MINNEAPOLIS -- When you shop online, is the person sitting next to you getting a better price for the same product?
For decades, retailers have used what’s known as dynamic pricing to alter the price of goods as market conditions change.
But what if companies stopped pricing based on market conditions and instead focused prices on data from each individual customer?
Amazon prices can change every hour as the company continually runs products through a secret algorithm, according to industry experts.
It’s a concept known as ‘personalized pricing,’ to price a product at the maximum amount each customer is willing to pay.
“I can't think of an industry that does not do this,” said Akshay Rao, marketing professor at the University of Minnesota Carlson School of Management.
It’s no secret that companies gather swaths of data on customers across the internet and use it for marketing purposes, but is that data used for pricing?
We conducted an experiment—at the direction of Professor Rao—using three computers and a smart phone.
Two computers were filled with different search histories and cookies, one representing a price-conscious weekend-travelling tourist and the other a corporate traveler with a luxurious shopping trail. On the third, we erased the search history and cookies with every site we visited.
With all four devices we went shopping, searching for the same items on the same sites at the same time.
We started with airlines.
We searched flights on Delta, American, Southwest, and United. Each airline offered the same prices on all four devices with no difference in price.
But when we searched on aggregate travel sites like Travelocity, things started changing.
A weekend at the New York Marriot East Side cost $68 dollars more when we searched on the smart phone versus the three computers.
Then we searched for flights on Kayak and found the exact same flight cost $15 more on the smartphone versus the computers.
How about the retail giant Amazon?
Again, we began seeing different prices posted for products like Larabar protein bars and Pampers diapers.
The bars were 80 cents cheaper for some users, and the diapers were $1.50 cheaper for some users.
We saw a pattern of price differentials between desktop and smartphone, but we also saw it vary from phone to phone.
But when the users tried to purchase the item at the lower prices, Amazon required the customer to sign up for a promotion.
But still, why are some seeing lower offers than others?
“We call that dark patterns, user interface design that is intentionally misleading,” said Christo Williams, associate professor of Computer and Information Science at Northeastern University.
In a 2014 study, Williams helped uncover a number of online price discrimination examples.
Their research found Home Depot charging $.50 more to Android phone users, and Expedia showing cheaper hotel results first for some users and more expensive results for others.
“This was a clear test to see if they could influence people's buying behavior by showing the different things,” said Williams.
We asked Amazon about the varied pricing and search results we were seeing.
In an email to KARE-11, a company spokesperson said, "We consider many factors when choosing what products to feature to customers including different attributes of a product (e.g. its title or description), the actions that customers took on our site (e.g. how many times the product has been purchased in the past) and price."
While we did find numerous examples of varied prices for the same products across multiple websites, we did not find pricing tailored specifically for an individual user.
Williams said the technology is there, but companies may be reluctant to pull the personalized price trigger for fear of brand backlash.
We've spoken with legal experts and marketing experts about these pricing techniques, and all say what we saw in our experiment is legal.
What Can You Do?
- Try clearing your browsing history and cookies from your web browsers.
- Search the prices of products you want to buy on a smartphone and a desktop to ensure you are getting the lowest price offered.
- Ask a friend in a different zip code to search for the same product.
- Specific to Amazon, don’t settle on the listed price as the lowest. Try searching below the buy box to see offers from other retailers.