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How Retailers Use Personalized Prices (hbr.org)
257 points by hrasyid on Oct 22, 2017 | hide | past | favorite | 146 comments

At some point in the next 5 years, I predict there will online services that will "proxy-shop" for you. They will specialize in building profiles (cookies, logins, etc) that get offered low prices, then use these to purchase products on your behalf. Perhaps a browser plugin, so that at the moment you go to check out on a product, you send the product's link to the service and they get it for you at a lower price.

Then retailers will attempt to bring legal challenges against them for breaking terms of service, that will be interesting...

These services already exist, although I don’t believe they use the implementation you describe. Instead they’re basically coupon collectors. They just find the lowest available price and route you to it, or something like that. (I don’t use any of them, but they advertize to me relentlessly. I should probably try them out, actually.)

That's interesting. Are they actually using personalization to get better prices?

I'm thinking of scenarios where if two different browsers visit the same page, they'll get shown different prices depending on their cookies etc. In that case, a third-party site can't really "route you" to a lowest available price, they have to help you make the purchase from the right browser environment.

I have been thinking about that exact service for a while. One big issue is that you need the reverse engineer the pricing models of retailers, i.e. mapping out a high-dimensional space. For that you need a lot of data from the retailers. They could probably ban you quickly if you start pulling price quotes en masse. Then you need to invest a lot in cloaking techniques etc.

You don't. At least we didn't.

Here's the real problem:

1. modern shopping sites are built haphazardly without structure;

2. a typical page load time is 10-20 seconds for many (most?) shops.

1. matters because you cannot build a simple crawler. This is because sometimes, the brand is in the title, the description is in the brand, and the gender is in the quantity, which itself is in the photo as a pixellated image...

You must load the entire page and figure out where the attributes are in a smart way. You can do this today with headless chrome, in the old days with Selenium, etc.

... which brings us to 2. A mainstream, regionally-dominating shop, particularly any that adopt the marketplace model (Amazon, Taobao, etc.) may have as many as 20 million products. Given 2., good luck refreshing this price list in a sane time, even if you crack the attribute extraction.

If by some miraculous feat you solve these issues you now have to product match an inventory of billions of listings, most of which are misspelt, missing attributes (brand, etc.), and use photos that even a human could not match by sight. Think how hard it is to find exactly what you want on eBay...

The only way is to get the data directly from the retailers. Assuming they will give it to you, you end up with the same problem of feed poisoning that you have with marketing.

Oh one thing you could do: Create a huge community of users who share their purchase data and other data.and then build the model through that died so if you want to participate and save you need to be part of the panel

> 2. a typical page load time is 10-20 seconds for many (most?) shops.

That sounds very exaggerated, are you quoting this range from actual data?

For a sanity check the first two shops that came to mind loaded in <3 seconds (guitarcenter.com, nike.com)

Funny, I had a lot of overlap in this kind of smart data quantizing when I was trying to build a venue page crawler that would intelligently mete out live music event dates, times and locations. I realized about 20% into the project I'd need some form of machine learning and then bailed.

Oh wow, so it’s far worse than I thought. So the only way is to best-guess pricing models?

You’re over-thinking it, I think. All you need to do is provide a service that makes the E-commerce website think you’re not a big spender: geo: live in a poorer neighborhood, and age/gender/preferences must be the most optimal for you not them. Each experience (as they call it was pre-defined and pre-build).

Except it's not necessarily that simple. They are also probably taking into account your ability to seek out other options.

Researchers found that black women were getting cars sold to them at a much higher markup than white men. I doubt that is because they were getting profiled as wealthier.

how are you going to hide your shipping address? by using reshipping services?

You only provide the shipping address once you've been given a price quote.

You can go an uncloaked route and offer customers that buy the product with an usual profile small cashbacks if they provide you with their data.

We can have TensorFlow do it...one model to rule them all...there will be neural networks fitting retailers, then there will be adversarial networks deployed by retailers, then NCMs (network counter measure)... the price will be high, since more and more will be consumed by the networks, then as an emergent behavior Skynet will rise and it will launch the missiles...

What about blockchain technology? That would sure help, too...

