With fears about price personalisation growing in recent times, even Harry Enfield’s creations, Stan and Pam Herbert, may think twice about showing off their wealth! 

Personalisation is something that has been heralded by businesses and customers alike.

It has mainly been associated with online activity such as personalised content on a website, cross selling suggestions (think Amazon), bespoke emails such “Here’s what’s new from your favourite brands” (mrporter.com), I can list many more examples. 

Different prices have always occurred offline. For example, buying a beer in a five star hotel London is likely going to cost more than the same drink in a student union, but in-store personalisation is now starting to become more advanced.

The introduction of iBeacon and Beacon for Paypal are exciting developments and B&Q are already testing electronic price tags that change amount based upon the profile of the customer which is accessed via a chip in the customer’s mobile phone!

But I am just going to look at online price personalisation in this blog post. 

Customers enjoy the superior user experiences that they receive as a result of personalised content. Whilst companies love it because they are creating user profiles which allow them to make their marketing far more targeted, which as we all know delivers greater results.

Over the last couple of years I have seen first-hand the growing popularity of personalisation as both existing and new clients want to implement it and the results have been very positive indeed. 

However, as Spider-Man can testify, “with great power comes great responsibility”.

What if unscrupulous companies started to use personalisation for evil? What if people living in affluent areas and using high spec computers were charged more for products than someone using a crappy computer and living in {insert your choice of horrible town/city here}?

Well that is the fear of some, but are they right to be worried?

Why is the BBC talking about the Dog and Duck?

Dog and Duck

Just last week Marketing Week listed Personalised Pricing in its  five hot topics for 2015, but it was being discussed much before 2014.

Back in November 2012, when most of the nation were still doing the “Mo-bot”, the BBC was writing about personalised pricing and using a nice little pub analogy.

Kevin Peachey explained how people like going into their local pub and the landlord is already pouring their favourite tipple before they have even ordered. However, he asked how readers would feel if they went into another pub up the road, one that they had never been in before, and the landlord was again pouring the drink of their choice.  

It turns out the first landlord had sold your information to the second landlord. This is a little alarming, but what’s worse is that the second landlord has charged you 10p more than the usual drink price because he knew what you were going to order!  

Kevin wrote that as well as reports of prices being different based on model of computer and living area, here has also been suggestions that if someone had viewed a hotel or flight booking on a website, then went back to view it again, the price had gone up! 

The Office of Fair Trading (OFT), which is now the Competition and Markets Authority (CMA) as of April this year, said in 2012 that there was no evidence to suggest skulduggery but they remained concerned and would continue to monitor the situation.

Was it inevitable?

Amazon

As websites started to track visitor behaviour and reward online consumers with discounts for repeat purchases and loyal custom, it was perhaps only a matter of time before companies started to use their new found power for evil and not good. 

Earlier this year Amazon was forced to apologise after it charged certain people more than others for DVDs. The outrage amongst the general public, not just those affected, was perfectly understandable. 

Amazon was accused of setting prices based upon customer demographics such as where they lived, or how much they had spent on similar products previously. Amazon denied the accusations.

Founder, Jeff Bezos, said

"We’ve never tested and we never will test prices based on customer demographics”.

Amazon say that it was simply performing random price tests to establish the suitable price point for the DVDs. Mmmm, Amazon not sure how much they should charge for DVDs? That doesn’t sound quite right. 

Whether you believe Amazon was doing random price tests or you think there was something more underhand happening, Amazon had to refund a total of $21,377.60. As we all know, that amount is small change to Amazon but in terms of PR it was a bit of a disaster.

Should we really be worried?

1997 Toshiba 3010CT

It is accepted that the cost of goods will vary at certain times. The obvious example is cheaper holidays outside of the school holidays. This is not fair but as it affects so many people and is not really personalised, it is begrudgingly accepted. 

It is when things become personal that concerns are raised. Why should people that are less price sensitive suffer a higher price for products? They shouldn’t of course, and I actually believe that this is not going to happen. 

As yet, there are no actual examples of companies being found guilty of implementing price personalisation and with good reason. 

Just look at the Amazon example. There was just a whiff of wrongdoing and the reaction was huge. Due to the size of the monster that is Amazon, they can brush this off and carry on as normal.

However, there are few companies that occupy a place in their respective markets in such a dominant manner. Should a company be caught personalising prices it could potentially be a PR disaster that may not be recoverable. Surely no business thinks this is worth the risk!

