News. A new way of getting you to pay the optimal price – according to the seller – is to higher the price, the closer you get to a physical store, according to a story In Yahoo Finance. But this is just one of a growing number of sophisticated ways to price products and services based on how much the sellers know about you. The more they know, the better they can calculate how much you are willing to and capable of paying.
In the US they call it ‘dynamic pricing’. In Europe, we call it ‘price discrimination’. The more neutral word for it is probably ‘price differentiation’, and whatever name, it is becoming more and more sophisticated.
“Ever see a price for an item online, then look again and see a different price, and think you were going crazy? Probably not. You were probably encountering some form of dynamic pricing, which retailers have quietly dabbled in for many years.”
This is how Yahook Finance decribes the Target supermarket chain’s pricing tactics. Basically, the closer shoppers are to the store, the more the item cost. If you are near the store, you don’t need a price enticement. After the story, Target said it changed its policies. But the story shows that the more transparent a consumer gets, the more some shops will take advantage of it when pricing their products and services.
At first digital price differentiation was primarily done by use of cookies. A cookie can determine if you are going back and forth to find prices for e.g. a flight or a hotel, and if you come by several times, then you are probably more interested, the logic goes. So, many consumers today use ad- and cookies blockers (like Ghostery, Ublock Origin and Disconnect) to avoid this and ads, in general.
Another way for price differentiation is using your IP address. If you don’t block your IP by using a VPN, you most certainly get higher prices sitting in Denmark than in e.g. Sweden and Germany, especially when using huge global platforms, e.g. US-based platforms where ‘price dynamics’ are much more common than in Europe. According to the EU following counts: As an EU national or resident you can’t be charged a higher price when buying products or services in the EU just because of your nationality or country of residence.
A third way is using loyalty cards. If a shop knows that you always buy this and this product, why then give you a discount on that – even when they discount it for new customers. Being anonymous when shopping is often an advantage, if you want discounts for new potential customers.
A fourth way is device finger printing. A kind of next generation of cookie tracking, where they can see e.g. which browser you use and which computer or gadget you are currently working on. If you are on an Apple product, it is likely that you get higher prices, than if you are on a Google product, as Apple users in general have more money than Google users.
Then we have the more detailed location stalking that follow which country you are in and decide the price on that – called regional pricing. If you give your location to a service, and many do via apps, they can do what Target did, and give you a price and an offer according to where you are located in the very country in the very second. If you are at the golf course, you can get golf related ads and may be prices change accordingly, as we saw with Target. Target, by the way, was also ahead of its competitors in the tracking game, when in 2012 the New York Times revealed that it used big data analysis to predict when teens got pregnant to target them with advertising.
Probably not illegal
Price discrimination is illegal if it is based on factors like race, gender, religion, or nationality. So stores can’t charge men and women different prices for the same product. But otherwise it is probably not illegal, as you bargain prices all over the world in real life and in digital life. But it is certainly deceptive, because you have not idea what prices aimed at you are based on.