Once the deep learning blockchains are on quantum computers this will all be easy

Someone is already doing it for Airlines: https://flightfox.com/

So a travel agent?

What's old is new again, I guess.

Ha. No, the big difference here is the deception factor. Using online retailers' personalization against them.

A "meatspace" analogue from 50 years ago would be wearing a disguise to avoid discrimination, for example a woman dressing up in a coat/hat/fake mustache to avoid getting ripped off at the car dealership.

> So a travel agent.

Travel agents were never on the side of the consumer. If you asked travel agents who they perceived they were working for, they'd tell you it's the airlines. This is not just my opinion; in travel industry magazines, articles, etc., this definitely was their stance. They'd choose flights for you that were most profitable for themselves and/or the airlines (and those two factors coincide nicely). Even pre-web, I almost always found a better prices by phoning the airlines directly if I wanted to spend the time.

I was explaining travel agents to my kid the other day. The service of the agent was more than just booking you a flight, you were paying for their knowledge and experience with traveling in particular regions.

Resources like Zagat were helpful but could only get you so far.

In pre internet days if you were flying to far away places like India or Vietnam where your local airline didn't offer service, you would have no resources available for finding or arranging flights, hotels, or other transport. That's where a travel agent was helpful.

To be fair, the bread and butter for most travel agents was booking flights, cruises, and tour packages. Which is why the corner travel agent isn’t around any longer for the most part. Yes, some were more knowledgeable. My parents used a couple of them over the years.

These types of travel agents still exist but they’re generally specialty travel, adventure travel, etc. companies that handle a combination of group trips with guides and private trips with or without guides. Besides the big global ones there are many that concentrate regionally and/or in a particular type of activity.

In UK in the past we got better deals from the local travel agent than you could book direct from the suppliers. That's going back quite a long way however.

When travel agents were local shops, like a local boutique clothing shop, it would seem they had a lot to lose and not that much to gain by working against their customers interests.

In short I wouldn't say "never".

I really like this, why not dynamic purchasing if consumers are increasingly confronted by dynamic pricing?

Are there reasons why this wouldn't work?

I am curious what would the legal challenge be if dynamic pricing on the sell side is considered acceptable?

Morally it seems fair. But like most things in our system, I'm sure it will end up being rigged legally in the big guy's favor.

Look at our system now. Big capital can move their tax headquarters to Ireland, its service center to India, its manufacturing to China. Hell, they can now even import low wage workers to the EU and US on visas if it will give them an advantage.

But good luck to any consumer trying to buy products at the same prices sold in these same places (e.g. pharmaceuticals). Even digital goods like games, music, and movies are priced differently, but consumers can never take advantage of currency arbitrage as companies ban VPNs, track IPs, restrict payments by the address of credit cards, etc.

>"Morally it seems fair. But like most things in our system, I'm sure it will end up being rigged legally in the big guy's favor"

Indeed, corporations are now considered people in the US, which more or allows allows then legislate away any perceive threats to the rigged system.[1]

[1] https://www.theatlantic.com/politics/archive/2015/06/raisins...

Good argument - they 'geo-shift' to reduce their costs on the one hand, and make sure we can't decrease our costs on the other hand. Pretty unfair taking advantage of the system like that.

I've always wondered why it's not possible to get insider info from purchasing depts on factory details so we're not simply paying for over inflated brands to line corporate pockets.

Alibaba.com / AliExpress.com

Except they're not the same products are they... often cheap imitations.

The first thing retailers will probably try is simply modifying their terms of service. I'm not sure what argument they'll come up with there.

An analogy I'm thinking of is, imagine the website has a box that asks you to input your age, then it shows you your price. If you put in a number over 40, the price will be higher. Now you can just put in a number under 40 and get a lower price, but their response would be to make it against their terms of service to "lie" about your age.

Similarly, they will equate using "someone else's cookies" to lying and claim it is morally wrong and illegal and against their TOS. Even though what they're doing is discrimination.

I wonder if there would be a case where the technology is patented. Then some startup is acquired and the same consortium ends up owning both the tech to dynamically price and the tech to dynamically purchase..

