Shield Yourself from Personalized Pricing: Essential Tips for Savvy Consumers

Recently, Delta Air Lines announced a plan to use artificial intelligence (AI) to set personalized ticket prices. While this could potentially improve customer experience, it has raised eyebrows among travelers and politicians alike. Other industries, including finance and gaming, are already employing similar personalized pricing strategies.

What is personalized pricing?
Personalized pricing means different customers could pay different prices for the same service or product. This strategy can increase profits by charging higher prices to those willing to pay more while offering discounts to price-sensitive customers. It’s like tailoring clothes to fit individual needs—here, prices fit each customer’s willingness and ability to pay.

Economist Jay Zagorsky, who teaches pricing at Boston University, highlights concerns about transparency in AI pricing models. He worries that this technology could exploit less financially savvy consumers. In a digital world where companies gather vast amounts of consumer data, price adjustments can happen in real-time, raising ethical questions about fairness.

A Brief History of Pricing
Historically, bargaining was the norm. Business owners often sized up customers and negotiated prices based on their skills. One famous joke illustrates this well: a wealthy man once questioned the high price of eggs, only to be told that while eggs were abundant, rich men were rare.

In modern-day shopping, set prices dominate. The shift to fixed prices began with retailers like John Wanamaker in the late 1800s, who made shopping easier with non-negotiable price tags. This change allowed stores to hire less specialized staff and streamline their pricing strategies.

The Rise of AI Pricing
Enter AI. It analyzes extensive consumer data from electronic payments, allowing companies to determine optimal pricing for individual customers. For instance, Mastercard uses data to help businesses refine their pricing strategies. Yet, this also raises eyebrows—recent concerns about price discrimination led the Federal Trade Commission to scrutinize how companies use AI tools.

To combat personalized pricing, some states enforce laws requiring stores to display a single price. However, targeted digital coupons often sidestep these regulations.

How Shoppers Can Navigate AI Pricing
Consumers can take steps to outsmart personalized pricing. Using cash can be a game-changer in physical stores, as it leaves no digital footprint. Online, clearing browsing data can help; this action limits the information AI uses to set prices.

For instance, location can influence pricing—a person using a VPN may receive different quotes based on perceived income levels in different regions. Lastly, waiting before making purchases online can sometimes prompt retailers to offer discounts to complete the sale.

Looking Ahead
AI is rapidly advancing, making personalized pricing more common in our shopping experiences. While it can enhance customization, it also poses unique challenges regarding fairness and transparency. As these technologies evolve, it’s essential for consumers to remain informed and proactive in navigating changing pricing landscapes.

For more on personalized pricing, check out resources from reputable sources like the Federal Trade Commission and Harvard Business Review.

This article was adapted from content originally published by The Conversation under a Creative Commons license.

Source link