Charging Different Prices to Different People: Why It’s Good for You
The Wall Street Journal ran a piece suggesting you can’t trust online shopping for airfare and for other goods, because sites may charge you more or less based on who you are.
A new study of top e-commerce websites found these practices—called discriminatory pricing or price steering—are much more widespread than was previously understood.
Here’s what the Journal reports regarding hotel price discrimination at some of the big online travel booking sites:
Among the study’s findings: Travel-booking sites Cheaptickets and Orbitz charged some users searching hotel rates an average $12 more per night if they weren’t logged into the sites, and Travelocity charged users of Apple Inc. ’s iOS mobile operating system $15 less for hotels than other users.
…And Expedia and Hotels.com steer users at random to pricier products, the study said.
These sites are operating with big data and crude models, but they’re testing theories of what different consumers want so they can provide consumers with the easiest and quickest buying experience.
The worst thing for an online booking site to do is present the wrong thing to a consumer, what the consumer doesn’t want, because the consumer will leave and buy somewhere else.
As I pointed out in the regulatory comment I filed with the DOT regarding their pending airfare price transparency rules, it’s not necessary to make every online booking site one-stop shopping for all information because consumers visit on average about ten sites per trip that they book.
When basic trips migrated from brick and mortar travel agencies to the web, inefficent costs were squeezed out of the system. Consumers got more control over their trips. But the craft advice an agent could provide was lost. Travel is complex and booking sites are pushing towards a next generation of online booking, mass customization, where the site learns what you’re most likely to want and guides you to the best fit.
One early attempt at this caused a stir two and a half years ago when it was revealed that Mac users were being presented with more expensive hotels by Orbitz. The idea here isn’t new. Their data suggested that Mac users tended to choose somewhat pricier accommodations on average than PC users. So Orbitz was trying to recommend hotels these consumers wold be more likely to choose, so they wouldn’t leave the site and book somewhere else.
Now, sometimes elite members of a program can be hoodwinked into not checking prices and will wind up paying more but that’s virtually a non-issue for OTAs. And on average consumers are checking a ton of sites, an OTA would be foolish to price uncompetitively.
They’re testing, and learning, and trying to get better. They’re not trying to squeeze an extra $12 out of a hotel hoping that consumers won’t notice. Nonetheless, it’s wise to follow the average consumer in this case and also comparison shop prior to booking.
(HT: Hack My Trip)
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