I am curious what would the legal challenge be if dynamic pricing on the sell side is considered acceptable?

Indeed, this seems to me to be no different than a form of reselling.

I predict that governments will require shops to show the average price for items.

why have something/someone purchase for you on your behalf when you can browse through aggregators to find what you like? For instance, there's shopittome. I'd much prefer to select from a list of offerings and sources rather than pay premium for someone/something placing the order and then having to navigate obstacles to return (where accepted) if the item is ill fit.

Not just limited to fashion here... electronics, tickets for inconvenient travel time, food, etc.

How do you like shopittome btw? We're working on a similar service for higher end fashion, but aim to be more personalized with product types, colors, styles..etc:


Would love to hear what you think (currently in beta on fb messenger)

The extent of my profile that can be built (and is probably available) is absolutely insane. Picture this: most people use a single email ID to register anywhere. Dating sites, e-commerce, social networks, banks, and even offline stores. My online purchases can be linked with my preferences on OKCupid that can be linked to ads I am clicking that can be linked to my offline behaviour. Personalised pricing is direct result of that. Who knows what other interactions are being shaped by it. Because the power of having this profile is limitless.

There's a Gmail trick to avoid it by using "+random_name" suffix but that is easy enough to circumvent. Disposable email IDs are banned from most sites and I never found it easy to integrate in my workflow. I have been pondering about building a service that acts as a mask to your real email ID, can be configured to forward emails to your real ID and can work with your personal domain name. I know some people who are running similar kind of setup here; a service might be helpful for those who don't might not want to go through the trouble.

Whether on Google Apps or using Exim, all my domains have a catch all address so emails to unmatched local names (addresses) are sent to a single inbox. I then use servicename@mydomain.tld for registration at each service.

It's not much more difficult to circumvent than gmail's +randomname but a little fuzzier. There's no way to know from the outside how many people are using each domain.

It is good to use +randomname for another reason: so customer service departments can't be tricked into giving up your data, since the attacker can't even guess your login id.

Fastmail offers you up to 100 email aliases (2 per each of 50 different domains) which route to your main account.

Edit: it's actually 600 aliases now: https://www.fastmail.com/help/account/limits.html

If you're using fastmail you don't even have to worry about that limit. If your email is example@fastmail.com and you are registering with http://www.onlinestore.com/

Just use onlinestore@example.fastmail.com and fastmail will make sure it arrives in your example@fastmail.com inbox.

It's completely hassle free.

You'll still be uniquely identified. Just using fastmail itself is going to greatly narrow the search for your real identity.

Except with Fastmail you can use your own domain so it's not immediately obvious that you are using Fastmail.

Wow - been a Fastmail user for about a decade and have always used aliases (though I'm limited to just 10, I believe, based on my account type).

But this will come in handy!

It's not email addresses they want most dearly though (although it is used and correlated of course) it is that nice unique identifier that is your (mobile) phone number. For smartphone apps it is the default (and often only) identifier (and conveniently, it is also the one identifier nearly always present in the contact lists they guzzle in).

A lot of services on the web want your phone number too; as a contact on the shipping label (often a required field), as part of the authentication scheme (out-of-band text messages with OTP codes to confirm certain actions), or as an account recovery option. A person's phone number is a unique numerical identifier that doesn't change often, if at all (in the EU you tend keep your mobile phone number when switching telco's).

This is why I'm always reluctant to sign up for 2FA, opting instead for long randomly-generated passwords and a password manager when I care about an account. Google/FB having my phone number is way worse than someone hacking my crappy FB profile or spam-catching Gmail account.

I run my own email server and set up a catch all address so I can give any website a new email address at my domain. It was a bit of a pain to set up initially, getting other servers to accept sent emails, but maintenance is pretty straightforward.

> Disposable email IDs are banned from most sites and I never found it easy to integrate in my workflow.

Sign up for fastmail. Integration is completely painless. https://news.ycombinator.com/item?id=15525512

This is just a minor variation on the plus tag in gmail addresses, or am I missing something?

It is! Except sites can't just do a regex to test for '+' so it's not easily detectable as such.

