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Personalized pricing - Why some pay more than others · DEEP INSIGHT

• 0:00
  Speaker 1: Booking a flight this summer has been a guessing game.
• 0:02
  Speaker 1: Every time you check, the price has changed. I thought
• 0:06
  Speaker 1: it was all about timing. Book on the wrong day,
• 0:09
  Speaker 1: pay more. But timing is only part of the story.
• 0:13
  Speaker 1: People have seen the same thing on ride-hailing apps. In
• 0:16
  Speaker 1: Kansas City in the U.S., 55 people requested the same
• 0:20
  Speaker 1: route at the same time. They were quoted 29 different prices.
• 0:24
  Speaker 1: In another test, quotes for the same ride ranged from
• 0:27
  Speaker 1: $ 25 to $ 65. Nothing about the trip was different. The
• 0:32
  Speaker 1: only thing that changed was who was holding the phone.
• 0:35
  Speaker 1: The practice goes by different names. In the United States,
• 0:39
  Speaker 1: it's often called surveillance pricing. In China, it's known as
• 0:43
  Speaker 1: big data swindling, using customer data to charge loyal users
• 0:48
  Speaker 1: more than new ones.
• 0:51
  Speaker 2: Personalized pricing is about using all the data you have
• 0:54
  Speaker 2: at your disposal to go down to the single unit
• 0:59
  Speaker 2: of a consumer and adapting dynamically pricing for this customer.
• 1:05
  Speaker 2: We no longer go from one size fits all.
• 1:08
  Speaker 3: Or segment by segment.
• 1:11
  Speaker 4: We have enough data and insights to be able to
• 1:14
  Speaker 4: give the right price at the single customer level.
• 1:18
  Speaker 1: The story goes back to the year 2000, when Amazon
• 1:22
  Speaker 1: shoppers discovered different prices for the same DVDs. The company
• 1:27
  Speaker 1: refunded nearly 7,000 customers and said it had been a
• 1:30
  Speaker 1: random price test. What's changed since then is the sheer
• 1:35
  Speaker 1: amount of data companies can collect and the AI powerful
• 1:39
  Speaker 1: enough to process it. Today, prices can be tailored to
• 1:43
  Speaker 1: individual customers in real time, and more people are noticing
• 1:47
  Speaker 1: what's going on. The same thing is happening on dating apps.
• 1:52
  Speaker 1: One company was found offering the same subscription at 36 prices,
• 1:57
  Speaker 1: from around 3 euros a month to about 33 euros.
• 2:01
  Speaker 1: Travel platforms are raising questions, too, In one test using
• 2:05
  Speaker 1: 22 devices, searches for the same hotels returned prices hundreds
• 2:10
  Speaker 1: of euros apart, although there was no pattern the researchers
• 2:14
  Speaker 1: could detect. Airlines are going even further. One American carrier
• 2:19
  Speaker 1: told investors AI was helping price about 3% of its
• 2:23
  Speaker 1: domestic network and that it wanted to reach 20%. In India,
• 2:29
  Speaker 1: passengers reported paying more for a cab ride or an
• 2:32
  Speaker 1: iPhone than on an Android. And it's not just the price.
• 2:36
  Speaker 1: The order of what you see can be personalized too.
• 2:40
  Speaker 1: An EU study found more than 90% of travel sites
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  Speaker 1: use personalized rankings. Faced with these findings, the companies have
• 2:49
  Speaker 1: mostly denied it. They say prices move with demand, not
• 2:53
  Speaker 1: with the identity of the person paying. So what exactly
• 2:57
  Speaker 1: goes into your price?
• 2:58
  Speaker 3: Because of the massive information asymmetry that is caused by
• 3:02
  Speaker 3: tracking and profiling, companies can identify vulnerabilities of every consumer, basically.
• 3:11
  Speaker 3: Companies know about our personal circumstances, our health conditions, our preferences.
• 3:22
  Speaker 3: So in theory, each consumer can be exploited.
• 3:30
  Speaker 1: The U.S. Federal Trade Commission has been investigating that question.
• 3:34
  Speaker 1: It found that companies can track how you move your
• 3:37
  Speaker 1: mouse and what you browse, whether you hesitate and which
• 3:40
  Speaker 1: products you leave sitting in your basket. Algorithmic pricing first
• 3:45
  Speaker 1: started as a way to fill empty seats and boost sales.
