Beware of Personalized Prices

Category: Finance

Did you know that prices you pay for online purchases can be affected by your zipcode, your computer's operating system, using a smartphone for shopping, and other mysterious factors? Read on to find out why, and what you can do about it...

Location, Location, Location

I've always been suspicious of websites that want to know my location before showing me their prices. Cellular carriers and supermarkets have done this for as long as I can recall. Home Depot also insists on a zipcode before showing prices. Why do they need my zipcode to give me their best deal on carrier service, carrots or carriage bolts?

Now researchers at Northeastern University have discovered that a great many other factors about you influence the prices you are shown on many e-commerce websites. For the same product, you may see different prices depending on whether you’re using a mobile or desktop browser; the operating system of your browsing device; what you have clicked on in the past; and what you have purchased in the past.

Price personalization

Similar secret algorithms “steer” you to certain products based upon what they know about your online activity; but that’s what “personalization” is supposed to be about. It’s supposed to anticipate your interests and show you a power tool instead of a network appliance when you search for a “router,” or vice versa.

I’ll even allow that it’s permissible to steer a customer who always buys top-of-the-line routers (of either type) to top-of-the-line other types of products that cost more than average. If quality matters more than price to a shopper, show him quality first.

But personalization is not supposed to be about gouging extra dollars out of a customer for a given product just because his dossier says you can probably get away with it. That’s what appears to be happening on a broad variety of e-commerce sites.

What is Price Personalization and Discrimination?

You'll need a degree in statistics to interpret much of the data in the Northeastern study, but their summary claims that "there is mounting evidence that e-commerce sites are using personalization algorithms to implement price steering and discrimination" and they found evidence this on four general retailers and five travel sites.

Savvy online shoppers will use price comparison tools, and scour the web for coupons, promo codes and rebates. Those are just a few of the money-saving ideas I offer in my Ten Tips for Online Holiday Shoppers.

Travel sites are infamous for “differential pricing,” of course. The researchers found that Travelocity charged iPhone and iPad users an average of $15 less than others paid. (Must be a bug in that algorithm; everyone knows that Apple fans are spendthrifts.) Cheaptickets.com charged “guest” shoppers who were not logged in to an account on the site an average of $12 more than those who registered. Prices paid by users of Expedia, Priceline, and Hotels.com seemed to be tied to the presence of certain cookies on the users’ devices, but the researchers could not divine why.

The researchers also looked at 10 large retailers including Walmart, Staples, and JCPenney (but not Amazon). Home Depot steers customers to higher-priced products based on their browsing histories; as much as $80 higher, the study found. Because the researchers could not actually buy things on these sites (budget constraints) they were unable to explore how past purchases affected current prices displayed. Travel prices were tested by booking and then canceling reservations.

There’s nothing illegal about charging an Apple fan less than a Windows user, or steering customers to higher-priced options based on past purchases. But it certainly feels arbitrary, unreasonable, and unfair. The distinction between mobile and desktop browsers is baffling, too. But avoiding such price discrimination is difficult, even if you are one of the few consumers who realize that it's happening.

To get the best price, the researchers recommend checking the same item on the same site with both mobile and desktop browsers; using incognito mode to elminate cookies from the equation; and having a friend check the price from his/her machine. But there's more you can do to make sure you get the best price when shopping online. See the inset above for a link to my Ten Tips for Online Holiday Shoppers.

Your thoughts on this topic are welcome. Post your comment or question below...

 
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Most recent comments on "Beware of Personalized Prices"

Posted by:

Mike
14 Nov 2014

Sound advice for online buying, as usual, Bob.

Another trick I've noticed over the years. Put an item in your shopping cart, and if you haven't bought it right away, you may find its price has mysteriously gone up when you do go back to it. That's happened to me several times on Amazon. Now, I just save the URL on WordPad and leave the item out of my cart.

I do take personalized prices at Safeway. The prices are delivered to me online via email and the Safeway app, but the actual purchases are made in-store, where I can compare with everything else on the shelf.


Posted by:

G. Landry
14 Nov 2014

personalization, of course based on all the tracking cookies and malware keeping tabs on us as we search or surf the net.
Why else would they go to all that trouble?


Posted by:

elandry8
14 Nov 2014

Dear Bob,
Nothing wrong with charging different people different prices? This is fraud. If my cookies show that I live nowhere near any stores and do not have a car, then the site knows that I am a target for premium prices. If it knows what my income bracket is, then jackpot again for taking advantage of me. I suspected that this was going on when I looked for a dvd of a muppet movie and the site said 350.00 dollars. Thanks, Bob. Once again, you have shown us the little man behind the curtain. Peace, E


Posted by:

Tom Hargrave
14 Nov 2014

Online personalized prices are no different and no more sinister than what retailers have been doing all along. There are four "Wally Worlds" within easy driving distance from my house, and not only is inventory different based on region, prices are different too.

