Online shopping tips: Put differential pricing to work for you
You're strolling the aisles of your local department store when an item catches your eye. You check the price tag. Imagine the number on the tag changing based on the means you used to travel to the store. If you arrived in a brand-new Mercedes sedan, the price is $19.99. If you arrived by bus, the price is $14.99. And if you walked to the store, the price is $12.99.
That's one form of differential pricing, which is also called price discrimination. There's nothing new about the practice. Insurance rates vary based on risk, for example. But what's missing in modern price discrimination is transparency. We all know our insurance rates can go up or down based on many factors specific to our situation: our location, age, profession, driving history, even lifestyle.
But few of us are aware that if we're looking for a hotel room on a travel site, we may be directed to more-expensive rooms when we're using a MacBook Air or an iPad than when we're using a Windows PC. In the June 2015 issue of Kiplinger's Personal Finance, Lisa Gerstner writes that the price you're shown for an item sold online may vary based on the web browser you're using, your location (determined by your IP address), what you've bought before, even your search history.
The President's Council of Economic Advisors released a study on differential pricing in February 2015 in which it concluded that while the practice can be good for both consumers and retailers, there's a risk that it can be unfair when an item's price is determined by factors beyond the potential buyer's control. The report also noted that consumers can be disadvantaged by a lack of transparency about how a product's price was determined. Yes, differential pricing can "help expand markets," as the CEA states, but it can also lead to "unfair discrimination based on sensitive information that consumers may not understand they have revealed."
Smart online shopping pays big dividends
Here's the good news: With a little extra work, you can make differential pricing work for you. Kiplinger's Gerstner recommends that when you search for a product on a retail site, sort the results by price from lowest to highest. Often the site's default sort method will place at the top of the results the more-expensive offers, or those that are most favorable to the seller.
On sites where you sign in, check the price of items before and after you log into your account. Conduct your search on a PC and also on your smart phone or tablet. Use two or more browsers to search the same products on the same sites. Search with first-party cookies enabled (always disable third-party cookies, as I describe in this article from May 2013), then open up a new window using with your browser's privacy or incognito mode enabled, and search again.
Gerstner recommends several sites and browser add-ons that offer coupons and price comparisons, such as: the Honey coupon add-on for Firefox, Chrome, Safari, and Opera; the InvisibleHand price-comparison extension for Firefox, Chrome, and Safari; and the CouponSherpa.com and RetailMeNot.com shopping sites.
A code of conduct for customer tracking by retailers
Everybody knows they're tracked when they use the web. Not everybody knows they may be tracked when they shop in brick-and-mortar stores. Several companies offer services that automatically pick up the MAC addresses of mobile phones as their owners enter a store; the services also collect other information about the devices, including the dates and times the phones were detected. In a May 11, 2015, article on the JD Supra Business Advisor site, Thomas C. Bell, Meredith Halama, and Janis Claire Kestenbaum of Perkins Coie describe how such device tracking works.
The U.S. Federal Trade Commission announced on April 23, 2015, that it had settled a complaint it had lodged previously against retail-tracking firm Nomi Technologies for failing to offers consumers a way to opt out of mobile-phone tracking when they entered a store in which Nomi's tracking technology was in use. When Nomi started tracking shoppers in late 2012, the company promised in its privacy policy to make it clear that consumers were being tracked when they entered the store, and to allow them to opt out of the tracking.
The FTC found that Nomi failed to offer people a way to opt out of the tracking, and in fact didn't notify them that they were being tracked. The upshot for retailers is that, according to the FTC, tracking their customers' cell phones while they're in the store is okay (despite the increased privacy risk to the shoppers), so long as they let the customers know that they're tracking them, and they make it easy for customers to opt out of the tracking.
The upshot for shoppers is that your phone may be broadcasting details about you to the owners of the stores you frequent, and the only way to prevent it is to turn off your phone, or don't bring it with you when you shop.
That's one form of differential pricing, which is also called price discrimination. There's nothing new about the practice. Insurance rates vary based on risk, for example. But what's missing in modern price discrimination is transparency. We all know our insurance rates can go up or down based on many factors specific to our situation: our location, age, profession, driving history, even lifestyle.
But few of us are aware that if we're looking for a hotel room on a travel site, we may be directed to more-expensive rooms when we're using a MacBook Air or an iPad than when we're using a Windows PC. In the June 2015 issue of Kiplinger's Personal Finance, Lisa Gerstner writes that the price you're shown for an item sold online may vary based on the web browser you're using, your location (determined by your IP address), what you've bought before, even your search history.
The President's Council of Economic Advisors released a study on differential pricing in February 2015 in which it concluded that while the practice can be good for both consumers and retailers, there's a risk that it can be unfair when an item's price is determined by factors beyond the potential buyer's control. The report also noted that consumers can be disadvantaged by a lack of transparency about how a product's price was determined. Yes, differential pricing can "help expand markets," as the CEA states, but it can also lead to "unfair discrimination based on sensitive information that consumers may not understand they have revealed."
Smart online shopping pays big dividends
Here's the good news: With a little extra work, you can make differential pricing work for you. Kiplinger's Gerstner recommends that when you search for a product on a retail site, sort the results by price from lowest to highest. Often the site's default sort method will place at the top of the results the more-expensive offers, or those that are most favorable to the seller.
On sites where you sign in, check the price of items before and after you log into your account. Conduct your search on a PC and also on your smart phone or tablet. Use two or more browsers to search the same products on the same sites. Search with first-party cookies enabled (always disable third-party cookies, as I describe in this article from May 2013), then open up a new window using with your browser's privacy or incognito mode enabled, and search again.
Gerstner recommends several sites and browser add-ons that offer coupons and price comparisons, such as: the Honey coupon add-on for Firefox, Chrome, Safari, and Opera; the InvisibleHand price-comparison extension for Firefox, Chrome, and Safari; and the CouponSherpa.com and RetailMeNot.com shopping sites.
A code of conduct for customer tracking by retailers
Everybody knows they're tracked when they use the web. Not everybody knows they may be tracked when they shop in brick-and-mortar stores. Several companies offer services that automatically pick up the MAC addresses of mobile phones as their owners enter a store; the services also collect other information about the devices, including the dates and times the phones were detected. In a May 11, 2015, article on the JD Supra Business Advisor site, Thomas C. Bell, Meredith Halama, and Janis Claire Kestenbaum of Perkins Coie describe how such device tracking works.
The U.S. Federal Trade Commission announced on April 23, 2015, that it had settled a complaint it had lodged previously against retail-tracking firm Nomi Technologies for failing to offers consumers a way to opt out of mobile-phone tracking when they entered a store in which Nomi's tracking technology was in use. When Nomi started tracking shoppers in late 2012, the company promised in its privacy policy to make it clear that consumers were being tracked when they entered the store, and to allow them to opt out of the tracking.
The FTC found that Nomi failed to offer people a way to opt out of the tracking, and in fact didn't notify them that they were being tracked. The upshot for retailers is that, according to the FTC, tracking their customers' cell phones while they're in the store is okay (despite the increased privacy risk to the shoppers), so long as they let the customers know that they're tracking them, and they make it easy for customers to opt out of the tracking.
The upshot for shoppers is that your phone may be broadcasting details about you to the owners of the stores you frequent, and the only way to prevent it is to turn off your phone, or don't bring it with you when you shop.
