Say Hello to Online Price Customization, it's Here to Stay

In the Blog The Dilemma of Variable Pricing by author Marc Emmer, the fluctuations of demand and its effect on pricing in the contemporary markets is discussed. Marc explains how the way of the future lies in variable pricing in which services can be charged fluctuating prices based on quick changing demand.

Although Marc relates this to tangible services such as NBA games and Hotel services, a large industry which is going to be dominated by customized pricing is e-commerce.

In the article How deep are your pockets? found on the Economist's website, the matter software which can provide personalized online pricing is discussed. Here are some key points:

• Online retailers are able to determine which consumers are willing to pay higher prices

• In interpreting data purchased from firms and online cookies they can determine product tastes and preferences

• In using discount targeting firms can get 2 to 4x more money than assigning at random

• 6 out of the 10 largest online retailers use customized pricing software

So what does this mean?

Well, for a long time websites have been evolving to be more customer eccentric, product recommendations  customization abilities, and now price will be able to become more personalized as well. With all the data that is being collected, it is relatively easy to determine the price sensitivity of a customer towards specific goods, and now they are taking advantage of it. Meaning, two people can be purchasing the same good on an online store, but be charged two different prices because one receives a discount targeted to them to ensure a sale for the company,

Whether its fair or not is a different matter, whatever the case it is not price discrimination so it is here to stay.

Price Discrimination is nothing new, but regardless of the platform the effect can be seen as the same- see the book The Economics of Price Discrimmination