TheNextWeb’s Insider has an article aboutbehavioral pricing that I found interesting. The intro:
What if when you bought a new Macbook, the price was higher because your tweets constantly referenced your love and devotion for Apple? What if Orbitz used the fact that your Facebook Likes include ďParty Rocking in MiamiĒ to charge you more for a flight to Miami?
This is called online behavioral pricing. Itís a consumerís worst nightmare as it uses the traces of your online identity to maximize prices on the products and services you want most. Itís also an ecommerce merchantís dream.
Behavioral pricing is a form of price discrimination. The goal of price discrimination is to maximize profits by adjusting the price that different customers pay based on data about the consumer. Price discrimination is common offline, such as the Museum of Modern Art charging adults $25 but students only $14.
Weíve already seen online merchants make preliminary attempts at this. When the New York Times unveiled its digital subscriptions, it decided to charge $15 per month to subscribe on your clunky old Blackberry, but $20 per month to subscribe on your iPad. Yet, it doesnít cost the New York Times more to deliver content to the iPad. Instead the assumption was that you, the owner of a $500 tablet, would be more willing to pay than your average smartphone user. But this rudimentary price discrimination is a mere hint of whatís coming with behavioral pricingÖ
It’s an interesting idea, but far from inevitable. It contains a huge blindspot: price discrimination is held in check by unidentified buyers. You can charge different amounts to different people based on perceived needs, sure. But you have to post a price. And if you won’t post the price until you know who the buyer is, or they set the default price too high, unidentified buyers will move on. The Applyte in the example can simply log on to a different browser and/or fiddle with cookies and see what an unidentified buyer would pay. That sounds like a hassle, but if you’re worried about behavior pricing, keeping a separate browser with high privacy settings for price-checking becomes quite rational. Or, if the prices are so close together that it’s not rational, then I don’t see it as a huge problem.
What the author seems to be talking about seems, to me, to require people to actually be logged in (to a Facebook account, say, or PayPal). People might stay logged in to Facebook, but I don’t think they’re going to refuse to show you a price if you aren’t logged in to Facebook. And PayPal you won’t be logged in to until you’re ready to pay for it. Cookies are avoidable. IP addresses are problematic. Browser histories can be erased. In other words, they can only do this until the consumer gets wind of it and realizes that they might get a better deal by logging out. So if it happens, it’ll more likely be by way of discounts. You start at a price for the unidentified buyer and then, if you have someone that fits certain things, you knock the price down from there. Rather than upping the price for the Applyte, you might actually be better off lowering it because they are more likely to buy more Apple things in the future. Set the price for the unidentified buyer too high, you’ll likely lose customers.
So I guess I don’t disagree that behavioral pricing is a possibility, but I think its application is actually somewhat limited by the unidentified buyer. Transparent pricing has economic utility.
Tangential, but I got a kick out of this somewhat related article:
How Target Figured Out A Teen Girl Was Pregnant Before Her Father Did
And yeah, that does creep me out a little, but in the end it’s about offering people products that they might specifically need. Websites are pushing things based on my browsing all the time. I’d rather see an ad for Thinkpads than tampons.