My dynamic pricing experiment

It may be no surprise that companies like Amazon use "dynamic pricing" to extract maximum profits from you, but I learned some more details from my MBAs the other night.

Dynamic pricing adjusts the price so the company can discern (and extract) the highest price you will pay. They start out by offering you a price that they think you will pay, based on the data they have for you plus the data they have on the buying habits of millions of other folks. So, if you live in a wealthy zip-code and have a habit of impulse buying, they'll send show a high price. If you live in a less wealthy demographic, their first price may be lower. Dynamic pricing allows price adjustments throughout the demand buy/sell curve to basically custom tailor the highest price for each individual. As long as they make money above break even and can satisfy demand at each point on the curve, they maximize their profit. Sweet.

If you have any kind of significant online presence, they already know a lot about you--how old you are, size and type of your family, where you live, the value of your house, your income range. (If you are active and prone to over-sharing on Facebook, they know practically everything about your life.)

From your browsing habits, they know to a high degree of certainty if you have a baby coming, if you have elderly parents you need to care for, or if you have a terminal disease. Also more subtle things like how long you shop before you buy, and what types of online ads have triggered you to buy. Now, by applying artificial intelligence, they can fill in any gaps with a startling degree of accuracy.

Dynamic pricing allows companies to choose a price they think you will pay based on the data they have. If the tech platforms or Facebook see you searching for funeral services in Boston, they probably already know you have elderly parents there, and that one has likely died, and that therefore you are likely to pay a high amount for that flight to Boston you are researching. And on and on. Probably far more knowledgeable folks on the subject here than me.

What I learned the other night that was new to me (and fun) is that if you click on a pop up ad for a product you are looking at, but don't buy, they may adjust the price down if you visit again. I've recently been researching a Palmgren 30301 cross-slide vise, and get a lot of pop up ads for it. On an early check, Amazon had it listed at about $525 or so, discounted from $650 list. Armed with my new knowledge, I've been clicking on the pop ads for it each time I see them. As of last night, the price had worked its way down to $445.28. This morning, the pop up said $438.40, and tonight it was down a penny to 438.39, so they may be running out of room.

The ethics of all this is really interesting.

[Bill Douglas]

Us white trash people play that trick too. I go to Domino's pizza, look around for a short while, then goto Pizza Hut, and next thing you know a Domino's 40% off promo number arrives in the email.

[LWJ]

Ok. I am a little obsessed on a pretty expensive mountain bike currently. I can't find any downward movement. Thanks for the hope!

[dad911]

Put it in a cart, and come back a day or two later, sometimes price goes down.

I will also browse from an 'incognito window' especially for airline tickets. Sometimes my wife and I will be on the same site, and see different available flights and prices.

[masraum]

Originally Posted by dad911

Put it in a cart, and come back a day or two later, sometimes price goes down.

I will also browse from an 'incognito window' especially for airline tickets. Sometimes my wife and I will be on the same site, and see different available flights and prices.

For airline tickets, never spend too much time shopping. BUT IF YOU DO, clear your cookies frequently. For me, so far, that seems to have solved the problem.

Years ago (before I knew), I was looking for tickets to visit some family. I got on and the tickets were something like $400. I tried changing the days of my visit around to see if that would help me save money. The first couple of searches left the price the same, but my the time that I thought "OK, I guess $400 is the best price" the price shot up to something like $750. I had been at work. I went home and got on the website to buy the tickets and they were back at the $400 price because I was using a different computer/browser. You can even get the same thing by using multiple browsers.

[wildthing]

camelcamelcamel shows you the lowest price an item has ever been on Amazon in the last 12 months... Patience is key. I try to not buy on impulse, unless it's something I'll need the next day like clay bars or engine wash...

Also clear your cache every once in a while, especially when shopping.

[RKDinOKC]

Hardly ever search and by online with out being incognito. Several months ago I picked up some underwear from Walmart.com and didn't hassle with changing to incognito. Now all I get is underweard ads on browsers. Especially this site. If it's not an ad for Pelican, it's underwear. Thinking I need to buy some women undergarments from Freddericks just to get some different Ads. LOL.

Have wondered what using a VPN would do...

[berettafan]

Great post OP, thanks for sharing.

