Have you ever gone online to book a hotel room or plane ticket, seen the price, called your partner to see if they agreed, made a coffee, then refreshed the web page you were on to make a purchase? for, and only found out that the price has increased significantly.
Those who don’t know about dynamic pricing assume they’ve been unlucky simply because more rooms or seats on the flight have sold in the time between seeing the original price, calling their colleague, and making that coffee. They assume that the price has risen due to simple supply/demand dynamics; there are fewer seats now than a few hours ago, so the price has gone up for those left. The buyer will probably curse his own hesitation and turn to try it; There’s an old saying, “If you sleep, you’ll lose.”
But the price increase may not be due to the sale of rooms or seats in those crucial two hours. Perhaps during that time no sales were made at all. It’s just as likely that you’ve fallen victim to “dynamic pricing.” The price may increase simply because, in your next browser session, the site knows that you are already interested in that flight. The concept is divisive. it causes hot heads and online controversy and is in a gray area of legality. To fully understand how dynamic pricing works, we need to look at it from the perspective of the seller and the buyer.
What causes dynamic pricing?
In short, sellers raise (and sometimes lower) prices for online products when the cap drops, either because they can get away with it in the case of price increases, or because they have to in the case of price drops. : But why does this happen and how?
There are two types of things that can be sold online: products and services. Whether any of those things primarily affect dynamic pricing depends on whether they are “spoilers”. In order for the physical product to be perishable, it must have an expiration date, or the service will take place on a given date and time, regardless of the tickets. were sold to it.
Obviously, oven-ready chicken on the supermarket shelf goes bad. If it is not cooked by a specific date, it will spoil with a “bird” smell (sorry) and become inedible and poisonous. Likewise, if an aircraft is scheduled to depart from a given airport on a particular day and time, it will do so regardless of whether there are no seats available or whether the flight is only 50% full. Therefore, the flight is “perishable” because it must sell all its seats by the given date. Otherwise, the airline loses half of its potential revenue.
Perishable goods and services are more likely to be dynamically priced than non-perishable goods. A non-perishable item might be a couch sitting in a furniture store or a can of baked beans on a grocery store shelf. Beans may have a “best before” date, but even then, their practical shelf life is measured in years, not days. It doesn’t matter if you’re selling the couch now or in six months, besides the fact that it’s taking up space, it’s obvious that its sell-by date isn’t urgent.
Then there are products that are “non-perishable”. These are things that don’t become unusable after a certain date. Rather, they become unfashionable, unpopular, or slightly impractical. Such items might be woolen sweaters, which should be sold during the Christmas or January sales, since hardly anyone buys them after the end of January, and they do not need to be worn long enough. Likewise, the latest version of an iPhone will be a hotter seller than the 12-month-old version next to it. When selling phones online, as soon as the manufacturer releases the “latest” version, the price of the older version drops.
So, dynamic pricing is nothing new, and since merchandising has been invented, it has been operating in “offline” brick and mortar stores. The difference is that “continuity of deterioration” is not the only factor that can determine the price you pay.
One product – several different prices
The concept of dynamic pricing angers many because it sometimes verges on the unethical. Dynamic pricing by location works like this. if two people search the same website for hotel room rates at the same hotel for the same date, the suggested rates may be higher for the person accessing the site from a wealthier neighborhood. The site scans the IP addresses of both visitors. A guy in Beverly Hills can almost certainly afford a higher price than a guy in a trailer park near Detroit. The pricing shown reflects that concept based on value judgments.
Furthermore, artificial intelligence (AI) is now being brought into play to account for hitherto unimaginable complexity through data analysis tools. Let’s say you post on Facebook that your brother has been in a car accident and is in the hospital dying 3,000 miles away; you need to book the next flight to New York from California. But the website selling the flight has registered your entry in its AI. It knows you’re seriously desperate for that flight. Is it morally acceptable to double the price of that flight just for you, just because the airline can get away with it?
From a legal perspective, dynamic pricing is theoretically prohibited in some cases by federal law, but its use is never regulated and criminal prosecutions are not heard.
How can you avoid being overcharged by online dynamic pricing?
It’s simpler than you might think.
· Try using “incognito” mode in your browser. this will prevent cookies from being stored, so if you see the price and come back days or even hours later, the selling site won’t know you’re already interested. that particular deal.
· Use a virtual private network (VPN) to trick a merchant’s website into thinking you’re in a poorer region or country if you’re in a wealthy neighborhood. It is often found that UK citizens booking US domestic flights receive lower prices than US residents. You can choose a UK based server to access the internet and see the difference.
· Have two different accounts for sites like Expedia, Booking.com, or any other—one on your phone and one on your laptop. Look to see if there is a price difference for the same flight or hotel room. Often, laptop or desktop users are viewed by some sites as business customers and charge a higher price.
The truth will set you free
In summary, the consensus among businesses, consumers and trade lawmakers today seems to be that dynamic pricing can work to everyone’s mutual advantage if it is completely transparent. If everyone knows that you are just gambling on the price of flights, no one will complain that they were cheated. It will be expensive if you book three months in advance, but taking a bet and booking 24 hours before your flight may mean the airline wants to offload the last few seats on the cheap, or if demand is high, the price goes up.
In short, dynamic pricing is here. Learning how it works and being in control can save you a tidy sum, but it’s not as easy as ABC.