OnDemand WTP Pricing Research

Your Friend May Pay Less Than You For The Same Things You’re Buying | Forbes

On any given airline flight there are numerous prices being paid by different passengers. That happens because passengers have different itineraries, book at different times and of course travel in different classes. But it’s also true that airlines use what’s called dynamic pricing. Based on how and when you purchase your ticket, they can identify what price will maximize their revenue when you book your ticket. The timing of your purchase can indicate to them whether you have flexibility or whether you are likely to pay a higher price to travel on a specific flight. Or you may be traveling with a friend and if you booked your tickets separately, you may be paying different prices.

At the recent Internet Retailer Conference & Exhibition, I had a number of conversations with CEOs about pricing. The dynamic pricing technology long used by airlines is now available to consumer products companies. But in the case of internet retailers of consumer products, it works a little differently. It’s called cohort pricing and instead of being based on when you buy or other travel-related criteria, it’s based on groups (or cohorts) whose behavior resembles yours. What they’re identifying is a price that’s specific to you and people who behave like you. Consumers have come to accept this behavior from airlines. It stands to reason then that if ecommerce companies selling products online tried cohort pricing it would get accepted over time — but no one really knows.

Here’s how it works: When you go to a site, the site owner can instantaneously see millions of data points about you. They can see which demographic cohort you belong in and your purchasing habits. They know whether you’re a repeat or loyal customer and what kinds of products you buy. They may know that you’re a visitor of competing brands’ sites. There can see the weather in your city at that moment, where you like to go on vacation, what kind of work you do and many other things. They get this information in a flash as the page you’re viewing loads in your browser. They may decide, knowing it’s you, to charge you more for an item, or less, depending on how committed they think you are to buying their product.

No one will admit to using cohort pricing or talking about it favorably on the record. Some people tell me it’s not in use and others say it’s being used by many e-tailers. One thing CEO’s of e-tailers agree on:  cohort pricing is going to become more widespread over time. Because no one acknowledges it, the conversation is more whisper than talk but it’s definitely a conversation being had by retailers right now.

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Your Friend May Pay Less Than You For The Same Things You’re Buying.