The guy was being a jerk of a customer. When it came time to price out his invoice I had the choice of pricing it at the contractor, over-the-counter, or homeowner level. He received the highest homeowner prices I could charge because he was cranky and argumentative.
Profit maximizing technology
That was a true story, from 30 years ago, when I worked at a little hardware store and all purchases were written by hand. My memory of the price discrimination that I, and others at the store, imposed was jolted up front in my brain when I read the New York Times article on the smart phone application for price discrimination. Based on your customer profile, grocery stores will offer you special prices that your neighbor may not receive.
What is the real price?
On the surface, special discounts to help certain families doesn’t sound like a bad deal. They aren’t charging someone more for the same item, like I used to do. However, if smart phones apps become popular enough, you will see the overall average of prices rise across all items in the store. The elevated pricing allows the stores to give more frequent and deeper discounts to consumers while maintaining profit margins.
The losers in this scenario are those people who don’t have smart phones and end up paying the inflated prices. In the NY Times article it was mentioned that most people, when surveyed, don’t like the idea of selective priced discrimination, but they wouldn’t refuse it if offered. This sentiment only reinforces the dichotomy we see in society of the public condemning moral transgressions, but then rationalizing the behavior when personal gain is involved.
A new level of consumer manipulation
Just as we are finally jettisoning the premium price discriminations for health insurance based on a person’s past medical history, our celebrated business innovation acumen finds another method to exploit our personal situations. These applications can not only be programmed to offer lower prices for your frequent purchases to keep you loyal, but also to steer you to new items. And if they can steer you to new items, will they also be able to influence your purchasing habits for other items that maybe more profitable for the store?
Their rich, charge them more
At another job, we would compare the prices from a major grocery store chain’s circular from our local paper. The advertise special prices were always cheaper from newspapers delivered into zip codes that had a lower average per capita income than the zip code I lived in. While advertising inserts were tied to specific store location, it was another way the company could extract marginal revenue based on household demographics.
Buy your favorite candidate
What other household specific data might the stores integrate, unbeknownst to you, into your personal profile to determine in-store special prices? Is it unreasonable to speculate that if you perform internet searches on babies you might get special pricing for diapers? If you like a Facebook page for a political candidate maybe you’ll get special prices for products whose manufacturers openly support the same candidate. That would certainly be a new spin on buying votes.
Variable pricing model dream comes true
We have all come to assume that the age of computers has leveled the pricing field where we all shop. Hopefully, gone are the days where I could give the contractor price to the small immigrant gardener who spoke virtually no English, while on his next visit he might get the over-the-counter price from one clerk or the higher homeowner price from yet a different sales person. Unfortunately, it looks like we are facing a new wave of high technology price discrimination where bigotry might be built into the computer program. So much for progress.
Interesting side line to the profiling