I cannot believe that people would not find out that they were paying different prices for the same product. In fact, it would probably take a matter of minutes before social media platforms were ablaze with consumers venting their anger.

The call for greater transparency is something that would calm a lot of fears. It might be that companies become far more open about what data they are collecting from online behaviour and how they are using it. 

Or maybe I am being very naïve! Could be a very costly mistake at this time of year! Maybe, just to be safe, I will dust off my 1997 Toshiba Portege 3010CT, for present shopping online this Christmas.

Robert Yardy

Published 12 December, 2014 by Robert Yardy

Robert Yardy is Marketing Manager at MMT Digital and a contributor to Econsultancy. You can connect with him on Facebook, Google Plus or Twitter

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Nick Baillie, Senior Planner at True Digital Ltd

Easyjet use the personalisation features of a well known CMS to target Apple (via IOS detection) devices with higher prices than that of MS or Android etc.

about 3 years ago

Pete Austin

Pete Austin, CINO at Fresh Relevance

Online price personalization as described here seems based on the assumption that rich and poor buy basically the the same products from the same brands, and therefore a good strategy is for marketers to increase their prices in line with ability to pay.

I think there would be too much push-back from customers. For example, we're all aware of how expensive supermarkets loudly announce how they price-match branded products in these circumstances,.

A safer approach would be to offer a different product mix to each demographic - so average prices differ in line with ability to pay, but where they are higher it's because you are offering more valuable products in your mix.

about 3 years ago

Chris Michael

Chris Michael, Digital Transformation Consultant and CTO at CJEM

I have 3 thoughts.

1. Brands should test pricing all the time to see what works best.

2. Brands should offer discounts based on spend/loyalty.

3. But if brands try and charge more (eg based on customer demographics) then ultimately this will fail as it is not in the best interests of customers. And customers will find them out and choose another brand.

about 3 years ago

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Angling Direct, AD at Angling Direct

Totally agree with Chris' point here, - brands could and should offer better prices for loyal customer based on their spends, so price personalisation and differentiation is a very positive thing for both businesses and consumers at the same time.

My personal point is, even if certain businesses go and try making price differentiation based on demographics, devices analysis etc... so as long as its not against the law, this practices shouldn't be labelled "wrong", "bad" or "correct" & "good".

It's different from business to business and I think, and some customers won't mind having their prices amended based on their profile. At the end of the day it's down to customer to decide if he or she is happy with the price advertised, it's easy to do price comparison on-line. From the other point of view its down to business to asses their PR risks before applying such practices.

about 3 years ago

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Deri Jones, CEO at SciVisum Ltd

several people have made thw argument:
> brands could and should offer better prices for loyal customer...

But today: many brands do the opposite: e.g. banks promoting new accounts that are not open to existing clients!

What do folks think - is there scope here for our retail fairness laws to be amended?

Would brands curiously benefit: tighter laws might increase trust from consumers?

about 3 years ago

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Derek Adelman, VP Operations at Fanplayr

One can see how Amazon would worry about price personalization as it challenges its ability to control the relationship between merchant and customers Price personalization goes beyond visitor demographics. It's not so much about charging what people can afford but understanding if the customer is willing to buy now and buy more for a better deal. Making offers that appeal directly to interest and purchase intent can create a mutually beneficial dialogue between the merchant and customer in that it helps both parties get what they're looking for. Moreover, understanding the historical and behavioral context of each visit and what this reveals about the intent of each visitor serves the interests of both the merchant and customer alike.

But I'm not so sure it helps preserve the Amazon margin.

about 3 years ago

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Deri Jones, CEO at SciVisum Ltd

Talking about Amazon and dynamic prices.

Rather timely, given their 1p pricing error just now!

- http://www.scivisum.co.uk/blog/amazon-price-glitch-1p-pricing-lessons-learnt/

about 3 years ago

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Chris Monkman, Web Developer at E-Dzine

Going forwards though a canny brand can instead differentiate by stating they don't give different prices to different people in different areas.

It's not always feasible (just look at Shell if memory serves in the UK and it's attempt at flat pricing a number of years ago).

There's also Lloyd's and TSB's current account deals that are available to existing and new customers.
Or the likes of Sky, EE etc. Whom I've managed to beat prices down by threatening to leave (doesn't always work since Vodafone wouldn't entertain a better deal than another mobile provider in the UK so I walked).

Generally the best approach to this is be a savy customer, use different devices/browsers when checking expensive prices and be prepaired to move your custom if the company you're dealing with won't entertain a better deal than a rival. It's their business to loose, not your's.

about 3 years ago

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