• 3:49
  Speaker 2: Revenue optimization is key, which then leads to profit optimization.
• 3:55
  Speaker 4: And really dynamic pricing came from more of.
• 3:58
  Speaker 2: The hospitality and airline.
• 4:02
  Speaker 4: Businesses where, you know, yield management was very important because
• 4:05
  Speaker 4: you need to fill high fixed industries.
• 4:08
  Speaker 2: They need to fill the hotel. They need to fill
• 4:11
  Speaker 2: the plane.
• 4:12
  Speaker 1: Changing prices with demand is legal. But where's the line?
• 4:16
  Speaker 4: On servicing the customer differently, with more value, then they're
• 4:19
  Speaker 4: going to pay more. But if I have two ladies,
• 4:22
  Speaker 4: same age, same level of income, why are they paying
• 4:27
  Speaker 4: different prices at 8 p.m. and 10 p.m.? Then you
• 4:32
  Speaker 4: would have to argue that there is different value at
• 4:35
  Speaker 4: these different times, right? But that's where it gets a
• 4:38
  Speaker 4: little complicated, the line between legal and ethical.
• 4:41
  Speaker 1: So there are still gaps. A company may have to
• 4:44
  Speaker 1: tell you the price was personalized, but it doesn't have
• 4:47
  Speaker 1: to say which data changed the price or what everyone
• 4:51
  Speaker 1: else was charged. And by then, most of us have
• 4:54
  Speaker 1: already checked accept.
• 4:56
  Speaker 3: They should tell people, and they are legally required since 2022,
• 5:00
  Speaker 3: at least in the European Union, to disclose if they
• 5:05
  Speaker 3: are personalizing prices. However, they don't have to disclose which
• 5:13
  Speaker 3: data they are using or how they are personalizing the prices.
• 5:17
  Speaker 3: The question is just whether they actually understand what they're
• 5:19
  Speaker 3: consenting to. Because usually they declare that they consent with
• 5:24
  Speaker 3: long terms of conditions, which most people don't read.
• 5:28
  Speaker 1: Now Europe wants to close that gap. The EU is
• 5:31
  Speaker 1: working on a new law, the Digital Fairness Act, that
• 5:34
  Speaker 1: could restrict pricing built on tracking and profiling. But consumer
• 5:38
  Speaker 1: groups expect it could take years before any new rules
• 5:42
  Speaker 1: are enforced. In some parts of the world, some rules
• 5:46
  Speaker 1: are already stricter. In New York, companies must disclose when
• 5:50
  Speaker 1: an algorithm uses a customer's personal data to set a price.
• 5:55
  Speaker 1: China cracked down on personalized pricing in 2021.
• 5:58
  Speaker 3: But most of.
• 5:59
  Speaker 1: What we know still comes from people testing these systems,
• 6:02
  Speaker 1: running the same search on dozens of accounts or devices
• 6:05
  Speaker 1: at once. In much of Africa, Latin America and Southeast Asia,
• 6:10
  Speaker 1: those tests are far less common. But even as the
• 6:14
  Speaker 1: rules tighten, experts warn that personalized pricing could spread beyond
• 6:18
  Speaker 1: our screens.
• 6:19
  Speaker 4: Once we get into, for example, dynamic labeling in stores,
• 6:24
  Speaker 4: where you would have labels, price labels on the shelves
• 6:28
  Speaker 4: that are going to be electronic versus paper or plastic,
• 6:33
  Speaker 4: you will see prices changing daily. And it happens already
• 6:37
  Speaker 4: in any machine, depending on, you know, the temperature outside,
• 6:40
  Speaker 4: the location you will see. And if there is only
• 6:43
  Speaker 4: two water bottles out of 20 left, you'll see the
• 6:45
  Speaker 4: price change. So this is where consumers will start getting furious.
• 6:50
  Speaker 1: Booking a flight is still a guessing game, but consumer
• 6:53
  Speaker 1: groups recommend a few practical checks. And I use them now.
• 6:57
  Speaker 1: Check the price on a second device. Clear my browsing data.
• 7:01
  Speaker 1: Check again before paying. That still won't tell me exactly
• 7:04
  Speaker 1: how my price was calculated. but it might produce a
• 7:07
  Speaker 1: different price quote, and I can choose the better deal.