How do we feel about "personalized pricing"?

Posted Sunday, December 23, 2012 in Online, Mobile & IT by Patricia Seybold

The Wall Street Journal published a useful article, Websites Vary Prices, Deals Based on Users' Information. It talks about the ways in which Staples (and other e-tailers) use customers' IP addresses and location to provide pricing that differs by as much as 8%. The algorithm appears to be based on both the demographics of the customers' location and the degree of competition locally.

"It was the same Swingline stapler, on the same website. But for Kim Wamble, the price was $15.79, while the price on Trude Frizzell's screen, just a few miles away, was $14.29.

A key difference: where Staples seemed to think they were located.

A Wall Street Journal investigation found that the Staples Inc. website displays different prices to people after estimating their locations. More than that, Staples appeared to consider the person's distance from a rival brick-and-mortar store, either OfficeMax Inc.  or Office Depot Inc. If rival stores were within 20 miles or so, usually showed a discounted price."

For most of us, the fact that personalized offers are being made doesn't come as any surprise. After all, we devote a lot of ink to the discipline of personalized recommendations. Most people are also aware that pricing is often variable, real-time, and based on both demographics (supermarkets in upscale neighborhoods have higher prices than those in poorer neighborhoods) and yield management (three passengers sitting side by side on an airplane will probably have each paid a different price for their seat depending on when they booked).

But it IS surprising to many that online retailers like Staples and Home Depot vary the prices on basic staples as often as they appear to, according to this article. The researchers/reporters mentioned that Amazon and others had tried variable pricing but had found it to be very unpopular with customers who felt they had been "had."

What do YOU think? Should online stores vary their prices based on who you are?

1 comment

  • Ronni_author
    Ronni Marshak on January 9, 2013 at 10:15 a.m.

    Patty, your post sparked a thought not related to personalized shopping prices, but personalized bank charges based on location. Bank of America acquired my former financial institution years ago. I was a premium customer at my old bank because I maintained a certain minimum balance across all account; the information I got from BoA after the aquisition listed a significantly lower balance threshold required for "advantage" customers (which waives all fees as did my former premium status).

    However, when I inquired at BoA, I was told that, for New England customers, the old higher balance was still required. And that made me angry. Why should I have to maintain a balance that was over double that of other customers in order to get the same benefits.

    It wasn't until last year, when I was working on a refinance with a BoA mortgage specialist, that I heard the compelling reason why the thresholds were so different. As she explained, in New England, the percentage of customers who maintained the lower minimum balance was significantly greater than in other parts of the country. Advantage savings is a perk to be offered to a certain percentage of customers, not strictly on a dollar amount.

    Although I didn't like it, it did make sense to me. The mistake BoA made was putting the lower threshold numbers out there. I think they are now more careful to check where you are located before telling this number.

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