The grift called “dynamic pricing”
The noun “grift” has been evoked frequently in all media platforms during the last few years. It has usually referred to certain political figures, but the fact is that grifting is the right description for too many common American business practices today. As it turns out, there is a long list of synonyms for grift. And that may be part of the reason the practice lurks in the shadows and impacts our lives without the notice it should command.
American consumers are the victims of a practice innocuously referred to as “dynamic pricing”, which is a category of grift that does not get the attention and criticism it deserves. If you click on the link embedded in the above paragraph, you will notice that many of the synonyms for grift are a fitting description of what dynamic pricing really is. Because of that lack of attention, even though we are often angered by the financial impact we experience from it, we tend to swallow hard and absorb the damage because we know there is little to be done about it. But maybe it needs to be better understood.
Let’s take a closer look at the dynamic pricing model. I will walk you through an imaginary scenario that is part of your everyday routine. You are in your local supermarket. You are working through your typical shopping list of items you commonly purchase. But this time, the experience is very different. The shelves no longer have the paper price labels for the items they contain. Instead, the price markers have been replaced with digital displays for the amounts. When you pick up an item, the price changes. When you put it back, and then pick it back up, the price resets again. Would you be ok with that?
Next you go to the shopping mall and visit your favorite department store. You have the same experience. On the way home, you stop in at Costco or Sam’s Club. Again, the prices fluctuate right before your eyes. How do you feel about that?
Of course, in these times, we are accustomed to seeing prices rise in these places, and sometimes it is noticeable with every shopping trip. But that is not the same thing as dynamic pricing.
Where do you encounter dynamic pricing? Every time you buy a ticket for air travel, or make a reservation with a major hotel chain, you are probably the victim of dynamic pricing. I strongly suggest you recognize and acknowledge you are being victimized, grifted, taken advantage of. Why?
Consider the following. No matter what you agree to pay for that plane ride or hotel room, it is the same product and service. It does not change, or tangibly increase or decrease in value. If you pay a premium compared to standard rate for a hotel room, they do not upgrade the linens and towels to give you higher quality. It is the same regardless. The operating cost to the hotel does not change. The electric bill, water bill, housekeeping labor cost, and all other operating expenses remain the same at the time of your stay.
You are the victim of a computer algorithm that adjusts prices based on your behavior to maximize in an instant what you will be asked to pay. It is a very sophisticated calculation process that is remarkably effective and efficient. The theory implies measuring supply compared to demand. This is based on another theory that scarcity is the reason and justification for adjusting prices. The less of something there is available, the more valuable it becomes. We all know that to be true and valid is some categories and circumstances.
But what if that scarcity is manufactured and manipulated but not true at all. The consumer is at a disadvantage in most cases where dynamic pricing is applied because they do not have a way of finding out the facts. The algorithm can be calibrated to simply gauge the interest level of the consumer, and instantly adjust the price on the presumption that the desire is strong enough to choke down the increase. It is legal, but is it ethical? We live in a time and place where those two metrics have no relationship with each other.
Is there a solution available to the consumer? How about “caveat emptor”? That’s the best I can offer. I would encourage the consumer to confront the dynamic pricing offender and tell them their degree of integrity has been greatly lowered. They need to frequently hear that they are taking unreasonable advantage and it is not appreciated or respected and will be considered the next time there is a need for that service or product.
