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Selling fast: the hidden world of online pricing | RTE

CNBC explainer on how airlines price tickets

Bait and switch

One of the oldest tactics in pricing practice, the bait and switch approach is very effective online. Online sellers can offer a wide range of prices across any category, to make it inviting to prospects to come in and browse. Once engaged, customers often find that the cheapest prices are for the less attractive options, and switch to more realistic choices. At this point, the seller has the chance to intervene by sending a small discount to help to close the sale, or offering more options like car hire or travel insurance alongside the hotel booking deal.  What started out looking like a good deal, now involves paying more in advance or spending more on bundled extras.

The name of the game is data

Web sellers can observe online behavioural data and make price adjustments in real time. For instance, Amazon changes thousands of prices every ten minutes. Most changes are small discounts, but they can legitimately be called “sale” prices. This pricing flexibility is hard to match on the high street.

Online firms have also created special events such as Black Friday and Amazon Prime Day. By offering attractive discounts, the seller draws in substantial revenue, often at a low point in the sales cycle. Suppliers bidding to be listed for business must be flexible on price too, leading to an era of uncertain profits for many industries.

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Selling fast: the hidden world of online pricing.

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