Surveillance pricing? Price discrimination? Dynamic pricing?
The mere mention of these topics has recently caused some customers, government officials, and online commentators to howl in protest.
So when an essay comes along with some praise for surveillance pricing, it is worth taking a closer, critical look. Aradhna Krishna, a marketing professor at the University of Michigan, published such an essay this week.
Companies that practice surveillance pricing use your personal data to predict the price you are willing to pay for a good or service. That means you might pay a much different price than someone else for the same exact product or service. While some would consider that situation to be unfair, we tolerate and even encourage similar kinds of price discrimination every day. Think of discounts and perks for seniors or students.
Professor Krishna concludes that the future of surveillance pricing will depend on whether it “becomes a tool for equity or exploitation.” There are some strong arguments for it to serve as a tool for equity. She points out that when wealthier customers pay more than lower-income customers for the same good, it can generate societal benefits by promoting equity and creating wider access for some goods and services.
That assertion aligns with my own research over the years into how companies implement price differentiation. One stream of research showed that price discrimination is more ethical than uniform pricing when companies do it “progressively,” which means that companies charge customers as a function of their willingness-to-pay. Progressive pricing in that form can also be more profitable over time.
But the fact that her findings and conclusions overlap with some of mine is not the only reason why I recommend that you read her essay. The other reason is that her piece is an invitation to think more deeply about pricing concepts and ideas.
• 𝗪𝗵𝗮𝘁 𝗶𝘀 𝗮 𝗳𝗮𝗶𝗿 𝗽𝗿𝗶𝗰𝗲? Answering that question required two chapters in my Game Changer book. It’s not simple.
• 𝗜𝘀 𝘀𝘂𝗿𝘃𝗲𝗶𝗹𝗹𝗮𝗻𝗰𝗲 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗴𝗼𝗼𝗱 𝗼𝗿 𝗯𝗮𝗱? That is also a complex question and not an either-or one. I would rephrase it by asking: do the benefits outweigh the risks? The lists might be long on both sides of the ledger, but we should understand the full balance of benefits and risks before dismissing or regulating any pricing practice, not just surveillance pricing.
What are your thoughts on surveillance pricing and your experiences with it? And how do you define a “fair” price?
Original article can be found here.