Personalized pricing is a minefield and has more risks than benefits. Personalized pricing is legally OK but raises significant ethical concerns. Customer backlash and trust erosion are quite possible.

There are numerous ways to personalize the pricing while not affecting an entire class of customers. It could be based on detecting exit intent and intervening, offering better pricing for abandoned carts, offering individualized promotions – just about anything other than changing the basic price.

Pricing based on the class of service is also OK – charge more for in-person pickup, for instance.

Flexible pricing models are even more relevant and useful in today’s world where supply chain disruptions and inflation are key issues. Flexible pricing allows retailers and consumers to win, but transparency is crucial to these models’ success. With personalized pricing especially, consumers should be made aware by retailers that it’s happening. The idea of opting in will need to be an inherent component to combat the fairness challenge.

A prime example of personalized pricing that keeps consumers happy by requiring them to opt in is negotiation commerce. Since shoppers know they’ll end up with a different price than their peers due to their haggling skills, it feels much more fair and fun.

Personalized pricing isn’t ethical. If a retailer charges $10 for an item then it should be priced at $10 for every customer, regardless of where they live.

Just like there is no crying in baseball, there are no ethics (or almost none) in pricing. Retailers have always had multi-tiered pricing. Company pricing, division, region, zone and store pricing have always existed. Personalized pricing is just an inevitable evolution in the pricing model. As we gather more data analytics will determine the optimum price that I, as a shopper, am likely to buy. When you think about it, there are really only two ways to arrive at purchase price: one is tagging something with a price and marking things down to increase sales if necessary. The other is when you go to a traditional market and there are no prices on anything. You start low. The merchant cries. Your best move as a customer, if you want a better price, is always to start walking away. But personalized pricing, fueled by the merchant’s knowledge of everything you’ve ever done online, does not make this a fair fight any more. Why? Because the merchant now knows exactly when you’ll walk away, and if you’ll… Read more »

Transparency and fairness is more important to the customer than ever. With the abundance of information that is accessible to the customer, the retailer must tread lightly when considering dynamic and personalized pricing.

These types of tools should be used to determine the best price but also standardized pricing across like-brands across the globe. It is very common for luxury shoppers to fly to another country to shop a brand because pricing is more competitive due to currency value and this is what we need to avoid.

Retailers need to invest in the right tools to determine the right price that is profitable for them but also be conscious of keeping the customer’s trust and being fair to shoppers worldwide.

I have always thought dynamic pricing was a disaster waiting to happen. Personalized pricing, if it’s based on loyalty, is a lot easier for customers to swallow but just changing the price because you can has never been a good idea.

The first time I see a price change in front of my eyes is the last time I will shop at that retailer.

Personalized pricing is good for the retailer, and rarely for the consumer. Its only goal is to charge the highest price possible and still make the sale. The ethical challenges are numerous and varied. Nevertheless, personalized pricing is the way of the future.

Imagine a retailer advertising that different customers pay different prices — what would the reaction be across the customer base? If a retailer has to keep its policies private, those processes are probably not going to be popular.

Personalized pricing can be a powerful tool for both retailers and consumers alike and offers more benefits to both parties if done correctly. The key to doing it correctly is to start with consumer data and listen to them rather than creating logic based on factors which are not directly tied to their shopping decisions or are based on things like ZIP codes or demographics which runs the risk of discrimination. If a customer or customer segment has shown to be very elastic for category A and not for category B, it’s in everybody’s best interest to price those categories differently. The retailer wins by gaining share in category A and margin in category B and the consumer wins by getting great prices on the products they care most about. The best pricing platforms can add even more value by rigorously enforcing rules to make sure that prices are fair for all consumers – preventing pink taxes or higher margins/prices on products targeted to certain communities. The right analytics, solutions, processes, governance and objectives can… Read more »

If we only look at the “fairness” of variable pricing this seems like a bad thing. But wielded properly it can be an instrument for good and an important way for retailers to maintain the profit margins they need to stay in business. It isn’t fair to charge different prices to different customers, but what if variable pricing wasn’t targeted to the shoppers’ ability to pay but rather to availability of the product? I see this as a fantastic tool to help retailers hold on to profit margins when legit supply chain issues reduce needed stock of popular products – raise prices across the board instantly to weed out people who are merely stockpiling. Conversely, it could be used to reduce pricing, either as a reward to high value loyalty subscribers or as a service to the community – such as quickly lowering prices of building materials in areas hit hard by disasters.

This is a tricky one. While personalized promotions may well be the order of the day there are huge potential pitfalls. Economist Tim Harford wrote some years ago about how specific pricing was seeking to charge more to those deemed to be able to pay more. There have also been suggestions over the years that certain websites have charged Mac users more than PC users because Mac users are deemed wealthier.

Ethically it is a problem, however legislation does not always provide for consumer protection – for example the UK consumer energy market allows energy retailers to charge the poorest people more for their electricity through the use of pre-pay meters.

Ethically, many are far more comfortable with tiered pricing whereby there may be differences in price yet the differences the consumer attains are clear.

If retailers deploy personalized pricing at an individual level (not zip codes, not large segmentation schemes) it is simply an extension of the overall customer loyalty or promotional strategy.

The key is taking into consideration the individual customer spend, omnichannel purchase behavior, visit metrics, LTV, etc. With that in mind, personalized pricing is not only ethical, it is a proven key to overall business success, builds customer loyalty, differentiates competitively, and is completely acceptable (and appreciated) by consumers that understand you are deploying this type of logic.

Amazon has been doing this for over a decade, it drives 25 percent of their profitability – it is surprising to me that some may still be on the fence on this topic if traditional retailers simply apply a common sense approach.