Gasoline is also target priced. The further away from major roads the station sits, the higher their gas prices trend. I fundamentally have no issue with targeted pricing.


Posted by:

Joe M
14 Nov 2014

What would be interesting is to see what differences might be when using proxies that let you choose your location. So if I wanted to book a ticket on cheaptickets.com and my connection was through Florida vs California.


Posted by:

Bruce
14 Nov 2014

no,it is very possible that selling the same product to similar customer at different prices could violate the Robinson-Patman Act; this Federal law specially says :

businesses should keep in mind some of the basic practices that may be illegal under the Act. These include:

below-cost sales by a firm that charges higher prices in different localities, and that has a plan of recoupment;
price differences in the sale of identical goods that cannot be justified on the basis of cost savings or meeting a competitor's prices; or
promotional allowances or services that are not practically available to all customers on proportionately equal terms./strong>

However, sellers can get around this by:

The transfer of parts from a parent to its subsidiary generally is not considered a "sale" under the Robinson-Patman Act. Thus, this situation would not have the required element of sales to two or more purchasers at different prices.


but discount chains selling to their distributors at lower than retail prices are not "sales to like customers" so the Act would not apply.

Most corporate attorneys are very aware of this but if I were a a large customer selling to a large consumer base in this country, I just would not want the publicity of a legal action.


Posted by:

Sharon
14 Nov 2014

I have discovered one way to overcome this nasty habit by ebussinesses is to wipe out all the stored cookies on my computer. I came across this when checking prices on Amtrak. When it came time to book, I did it on another computer and got different results, prices were lower. Went back to my laptop and prices were higher; same dates, same route. I could not figure that out until I cleaned my hard drive and wiped out all cookies to start fresh. Got lots of different results on several sites after that.


Posted by:

MmeMoxie
15 Nov 2014

I'm with Tom Hargrave!!! I have seen the exact same thing, with "Wally's World" SuperCenters, since, before ordering Online, was in existence!!!

As for Home Depot or Lowe's, they want to know which is the "closest" store to you, so that, you want to pick it up, at that store, the info is already there. I have purchased online at both Home Depot and Lowe's, to find that the prices are the same. Now please, don't "attack" me, this has been my experience and I am sure, that others have not experienced the same thing, okay?

I have found, that too many consumers, who like to research online for prices, tend to forget that the "retail prices" are going to be higher, then the Online prices. Since, employees must be paid, to keep up the inventory in the store, as well as the look of the retail store. I personally, do not have a problem, with that.

However, to just randomly increase Online prices, because of the Zip Code, you are living in ... Is really outrageous!!! For example: There are many families and people living in the 90120 Zip Code area, but, they are NOT living up in the hills and do NOT have multi-million dollar homes!!! They live much like the average person does. I know that sounds mighty strange, but, it is the truth. 90120 extends to the outer area of Beverly Hills, where most of these people live. They are normal, hard working, everyday people ... So, why should they be subjected to OVER priced products, just because of their Zip Code??? !!!


Please, do not tell me about Beverly Hills and the Los Angeles Basin. I grew up in Southern California and know my area, extremely well. In fact, I was actually born in Los Angeles, not 10 miles from City Hall and grew up in the San Fernando Valley ... NO, I am not a "Valley Girl", either. :)


Posted by:

Disgusted
15 Nov 2014

This should be illegal. It is price gouging, discrimination, fraud, etc. People need to start screaming about this and writing to their reps with proof


Posted by:

Bob
15 Nov 2014

MmeMoxie, I know you said not to tell you about Beverly hills, and that you "know the area extremely well", but are you sure you are not a "valley girl?" I think the zip code is 90210, like the TV series, not 90120 like you said twice. Duh!! :)


Posted by:

Dan
16 Nov 2014

Just like Mike, I've seen prices in my Amazon cart go up a day or two after putting items in there. I've often called Amazon.ca on it but they always claim it's some bizarre thing or other. I always remove an item that's gone up and I sometimes see it at the original price a few days later! I then look for it elsewhere. I never thought of just putting the link in a file but I will do that now. Thanks for the tip Mike.

BTW, I don't think you have to login to Amazon to check prices so it might be best to not do that while looking around.


Posted by:

pitou
17 Nov 2014

Thanks Bob,
I read your articles every day. These Companies
will learn eventually that as long as we, the observers, have mentors like you, they will have
to quit these useless tactics...


Posted by:

RandiO
17 Nov 2014

I would like to nominate Bob Rankin for presidency of "Caveat Emptor" society!


Posted by:

MmeMoxie
18 Nov 2014

@Bob --- Thank you, for the correction. My bad.

In my older years, I tend to "reverse" 2 numbers, in a sequence. You are very correct ... The Zip Code, I was referring to, is 90210.


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