried to figure out what was causing any differences they saw.
“The exact behaviour varies from site to site,” said Wilson. “For example, several of the travel sites gave deals if you were either logged in or you went from a mobile device, like your phone or your tablet, you would get around $10 off per night for a hotel or for a rental car.”
Shoppers looking at the same website from their desktop computer at home did not get the same discount.
Wilson said lots of information is instantly available to retailers when you visit a website, like whether you’re using a Mac or a PC, if you’re on a mobile phone and which browser you’re using. Your IP address, a unique string of numbers that identifies computers connected to the internet, can help a website guess at your postal code and real-life location with “pretty good” precision, he said.
“So immediately off the bat they can start to infer things like potentially how affluent are you. Are you using some kind of fancy Macbook, or if you’re on an iPhone. And they know your location, so that’s immediately tied to things like your demographic.”
Someone from a wealthier neighbourhood might be quoted a higher price than someone from a poor one, explains McGill. And it doesn’t take a ton of personal information for a website to guess at some of your characteristics.
Take a postal code, for example. That doesn’t tell a seller exact details about who you are but it helps them guess what kind of lifestyle you lead by using things like the average income in the area.
But the information-gathering doesn’t end there, added Wilson. “As you continue to browse the site, they’re tracking everything you click on. So again, this sparks a lot to develop things like an interest profile. What kind of things do you like? And potentially your price sensitivity: are you clicking on the cheap stuff, are you clicking on the expensive stuff? If it’s a site that you’ve been to before, it can immediately remember things like the things you’ve browsed, clicked on and purchased in the past.”
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Segmenting the market
But why would companies want to charge customers different amounts? According to Peter Bell, professor of management science at Western University, it’s very profitable.
“It creates additional revenue while selling the same amount of product and firms really like that,” he said.
“You don’t have to produce more, you don’t have to sell more, you just have to be smarter in the way you sell it.” And that means putting customers into different categories and marketing to them in different ways, including offering targeted deals or charging some people more if they think they’re willing to pay a higher amount, or less if they’re price-sensitive.
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According to Gary Liu, vice president of marketing for Boomerang Commerce, a company that helps retailers create dynamic pricing strategies, firms see a three to 16 per cent growth in profits and revenue as a result of the system.
But Liu doesn’t believe that detailed personalization of prices is all that widespread, at least not yet. But, he thinks the potential is there. “It could or should lead to more individualized promotions,” he said, adding companies should do it in a way that doesn’t appear shady to customers.
“I think there will be a day when you get pushed more individual promotions that are timely and relevant because of you being in that moment of time in that location, because of all the data that they know about you.”
Most retailers in Wilson’s study weren’t personalizing prices, he said — mostly just travel websites. But it might be different now. “Our study is just over two years old now, and we’re talking about the online world, where things move at light speed,” he said.
“But that said, all the major retailers, at least the biggest ones, are almost certainly experimenting with this kind of stuff.”
Spokespeople for Home Depot Canada and Walmart Canada said that they do not use any information beyond a customer’s location to inform prices they see online. The prices customers see on the website are the same as those in the nearest stores, according to the companies.
Back to the bazaar
But charging customers different prices isn’t all that new, said McGill. He thinks that increased personalization could take people back to the age of the village market stall and haggling with a shopkeeper.
“He’s looking at the style of your clothing, maybe he’s discovered you have some friends in common, where you grew up, how big is your camel, you know what I mean? You can be pretty sure you pay less or differently for that carpet than the next person who walks up,” he said.
In a village market though, the transaction is a bit more equal, he said. “This kind of being manipulated robotically by computers, it feels a little different.”
The privacy implications are different too, he said, though he thinks that’s a lost cause.
“Unless you want to live in a cabin in the woods with no power, we’re sort of inevitably being swept up into this cloud of data. You can control and minimize it a little bit but we have lost control of our personal data. So I think this will go as far as it can go, given the speed of computers.”
How to get cheaper prices
Since different sellers might use different approaches, it’s hard to say exactly what you should do to get the best price. The best idea might be to experiment, said Wilson.
He suggests trying a variety of methods. Try looking up the same product on your desktop and mobile devices to see if that makes a difference. Also try looking for the product in a “private” or “incognito” browser window, to disguise your search history and cookies from the site. If you really want to be thorough, you could try using a VPN to make the retailer think that you’re in a different location.
Bell and Liu suggest giving the companies as much data as possible, by filling out questionnaires and signing up for loyalty programs or mailing lists. This will ensure that you see all the special offers and discounts that the company makes available.
Bell also believes that if you want to be seen by a website as a price-conscious shopper, you should become one: visiting price comparison websites, shopping around, and putting the time in to find the best deals.
“If you start using those sites, they’ll pick up very quickly that you’re a price-sensitive shopper and they’ll give you those kinds of deals,” he said.
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