The ethics of pricing analytics?

There’s an interesting example of some pricing analytics in the news that might test my proposed framework (see my previous post) for the ethics of analytics.

According to the Wall Street Journal, Orbitz has been showing different hotel offers to Mac and PC users, offering more expensive options to Mac users.

Orbitz executives confirmed that the company is experimenting with showing different hotel offers to Mac and PC visitors, but said the company isn’t showing the same room to different users at different prices. They also pointed out that users can opt to rank results by price.

How does this example fare on the framework?

image

On Relationship, what’s being offered – a range of hotels – is directly relevant for the consumer. The Intimacy of the information being used is pretty low: the browser used is used of the easiest things to track, although some consumers might be unhappy with being profiled for pricing purposes that way. Frequency is not particularly relevant. The Provider benefits will depend on how good the correlation is between browser used and consumer type, though for a lower margin business like booking hotel rooms even a small lift might provide a significant benefit.

The two interesting criteria are Openness and Consumer benefits. It’s the lack of openness in the mechanism that will annoy some customers instinctively: read the user comments to the WSJ article if you don’t believe that. The Consumer benefits are, at best, debateable. But I’d argue that showing by default hotels in the price point Orbitz believes customers’ want to see if perfectly defensible.

The Economist reports the same story, but goes on to discuss the more difficult to justify practice of offering different customers different prices for the same product. According to the Economist:

Orbitz stresses that it does not charge people different rates for the same rooms, but some online firms are believed to be doing just that, for instance by charging full whack for those assumed to be willing and able to pay it, while offering promotional prices to the rest.

The Consumer benefit of this sort of differential pricing is almost certainly nil, certainly for the customer offered the higher price. There are plenty of companies employing such pricing in an open and transparent way (think of special offers for new customers that are not open to existing customers unless they threaten to leave). Perhaps it’s the combination of “unfair” treatment and a lack of openness that some consumers find so offensive. Comments on the Economist article seems to be running about 2:1 for those unhappy:happy with this sort of arrangement.

About these ads
This entry was posted in Ethics of analytics. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s