In addition, if retailers use dynamic pricing in such a way that it angers customers, they can erode customer loyalty, spark a backlash and lose business. Collusion by competitors in an industry to fix prices violates the law, as does the use of race or gender to target customers for different prices or other discriminatory treatment. To be sure, not all pricing strategies are permissible. But they understand senior citizen discounts and student discounts.” Hoch, chairman of Wharton’s marketing department: “People are exposed to dynamic pricing all the time. “The only thing new is that the Internet has given companies so many different ways to set prices and adjust prices.” Notes Stephen J. “There is nothing really new here,” agrees Wharton marketing professor Z. If retailers charge a flat, low price to make everyone happy, they’re leaving a lot of money on the table.” Companies must engage in flexible pricing practices in order to honor their responsibilities to their shareholders. Fixed pricing is a much later phenomenon and it’s an artificial one. This is more the norm in transactions than fixed pricing. People will pay very different prices for the same bolt of fabric. “Think of the classic hagglers in the market of a Middle East bazaar. “Dynamic pricing has always been with us,” says Wharton marketing professor Peter Fader. And, of course, the people who get bargains are not at all likely to be disappointed or feel exploited. But that happens because they often do not know much about the factors that go into a company’s decision to set prices, are reluctant to ask for a lower price, or find bargaining distasteful. Does dynamic pricing sometimes upset consumers? Research shows that people do get disturbed if they learn that they paid more than someone else for the same item. They say such pricing - also called targeted pricing, flexible pricing, tailored pricing or, to use the phrase employed in the Annenberg study, discriminatory pricing - is customary, an essential tool for companies, and often beneficial to individual customers and society as a whole. Is this type of pricing, known as dynamic pricing, underhanded or unethical? No, according to faculty members in Wharton’s marketing department. It found, for example, that 64% of respondents who had recently used the Internet did not know that it is legal “for an online store to charge different people different prices at the same time of day.” In addition, 71% did not know that it is legal for bricks-and-mortar stores to do the same thing. But it also examined people’s knowledge of pricing. Much of the study, which was based on a telephone survey of 1,500 adults, focused on privacy issues dealing with the collection of information about consumers. The Meeting Style That Generates Breakthrough Solutions August 7, 2023Ī study released in June by the Annenberg Public Policy Center of the University of Pennsylvania was provocatively titled, “Open to Exploitation: American Shoppers Online and Offline.” It concluded that American consumers are “vulnerable to subtle forms of exploitation” by marketers.Strengthen Your Leadership with the Science of Awe August 21, 2023.Timing Matters: Design the Day for Maximum Productivity October 20, 2023.The Power of Intentional Networking November 20, 2023.Meet the Authors: Wharton’s Katy Milkman on How to Change May 14, 2021. Meet the Authors: Mauro Guillén on How Businesses Succeed in a Global Marketplace June 21, 2021.Meet the Authors: Wharton’s Peter Cappelli on The Future of the Office November 4, 2021.Meet the Authors: Erika James and Lynn Perry Wooten on The Prepared Leader October 3, 2022.Improving Accessibility in the Workplace - and in Space May 16, 2023.How Employers Can Support Women’s Reproductive Rights June 20, 2023.How to Use AI in a Fair and Responsible Way November 9, 2023.Diversity Is Critical for the Future of AI November 10, 2023.Great Question: Kevin Werbach on Cryptocurrency and Fintech July 21, 2021.Great Question: Dean Erika James on Crisis Management August 16, 2021.Great Question: Wendy De La Rosa on Personal Finance October 15, 2021.Great Question: Witold Henisz on ESG Initiatives November 17, 2021.Making the Business Case for ESG May 3, 2022.How Companies and Capital Can Be Forces for Good June 21, 2022.Investing in Refugee Entrepreneurs in East Africa August 8, 2022.Why Employee-owned Companies Are Better at Building Worker Wealth November 11, 2022.How Can AI and the Human Brain Work Together? November 9, 2023.Can AI Make You a Better Manager? November 9, 2023.What Role Can AI Play in Sports? November 9, 2023.What Is the Future of AI? November 9, 2023.
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