Online Retailers Discriminating on Pricing Based on Customer Criteria

blog-customer-criteria-based-reportingCustomers have so far embraced personalization, agreeing to be watched in exchange for a more customized shopping experience. But a new practice may use that information against online customers. According to the Chicago Tribune, sites are now using a visitor’s IP address to set prices. Customers who have exhibited a willingness to pay higher prices may then pay more than those who don’t. Sites may also adjust product offerings based on whether a customer is a big spender or a bargain shopper. While this practice may be alarming to customers, it can be of benefit to retailers, but there are a couple of things retailers should know.

Careful Discrimination

As data becomes a more important part of using information to interact with customers, it’s important that businesses understand what they can and can’t do. While they can deliver different pricing based on specific behaviors, these tools can’t be used to profile people in a way that violates existing laws like the Fair Credit Reporting Act or the Civil Rights Act. In time, this type of price switching could result in legal action unless retailers are careful.

One White House report on the trend specifically cautions against discriminatory algorithms. The Federal Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, religion, or national origin. Businesses will need to be careful that these algorithms don’t target certain people to avoid legal action.

The Price Comparison Problem

No matter how much money a person has in the bank, everyone wants a good deal. Technology has made monitoring competitor prices so easy, any shopper can easily see when a deal is better elsewhere. In fact, price monitoring software might contradict the prices displayed by a website, alerting a consumer to the fact that others are getting a better deal.

The biggest problem for sites using this tactic is that customers will go where the best deal is. Today’s savvy customers know to shop more than one place before making a purchasing decision. When one site hikes up the price because a customer has displayed a willingness or ability to pay it, that site risks the customer going somewhere else that offers a better deal.

Businesses that choose to gather information on customers should first have an ongoing understanding of what competitors are doing. Through using a price monitoring tool like PriceManager, a retailer can win customer business while also knowing the prices the market will bear.

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