Retailers use customer info for ‘personal pricing’
INDIANAPOLIS (WISH) – The next time you browse online, make sure you take a moment to look at the ads in the margins of the news sites, social media feeds, and entertainment pages you visit. You may notice your own shopping history staring back at you.
More than ever before, your Internet habits shape the advertising you see. It’s the latest twist in the ever-evolving business of online retail.
“I think an individual’s information about themselves is limited by their memory. And memory is not as big an issue for a retailer,” says Dr. Goker Aydin, from IU’s Kelley School of Business.
Years ago, he started to study the rise in what he calls “personal pricing”, which is the ability of a retailer to tailor a price or discount to specific customers based on information learned about them.
In the online world, the information increasingly comes from the trail your searches leave.
“What books I’ve been reading, what music I’ve been listening to, what movies I’ve been seeing,” Aydin explains. “So they get a very good sense of what we like and how much we’ll be willing to spend.”
Retailers use that knowledge in ways ranging from obvious to somewhat mysterious. It’s no longer a surprise when a major retail site automatically keeps a history of our shopping trips for repeat viewing when we return to the main site.
What does surprise many people, however, is when those same items show up later in places that are not at all connected to the original search.
“With Facebook having Amazon ads come up, Wal-Mart ads come up,” says online shopper Natalie Morrow of Noblesville.
She also says it’s jarring to see the same items advertised across devices.
“Things I’ve searched for even on my phone, when I log on to the laptop and Facebook it has ads (for those items) coming up,” Morrow said.
“It’s a little scary,” says Bill Craig of New Castle. “Makes you understand why people go off the grid!”
Concerns aside, both Morrow and Craig are frequent online shoppers. Both say they like the convenience of shopping at home and the potential for lower prices. For this story, they helped us with a short experiment to show the potential benefits of “personal pricing.”
Shopping at the same time on the same sites, Morrow and Craig priced out a fake spring break: a flight, flip flops, sunscreen, and paper to use for letters home. They used identical search terms and, for most items, came up with identical results. But on the last item, Craig got an unexpected offer from Staples.com: a “Buy 2, Get 1” coupon code.
Morrow’s reaction?
“Very surprising, because I don’t see anything like that!” she said.
It’s impossible to know what triggered the discount, because retailers rarely offer details about their pricing strategies. The site may have tapped Craig because he lives far away from the company’s nearest brick-and-mortar store. Or something about his browsing device may have triggered it; he was on a Windows phone while Morrow was on an iPhone. Or it could have been because Craig says he had never visited the site before. Or it may have been an offer given completely at random.
Whatever the case, Dr. Aydin says discounts that differ from one person to the next should be no surprise. He also says there are ways for the shopper to take some control of the situation. By browsing with specific goals in mind, he says you can shape the way a retailer views you and markets to you.
“By doing more research, by committing to items a bit later, by committing to items when they are on discount, a customer can build up a profile that continues to get them discounts,” Aydin said. “They will try to present you with options to buy low because they notice you don’t buy at full price.”
To see more of Dr. Aydin’s advice and the rest of our online shopping trip with two viewers, see the video version of the story above.