Monday, 23 January 2012

Haggle! A comment on behavioural pricing.

When you buy some Euros or Dollars for your trip abroad, you probably do a little research. You check out on-line financial information aggregators, you’ll look at your own bank and maybe some well know high street finance brands. And you’ll pick the one offering the lowest rate and buy your currency.

It will never have crossed your mind to haggle. You simply take the price you’re offered – it’s the best rate after all! Well you should haggle and if you do the chances are you‘ll get a better rate.

However, as consumers we are trapped like rabbits in the headlights – we believe too often that the price we’re given is the price we’ll pay. Which means that the seller can play differential or discriminatory pricing games with us. And behavioural pricing is just the latest in a long line:

What if when you bought a new Mac book, 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 “Party Rocking in Miami” to charge you more for a flight to Miami?

This is called online behavioral pricing. It’s a consumer’s worst nightmare as it uses the traces of your online identity to maximize prices on the products and services you want most. It’s also an ecommerce merchant’s dream.

Now I guess that some folk will see a problem with this practice – I can hear the calls for “price transparency” linked to cries that the government must act to stop innocent consumers getting ripped-off by wicked marketers playing with their “data”. And the response will look like this:

The Labour leader says that the Government must take a more positive approach to stop British consumers from being exploited by “predatory” companies.

In an interview with The Daily Telegraph, he says a tough new consumer watchdog should be created to limit pension fees, car parking charges and airline levies.

The kind government will take away that consumer “nightmare”. And, of course, we’ll all pay more. People who plan their travel well-ahead will pay higher rail fares because it’s not ‘fair’ that the latecomers pay more. You won’t be able to pay a premium rate to jump the queues at Alton Towers because some mums can’t (or won’t) pay that extra. Everywhere we look prices will be higher, choice will be poorer and all because we were suckered into believing we are being "ripped off".

The alternative is for us to learn how to haggle (unless like me you’re fortunate enough to be married to someone who gets a thrill out of a little haggling). Why should we take the price that Apple thinks we should pay? Right now they’re using the information available to them as a means of setting a price maximum – they’ve no interest in setting this below their price minimum. Therefore, we should set about finding out what that latter figure might be – they’ll sell the new Mac Book to us at that lower price for sure!

And when you’ve found that price, pick up the phone, speak to the merchant and say you’ll buy it for a little bit less! We don’t need Ed Miliband’s “tough new consumer watchdog”, we don’t need to be frightened away from on-line markets by scary “consumer’s worst nightmare” stories, we simply need to start with the idea that the price we’re given is the starting point not the end.


1 comment:

Anonymous said...

You're asking us to become quite 'un-British'. To those who haven't yet tried it - what's the worst that can happen? The merchant says no and hey - you're no worse off! Give the merchant a reason to do it and give it a go...