[Crowbob]

Yeah.

Thanks, corg!

[mpeastend]

If you used a VPN, would that defeat the pricing algorithm? The VPN is supposed to be cookieless and completely anonymous surfing. Obviously, once you put in credit info to buy, they will know who they're dealing with, but by then you should've already been quoted a price...just don't know if it's the best price. Any thoughts/info on that?

[Geronimo '74]

Originally Posted by berettafan

Great post OP, thanks for sharing.

Yep, great post!
I’ll be booking a flight soon, thanks for the heads up.

[recycled sixtie]

I am thinking that hotels like Holiday Inn and Best Western work on the same principle?
It is made more complex for a cancellable versus non cancellable?

As the date approaches then if the hotel has lots of rooms available then the price is low and the opposite would be true?

How do you approach booking a hotel? Do you wait till the last minute to book or?

[Hugh R]

I think some on-line stock brokers work exactly the opposite way. The more you look, the higher the price.

This morning it was up a bit, to $438.74. And--I got the same price incognito. I have a couple different laptops, but they don't seem to vary.

Here's an additional wrinkle: According to one of my students who works for Microsoft, the way you move your mouse makes a discrete "signature" that is nearly as definitive as a fingerprint for identification purposes. If it is truly that accurate, clearing cookies and the like will not allow you to mask your identity. And, if you share your computer with, say, a spouse, your spouse will see ads tailored to them.

Finally, I'm finding a real generational difference in how OK students are with tailored ads. My undergrads, who have never known life without internet, are happy to sacrifice privacy for the convenience of tailored ads. Full time MBA's who are only a year or two out are the same way. But evening MBAs, who are usually 10 years older, are much more wary about the extent to which they are sacrificing privacy.

[Crowbob]

I think the lack of concern for privacy by the younger millennial types goes along with their lack of concern about the possibility of ours becoming tyrannical government. They just believe it unpossible. They seem to be naively smug (if such a juxtaposition is possible) thinking it simply cannot happen here in our time of global instant enlightenment-thanks to them-about which they will remind you. These youngsters are superb practitioners of avoidance and so are in denial.

Same goes for economic matters, such as another Great Depression or pandemic. These things are scary to them so they sorta close the window on the screen in their minds and click on something less offensive. Which, invariably, is some sort of phantasy.

[Bill Douglas]

NOW you guys tell me about incognito for airline tickets LOL

Thanks, I'll use that in future.

[cabmandone]

Ya couldn't have posted this BEFORE I dropped a little over 4K on kitchen appliances... could ya!

Interesting writeup and thanks for sharing.

Originally Posted by Crowbob

I think the lack of concern for privacy by the younger millennial types goes along with their lack of concern about the possibility of ours becoming tyrannical government. They just believe it unpossible. They seem to be naively smug (if such a juxtaposition is possible) thinking it simply cannot happen here in our time of global instant enlightenment-thanks to them-about which they will remind you. These youngsters are superb practitioners of avoidance and so are in denial.

Same goes for economic matters, such as another Great Depression or pandemic. These things are scary to them so they sorta close the window on the screen in their minds and click on something less offensive. Which, invariably, is some sort of phantasy.

I agree to a large extent, C-B, and am often at a loss to explain exactly why they should fear the aggregation and concentration of data in the hands of the government, or, maybe worse, stateless actors such as multi-national private corporations. Just seems obvious to me, but I think the younger ones think I'm a crazy old paranoid Republican! They see the web as liberating and democratizing, which it can be and has been in places like China.

I don't blame the youngsters, or anyone, really, for where we are. Who knew what the web would bring? They are naive not because of any intrinsic flaws; they just haven't seen much yet. You still remember the "young" setting on the lifebox, C-B?

[Neilk]

I get the same price browsing incognito, so it looks like they changed the price globally.

[dad911]

Want to have fun? Screw with Amazon logistics.

Everyone in Florida start browsing snow shovels and ice scrapers on Amazon. They will start to move product to closer warehouses........

@madcorgi: I don't know your application, but for not much more you can get a small mill: https://www.grizzly.com/products/Grizzly-Mini-Milling-Machine/G8689

Grizzly also has vices and cross slides for a lot less. There is a store in Bellingham, north of Seattle.