A study released in June by the Annenberg Public Policy Center of the University of Pennsylvania was provocatively titled, "Open to Exploitation: American Shoppers Online and Offline." It concluded that American consumers are "vulnerable to subtle forms of exploitation" by marketers.
Much of the study, which was based on a telephone survey of 1,500 adults, focused on privacy issues dealing with the collection of information about consumers. But it also examined people's knowledge of pricing. It found, for example, that 64% of respondents who had recently used the Internet did not know that it is legal "for an online store to charge different people different prices at the same time of day." In addition, 71% did not know that it is legal for bricks-and-mortar stores to do the same thing.
Is this type of pricing, known as dynamic pricing, underhanded or unethical? No, according to faculty members in Wharton's marketing department. They say such pricing -- also called targeted pricing, flexible pricing, tailored pricing or, to use the phrase employed in the Annenberg study, discriminatory pricing -- is customary, an essential tool for companies, and often beneficial to individual customers and society as a whole. Does dynamic pricing sometimes upset consumers? Research shows that people do get disturbed if they learn that they paid more than someone else for the same item. But that happens because they often do not know much about the factors that go into a company's decision to set prices, are reluctant to ask for a lower price, or find bargaining distasteful. And, of course, the people who get bargains are not at all likely to be disappointed or feel exploited.
"Dynamic pricing has always been with us," says Wharton marketing professor Peter Fader. "Think of the classic hagglers in the market of a Middle East bazaar. People will pay very different prices for the same bolt of fabric.
[continue]
Page 1 of 7
> >>