I do this with one of my domains. Setting it up was just adjusting some forwarding preferences in my registrar's web interface. Not sure how a separate service could make this easier, I'd presumably still have to login to my registrar to point an mx record at it.

https://33mail.com and https://mailhero.io both offer what you're describing. https://mailinator.com is disposable email that reliably avoids block lists by showing (on their homepage) only one of their list of forwarded domains.

Also, the plus thing isn't Gmail-specific, it's part of the email protocol.

Orbitz also played with how they rank search results. After finding Mac users were likely to spend 30% more on a nightly room rate, they started putting higher priced rooms at the top when Mac users searched.


I'm waiting for the day my Linux browser agent string pays off. So far, I've only seen random sites refusing to work for no good reason.

I wonder if Linux users spend more or less. I can definitely imagine that American Linux users are wealthier than Americans in general if you exclude non-traditional distributions (Chrome OS, Android, etc.) from the Linux category.

In the beginning of Humble Bundle (pay want you want for a collections of games for all platforms) they showed the average price paid per platform. Linux was always the highest.

I doubt this had little to do with any relationship between linux users and their likelihood of overpaying on a hotel room or rental car.

The price paid by Linux users was almost certainly bumped up by Linux gamers explicitly trying to support game studios who supported Linux.

You wouldn't see the same thing with hotel rooms or most other products that weren't intimately tied to the OS itself.

Yeah, there was (or is) a inverse correlation between how common an OS is on the desktop (Windows, Mac OS, GNU/Linux; starting with the most common OS) and the amount people are willing to pay for a HumbleIndieBundle release.

This is presumably partly because customers appreciate that game studios see their chosen OS as a viable release target.

Skew wealthier, but are more practical with that wealth. Cuts both ways, the more expensive room will have to be perceived as a better value regardless.


Take that idea in the other direction. Vendor tie-in with browser maker to grant users a decent discount for use of IE or even the new and allegedly compromised Opera? I'll give it a shot on your site.

I wonder how sustainable some of these approaches are and how often people will just stop buying from places that prey on them too much. For example, I'll often end up paying more for e.g. flights if it's not too costly and it removes the hassle of comparing days/large numbers of airlines to save 50 bucks. But if they started charging me double what others were paying, I'd just stop using that airline.

Likewise, I've noticed a similar behaviour with ads on youtube. If you always click the skip ad button, you'll always get the 15s unskippable ads, or 30s ads. But when I stopped for a while (because a lot of the channels I watch are solely supported by them), YouTube kept pushing the line until it was showing 5 minute ads for 10 minute videos. So now I skip them again to avoid the gradual creeping increase in ad length.

I now buy flights direct from airlines because of the dirty tricks of resellers. They've been terrible at sorting out missed connections (please get a paper document in person from the middle-of-nowhere stopover airport to prove it was their fault, and not going to refund legs on a 2nd airline at all) and do dirty tricks like not actually booking your ticket when you pay but waiting till they expect to get it for a lower price, which might mean not getting it at all. I know airlines overbook too but it's one less reason for an already stressful trip to go wrong.

Custom pricing feels like buying from a shopkeeper with no price stickers. You expect to get charged according to what he judges you can afford. It removes the value of being able to rely on all the other customers to collectively decide if the price is fair or not. That means every customer has to individually evaluate every price which is a massive waste of effort.

> Custom pricing feels like buying from a shopkeeper with no price stickers.

This is one of the best things about living in the developed world: most things are bought without haggling. All of your most stressful and miserable transactions -- buying a car, booking a flight, tipping a server -- lack a fixed, public price. Dynamic pricing based on digital surveillance is a huge step backward.

It's funny that you think the airlines don't do dirty tricks.

What reseller doesn't buy tickets when you book? They get paid when you buy, why would they refuse to buy?

As said, they want to buy when the price is the cheapest. Sometimes if you book a long time in advancr (eg 6 months) they will wait a few months before buying the ticket because their statistics say the ticket is cheapest 2 months before the flight. Occasionally it can mean they don't manage to book before the flight is full. Not all companies do that though, but many of the cheapest/shadiest do.

