Josh Elledge - Chief Executive Angel
Ever been to a store and notice the prices are higher, even across the same store chain? A few years ago, a friend of mine was at a supermarket in a more rural area of Michigan. She couldn't believe the price for a jar of name brand mayonnaise ““ nearly $8! This same mayo was typically $3.49. You could chalk it up to the store being far from a large city, but over twice the average price seemed excessive.
We're used to retail goods varying in price from store to store. In the brick and mortar world, this has always been. Further distance drives prices up; competition drives prices down; the “buy price” agreement the store has with the manufacturer can drive prices up or down”¦ But sometimes,you wonder if the price range you see is more about theclientelethan the store itself. More affluent neighborhoods often see higher prices ““ and, sometimes, even struggling neighborhoods do too. Why? Is it because more affluent neighborhoods are viewed as “able to afford it”, while lower-income, or underserved neighborhoods are viewed as “having little other choice”? Having few options, combined with distance, appeared to be the reason for the $8 mayo my friend saw.
While we mayexpect this form of price discrimination at physical stores, we don't necessarily expect it online. Sure, you know the cost to ship an item will depend on where you live, as will any applicable sales tax. But the price you are offered for the item itself? Why would it matter what you've bought in the past, or even stranger, what device you are using to shop online?
As unrelated as these things seem,a study at Northeastern University, set out to answer those very questions. They were suspicious that, like their brick and mortar cousins, online stores had ways to vary prices on consumers. The researchers wondered if personalized algorithms are being used. Complicated algorithms, designed to track people online, have been in use for years. Think about the ones that follow you around the web, displaying items you were searching, in other places like in your email borders. We know, of course, this is designed to try to trigger a later sale when you bailed and didn't buy the first time. So are online retailers using the same kind of personalization to sell consumers at different price points?
To test this, the Northeastern University researchers set up controlled tests. They set computers that had no purchase history or other personalized information, to search the same items, at the same moment as people with personalized information and purchase history. What the researchers found was these things, as well as whether the person was logged into an online account or not, did occasionally make a difference. However, it also revealed that price discrimination did not always happen. Many of the tests resulted in the same price being offered. But the takeaway the researchers found is that noticeable (and in some cases, large) price differencesdidoccasionally occur. In their testing scope, they noted these differences most often for travel-related purchases.
So what should you do?
1. It's the holidays and consumers are spending big dollars online. Be aware that tracking and personalization are being used to compete for consumer dollars – and shop accordingly using my advice below. At the present, exactly how far reaching this personalization goes is unknown. But just like the differences in pricing at brick and mortar stores can be based onclientele andlocal competition, online shopping is highlysusceptibleto this practice.
2. Just like you routinely compare prices between online retailers, take a few minutes to also search using different devices, and even different browsers, to see if any hidden additional savings are revealed. Obviously, you'll want to be more diligent when shopping for major purchases.Shop online using your browser's privacy mode – which should make you appear as a generic user.
3. It's been reported that mobile users tend to get charged more where price discrimination is employed – so before hitting purchase on your phone, it may be wise to start a new product search via your laptop or desktop.
4. To offset price bumps, if there is a membership or club or loyalty program, consider joining. Of course, always weigh the pros and cons if the membership is not free. Belonging to, and logging into, a membership seemed to consistently return better pricing, especially for travel. This goes for joining mailing lists as well. The same friend who noted the $8 mayo, gets coupon codes about once a month from various companies that result in free product.
5. Use any and all discounts, to get the best possible price. Search for online coupon codes, membership discounts, senior or student discounts, and bundle pricing (such as getting another item free if you spend a certain amount).
6.Don't forget to research price trends before making any significant purchases. We've seen great promotions on purchases for certain product categories made in the weeks leading up to Christmas. Similarly, as you shop around the calendar, there are other sales cycles that are worth learning – which can mean big savings.
