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The Truth About Price Customization

What You Can Do About It


Did you know it is not illegal for retailers to charge different prices on identical products to different people? Retailers refer to this practice as "price customization" and it has been going on in brick and mortar stores for years.

The results of a study called "Open to Exploitation" found that about 65 percent of online shoppers believed that the practice of changing the price of an item based on the spending habit of an individual was illegal.

The truth is, to change a price, for the most part, is not illegal unless a specific race, gender or age is targeted and at that point it becomes potentially discriminatory.

The study also determined that 87 percent of the people surveyed strongly disagreed with online retailers participating in such a practice. Whether or not this will discourage retailers from doing it remains to be seen.

How Do Retailers Know About Your Spending Habits?

The technology behind developing a customer profile is not all that difficult. It is done all the time at your local grocery store if you belong to the store's club, however online profiling works slightly differently.

One way information is collected on what an individual is willing to spend on a specific item is through the price-comparison sites. Consumers visit such sites and perform searches often based on how much they are willing to spend for a specific item. When the consumer finds what they feel is a suitable price they sometimes go and buy the item. But unknown to the consumer, while they are doing their search and setting spending preferences, some online retailers are capturing the information and adjusting the price of the merchandise accordingly.

Another area that promotes consumer-specific price adjusting is through e-mail distribution to "loyal" customers. If you were willing to spend $20 more than the average consumer was willing to spend, you are of value to them and maybe they can get you to return and do it again through targeted email communication to you.

They know what you have searched for, they know what you are willing to spend, and they think they may know how to set up their marketing campaign to get you to come back. Of course most of the information and the targeted marketing is computer generated, making it a low cost way to reach out to consumers.

The real bargain hunters may not see that kind of aggressive solicitation by stores to get them to return to make a purchase. The retailer (both Internet and brick and mortar) consider such a person as being potentially harmful to their profit margin and although they need such people to liquidate their excess inventory, they usually do not go out and try to solicit "bottom feeders" as they call them.

How Can Someone Avoid Being Profiled?

  • Do not let retail or service sites (such as travel sites) retain your information. Many promote this as a convenience to the consumer and although it might be nice to not have to type in your personal or shipping information each time you make a purchase, it may be costing you in the long run.
  • Download a good spyware program such as Webroot Spy Sweeper and clear spyware off of your computer system. Hardcore spyware is like a paper trail that is kept on you; tracking what sites you visit, how much you spend, what you spend it on, where you live, how old you are, what your first-born was named, and more.
  • If you are making a sizable purchase, put in various price preferences when using price-comparison sites. If data is being collected this may be a way to scramble the results making it more difficult to profile you.
  • If a sister store is located in a city near you, call and price-check the item before you buy it online.
  • Before you make your purchase online, if your zip code is requested before you sign the dotted line - try a few different zip codes around the country. See if the price changes.
  • If you suspect an online store has increased the price of the item - do not do business with them. Boycotting such activity may be the consumer’s only way to show disapproval of such activity. Follow up with an email so the company knows why you decided not to make your purchase at their store.
  • Do not stop shopping online or using price-comparison sites because of this practice. It isn't all online retailers who participate and it is being done equally as often in your local stores.
  • Avoid making purchases on merchandise that appears in sections labeled “Customers Who Purchased This Also Bought...” until you have left the website and returned to check the price of the item without your customer name appearing on the page. A friend can come in handy by logging on with their computer and checking out the price of an item you want to purchase.

What Information is Collected?
Will It Stop?
Part Two

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