I refuse to participate in YouTube's opaque ad selection system. If the video has an ad, even if it's skippable after 5s, I don't watch the video.

I very rarely get shown ads.

Why not get an ad blocker? Good for attention, privacy, and security.

I do on my computer, but I watch a lot of YouTube on my phone.

I ran AdBlock Plus for a while until I discovered that it runs as an open proxy, allowing anyone on the same wifi network as you to fetch content through your phone.

In combination with a VPN client that routes everything over the VPN, I considered that an unacceptable risk.

Firefox for Android has extension supprort and in particular uBlock origin support. Same as your desktop browser.

Could you elaborate on the "open proxy" part? I now switched to unlock, but still miss adblock plus interface. This could help me not switching back

How about paying for Youtube Red?

Not available on my continent. Always wondered why they didn't roll that out further.

That's not true. Unskippable ads appear on very popular content with wealthy advertisers. It's obvious when you see something like every single SNL video showing the same nonskippable ad for the same new movie release.

There must be some incredible data being mined by Amazon via Whole Foods. At the Whole Foods in Palo Alto, there seems to be an elaborate pricing experiment in the ice cream department. Entire brands (Talenti) are dropped in price 70%. Other times, particular flavors are reduced that much, sometimes less so. For Talenti, the entire brand is sold out. Some of the on-sale flavors go quickly or are also sold out while others are completely ignored, despite the discount (namely anything from Three Twins, who's blurb on their ice cream and their shop at SFO make them sound like assholes). Maybe 25% of the options in that section are discounted, and the amount of discounts varies as well, with a number of different steps like (80%, 50%, 35%, 20%, 10% or similar). Nothing else in the shop is stratified like that. Beer and wine might have 2% of the options on sale. Ditto produce and meat. Most departments offer no discounts.

Alternatively: Amazon has decided certain brands won't be carried anymore. Therefore those brands are getting steep discounts to clear the stock and Wholefoods' legacy contracts quickly.

To your point on beer and wine: state liquor licensing boards control retail pricing structures pretty heavily. In Tennessee for example (the state I’m most familiar with), the price of beer can be set at whatever, but liquor can’t be sold below cost and wine can’t be sold below a 20% markup over cost. It makes discounting a bit tricky, to ensure you stay compliant. Especially if you already have competitive pricing.

Summary: Except for auto dealerships, retailers don't use personalized prices.

What a terrible article:

1) Its first example of "personalized pricing" isn't actually personalised: it was the result of an A/B test.

2) It says 'Outsize profits can be extracted from “top of the demand curve” customers' when, in fact, the top of the demand curve is normally when price is zero. The author seems to acknowledge this as they reference 'the downward sloping demand curve highlighted in Economics 101'.

3) The only convincing example given in the article is that of 'auto dealerships', which are the least typical retailers there are. People hate going to auto dealerships, but they love doing other types of shopping, in-person or online. Part of the reason is the personalized pricing (and process of haggling), but this has existed for many years, and the rise of the internet has actually made it easier for consumers, not harder, to get a reasonable deal.

4) "A key question is whether personalized pricing, on the web or in-store, is ethical." A better question would be 'How do retailers use personalized prices?'. That's the question I thought would be answered, given the title. The author's answer seems to be "Except for auto dealerships, they don't".

Just For U is a comical disaster if a flop. It's the sort of user friendliness/usability you expect from the marketing team of an old grocery story -- an A/B -test driven development by finite monkeys at keyboard

With the Safeway app, you don't get exactly the same coupons as your friend, but in my experience they're almost the same set. However, the app does achieve price discrimination without personalisation: people that are money-rich but time-poor won't bother checking the app for coupons before they go to the checkout, so will pay more than someone who pinches pennies.

But this form of price discrimination is not personalised. It's the same as that achieved with coupons published in magazines.

The A/B test only explained the comparison between apps. The spokeswoman said they personalize based on web vs mobile app and logged in vs logged out.

That's not personalisation. Many (most?) people use both web and mobile. And do you always remember to log in before you do a search on Orbitz? Or are you sometimes logged in and sometimes not?

