The use of personalised pricing is on the rise, but what does it actually mean?
In essence, personalised pricing occurs if the price offered to a consumer is based on information that is collected or observed about customers.
This so called price discrimination which is a well-established practice for businesses is based on the assumption that all buyers are different and there is no “one price fits all” model.
Companies today are increasingly using technology to find valuable trends in consumer behaviour to gain insights into when they buy, how they buy and why they buy. Alongside a pricing tool, this data is then used to create special offers and prices that encourages more spending. The collection of such consumer data has also caused controversy, but where it has been legitimately collected through a transparent process, this data can be very useful to businesses to identify trends and behaviours for personalised pricing. For example, retailers can collect details of a customer's previous purchases made on the website.
Businesses can then offer personalised discounts, and are increasingly using information collected about consumers in order to improve their pricing strategies.
A transparent personalised pricing approach has the potential to benefit both the consumer and the business and customers. If conducted correctly, it will increase the revenues for the company and yield customer satisfaction along the way.