Consumers Hate ‘Price Discrimination,’ but They Sure Love a Discount

Zohar Gilad is the founder of Fast Simon, a company that specializes in helping retailers optimize their websites. Rather than offering different prices to customers, they may choose to showcase high-end products to those with a history of spending freely, while displaying clearance items for bargain hunters. Targeted coupons are also utilized to cater to indecisive shoppers, creating a personalized pricing strategy that can lead to increased sales.

According to Mr. Gilad, “If you search for an item but don’t make a purchase, you might receive an email offering you a discount as a gesture of appreciation for your interest. Personalization, when executed properly, benefits both the shoppers and the merchants.”

However, some retailers value the loyalty that comes from consistent pricing, even if it means sacrificing short-term profits. Walmart, for example, follows an “Every Day Low Prices” approach, avoiding coupons and discounts in favor of offering reliable pricing. This strategy helps build trust with customers, as they can rely on consistent everyday low prices,” according to Walmart spokeswoman Molly Blakeman.

Retailers must also be cautious to avoid any perception of discrimination. Instances like the Princeton Review charging higher rates in certain neighborhoods or Uber and Lyft pricing algorithms resulting in higher fares in nonwhite neighborhoods have sparked controversy. Both companies asserted that their pricing strategies were based on demand patterns rather than discriminatory intent.

Consumer Federation of America’s director of consumer protection, Erin Witte, emphasizes the importance of shoppers understanding the rules set by merchants. An “informational imbalance” can lead to issues, especially in areas like food pricing, as seen in the Wendy’s backlash.

Ms. Witte explains, “When consumers feel they can engage in a meaningful price negotiation, they understand that businesses aim to make a profit. However, when they perceive price manipulation without transparency, it feels unjust.”

Audio produced by Sarah Diamond.