Retailers who ask customers if they would like to donate to charity after a sale are using it as a test to see if they can raise prices.

I don't think grocery retailers "raise prices" across the board.

I think the "charity bundling" concept is just for P.R. The company presents the big check at the end of the campaign, and the public then credits the company, even if the company itself contributed nothing beyond a little (deductible) personnel time.

The Ronald McDonald House perfected that mechanism. Some retailers used to do the same with pooling customer MDA donations, then showing up to the telethon with a big check... with the company name on it.

BTW, I'm not opposed to this mechanism if the retailer is matching customer contributions.

Often they tout that donations are matched. In the fine print, they disclose that there's a limit to the matching. So if the limit is low, then the "matching" concept is effectively illusory.

Do you know this, or are you assuming this? It is certainly possible that, at the margin, someone is willing to spend money on a charity but not spend that same money on the product. Although I suppose there's probably a correlation between donating and willingness to pay more.

It’s a way to test shoppers and evaluate their willingness to add a marginal dollar for spending. That can be correlated against buying behavior and taking advantage of discounts.

Right now, for a grocery store, that means they can put butter on sale that women will buy for Christmas cookie making, and market sprinkles and decorative sugar at higher prices (or with a coupon) to increase customer value. That MDA heart that you bought on Labor Day weekend helps assess the effectiveness of that sort of promotion.

I really like Trader Joe's that does not do all of this segmented pricing, sales, and coupons. I wonder if they can survive without all that in the long run. Maybe with having mostly store brands it will work out for them.

ALDI (the company behind Trader Joe’s) has been doing without ads, segmented pricing, or coupons for half a century and became one of Europe’s largest retailers.

I’m sure they’ll stay competitive in the future.

In their German home turf they started a huge ad campaign last year (their first ever except for a weekly newspaper ad) and even started to discount some of their regular product lines. Maybe the days they could survive without all that are over?

ALDI Süd has, yeah, but afaik ALDI Nord only launched some ad campaigns in the past days, right?

And from what I know, that’s less about survival, and more that they can’t expand horizontally anymore, and the new owners (the Albrechts both died in the past years) also want to expand vertically into other market segments.

They both started about a year ago with a huge budget for ads online, on TV, on radio, on billboards, and in cinemas. They haven’t really talked about their decision (they never do). They lost a lot of market share to other supermarkets and especially to the heavily-advertising Lidl. Surely the new managers played an important role in that decision. In other countries they always advertised.

I know they’ve experimented for a while, but I don’t think Nord launched a major ad campaign until recently.

Supermarktblog documents these changes quite well, IMO.


The Aldi Nord campaign launched last year. I remember because I'm amazed by the campaign's bad typography whenever I see one of the posters in a shop.

That seems like a very weak and noisy signal compared to, you know, directly changing prices, which they do all the time.

Going by industry gossip it is a very strong signal. Strong enough to be worth while even though they know customers hate it.

Changing the price first has the disadvantage of possibly losing the sale.

But this is data for an INDIVIDUAL person!

Do you have a citation for this? What is this statement based on?

They also use it as a tax write off...

(former) tax lawyer here. This is definitely not possible, at least in the US. They could only take a deduction if they first recognized the donation as income — which would defeat the purpose and also be a very odd way of characterizing the transaction.

How? It's not their money in the first place so collecting deducting it just goes back to zero.

Does the money go directly to a charity? Or do they collect it on behalf of a charity and then donate it to said after end of business (or 4-8 weeks)? Electronic transactions are abused far more by companies/corporations compared to kids picking up a water jug of pennies.

I'm sure they collect it for a while, but that doesn't mean they can declare it as their own for tax purposes.

I'm not so sure about that. Citation? I believe in general (at least in the US), it would be really unusual for a corporation to get a tax break for money that was never theirs. The chief factor in how corporations are taxed in the US is their domestic profit. Whether you donate to charity or light it on fire, it shouldn't matter at all to the corporation's profit, and therefore it shouldn't matter to their taxes.

I'm happy to be convinced otherwise, though. Let me know.

Slightly related. I regret not having taken a screenshot to prove it, but oh well. A friend and I both open google.com and type weather. We are on the same Wifi, both using chrome, both signed in, and we each get our very own current temperature for the exact same city. Different by a few degrees that is. We hard refresh, we sign out, we clear cookies, still different on each machine.

With personalisation I wonder if they go as far as telling you how hot it feels for me as opposed to how hot it is.

I'd be more inclined to believe your queries were just handled by different servers that had cached different sets of data. Seems more likely if you had different DNS settings than your friend, too.

How would they know how hot it feels for you? Have you given any input on that?

I complain a lot about the weather near my phone, who knows maybe someone is actually listening for once :)

Some stores offer coupons and price matching guarantees to attract price sensitive customers. Some stores tout that every customer gets "the same low price."

A new facet on the old games.

just a whole lot faster and bunch more data mining.

I remember reading a data science research paper in the early 1990s that explained how Walmart had created a massive database containing all point-of-sale records. The data was stored in a relational database, and Walmart was mining it to be nimble with prices.

So their basic premise is a lie.... "We find you the lowest price"...

In fact they are finding the lowest prices, then trying to maximize the amount you pay for it.


> "We find you the lowest price"...

"We find you the lowest price (that we think you'll actually purchase)".


Supply and demand except on the individual level?

Yes. This if a very old concept and everything used to be sold this way in the market place. No price tags or signs anywhere. Learn how to haggle and try and get the friend discount.

Slightly related: I was just looking to buy Microsoft Office 2016 for Mac for my mother. She's American, but I'm currently in Bulgaria. The Microsoft web store says it's $149 but when I add it to my cart it becomes 289 Bulgarian Leva, which is about $174 (and the whole page annoyingly switches to the Bulgarian language). Then I look on Amazon.com and see you can get it for $129. God I hate digital software pricing.

Seems like the price difference easily can be explained by the 20% VAT rate in Bulgaria?

Ah, indeed!

I'm surprised no one is talking about how progressive this is. Rich people (or people who signal 'rich') pay more and facilitate discounting at the low end. Companies discount to increase marketshare.

Several pricing methods together for close to optimal price discrimination.

1. Scientific experiment to determine the price. With enough customers, it's possible to determine optimal price level using scientific method. Vary the price and see how it affects demand and discover what customers are willing to pay.

2. Divide customers into segments, and apply scientific pricing into segments. Segmenting can be heuristic based on devices used and behaviour.

3. Personalization comes last. It's segmentation in the finest level. If user be identified, his social networks analyzed etc, it's possible to model his behaviour and determine users price sensitivity and how the user perceives value. Triggering purchase decision can be personalized. For some people showing generated review or rating helps to make a decision, for some you need to show purity values (images of people in white clothes in the sun), for some you must indicate that they are able to "win" over the seller. Access to the mobile gaming data with in app purchases is massive leg up in personal profiling. Data from mobile gaming can be used to experiment and model personal behaviour and personality.

You need scale for all of these, right? How would you start with an entirely new product or service with no previous presence in the market?

I guess you could look at similar products but if you're targeting a new market entirely, you might have no assurances that your assumptions are correct.

You revert back to more traditional pricing methods.

Pricing was advanced field even before the internet. Everyone doing it should first study pricing at least few days to get a feel and ideas and to know what kind of pricing methods to use and how to determine the initial price and how to change it.

What are they, out of interest? Is there a good primer anywhere online?

Or in other words...price discrimination as a service

Is this legal? Can they really code in a different price based on the end user's profile? That sounds super shady to me. I know there have long been suspicions that Amazon does this but I thought all of them turned to be false. If a company as big as Orbitz is doing it, are there other companies that do it too? I am surprised this has not come out sooner.

I expect this to have a large downside in that it introduces a negotiable element into the price. And as such you'll see it become mandatory that you negotiate (just as frequent flier miles became mandatory) and as a result margins will decrease.

Also, while people here are thinking mostly about retailers like Amazon, I'd say that even with all the data they have and the processing and engineer power they throw at it, they still haven't caught up to the airlines in terms of efficiency at determining how much people are willing to pay for something.

Airline yield management -- which includes both setting the price buckets for different fare classes, and deciding which flights/routes get allocated certain numbers of seats in different fare classes -- is a dark art.

And in case someone happening by is confused by that, I'm not talking about economy class versus first class here. In the US, for example, there may be a dozen or more different fare classes which all book the same type of seat in the same cabin of the same aircraft, but which have different prices attached to them. This is the source of a lot of (inaccurate) advice to do things like booking tickets on certain days of the week or at certain times to try to get the lowest price. Airlines dynamically allocate and re-allocate differently-priced fare classes to flights all the time, and unless you really really know what you're doing, have time (which isn't free) to spend on it and pay (which also isn't free, obviously) for a service that lets you scan inventory by fare class, you're not going to reliably get the lowest price.

For example, by my count currently American has 14 fare classes which initially book into the economy cabin (and with different rules about how and whether they upgrade to a different one), Delta has 15, and United has 17. These vary by level of discount, restrictions on change/refund, who they're offered to (Delta has some which are known to be explicitly a "we only use this to indicate a fare where we're trying to price-match another airline on the same route", for example, and all three have fares for things like government and military travel), etc. and price differently.

Yeah airlines "yield management" and "pricing" departments are indeed a black art.

But, by and large, they're still not "personalizing" pricing. Instead they are basing pricing on factors like demand, destination, whether you're doing a Saturday stay (business travelers wont, so they'll charge more), how close you are to departure, etc etc.

Plus they're now tweaking their frequent flier programs as a way to encourage people not to buy the "absolute cheapest" fare available.

I recently booked a delta flight from sfo to San Juan, connecting in jfk. Got off in jfk and "missed" my flight. Saved over $1000 versus buying a ticket on the same flight from sfo to jjfk.

You did a hidden-city ticket, is what you mean.

Airlines don't much care for that, and are known to shut down frequent-flyer accounts or take other punitive actions against you if you do that.

They also charge you more if you visit their website several times in a row or if you look up the prices from a Mac book. So that's personalized.

On a related note - Recently I've noticed that pricing, or more specifically menu selection, is also happening in brick and mortar shops.

Going to a McDonald's, I noticed their menu boards went displaying children's meals or value items during my last visit - looking around the window and floor ads, I did see mention of discount items available but nothing in the menu-board slideshow.. Didn't think of asking at the time, thought it was odd, now I have come to realized they were gaming me for higher sales items.

Now will stick to establishments with printed menus and non-video menu boards.

Guess, will have to use a cheap phone to book my flight tickets next time. :-P

I have recently learnt it is same with energy companies. My monthly contract prices were hiked up to get more out of heating bill for energy company. I was left disgusted since we live in a relatively warm house and energy bills are minimal. After spending an hour with support - it became clear that prices are tailor made for postcode - read each individual home.

At least where I live, gas and electric are pretty heavily regulated, and fees are itemized to where I can tell you how much I pay per kilowatt for decomissioning hydroelectric dams.

PG&E does offer equal payment plans, where you pay the same amount every month, but they still track usage and bill/credit you every year for the difference between their estimate and your reality.

Not exatcly the same, but if you fly with norwegian, booking ticket through Norway locale will sometimes save you more than 25%.

In Poland an easy way to get a lower price is to go through price comparison engine like Ceneo[1]. Many retailers will offer significant discounts to users specifically looking for the lowest price.

[1] https://www.ceneo.pl/

The best way to avoid being manipulated in this way is to stop buying things.

In some hotels, when paying less for a room, you might actually get a worse room. Some rooms have cracking beds or bad wifi reception. That is why you might find different prices for similar rooms in a hotel.

so this is retailers doing "a/b testing" across different devices to see how much money they can happen to squeeze out of you depending on which experience you're willing to use to complete the transaction? Is mobile shopping costlier because of added cost to build the mobile app? Is it because mobile users don't do as much comparative research? Is it throwing a dart in the dark to hope mobile users are least likely to have time to shop around and will purchase given limited time to make a decision?

I may guess that is Booking.com doing the same stuff.

I'm sure they would love to, but they don't hold inventory or set pricing.

Hello :)?

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