Online Pricing

University of Pennsylvania professor Joseph Turow calls this "the evolution of a culture of suspicion. From airlines to supermarkets, from banks to Web sites, American consumers increasingly believe they are being spied on and manipulated. But they continue to trade in the marketplace because they feel powerless to do anything about it." His article on the subject appeared in Sunday's Outlook section.

Turow was online Monday, June 20 to talk about Internet pricing and the rules of behavior -- or lack thereof -- in the e-commerce world.

Turow is a Robert Lewis Shayon professor of Communication at the University of Pennsylvania's Annenberg School for Communication. His book on the social implications of database marketing is to be published next year by MIT Press. He is the author of more than 50 articles and seven books on mass media industries, including "Media Today: An Introduction to Mass Communication" (Houghton Mifflin, 1999) and "Breaking Up America: Advertisers and the New Media World" (University of Chicago Press, 1997; paperback, 1999). His continuing work on "The Internet and the Family" has received a great deal of attention in the popular press as well as in the research community.

_______________________

Washington, DC: People need to use the tools that are available to help protect their privacy. First of all, anyone (most people) who is still using Internet Explorer needs to get their head examined. Get Firefox and learn how to block cookies - doubleclick, etc.

Also, anyone who downloads something "free" and just clicks the Next button on the User Agreement screen without at least eyeballing it deserves to get the resulting spyware that will get installed. I have never had any spyware installed on my computer. None. Ever.

Also, people who don't want to take the time to download and install a non-IE browser should at least from time to time just erase all of their cookies. It might be inconvenient in that you would have to re-log into some web sites, but at least it will cause doubleclick and the other spies to have to start all over again tracking you.

Joseph Turow: I agree with everything you write. Unfortunately, I fear Firefox will not be safer tha IE for all that long...

_______________________

Arlington, VA: Are there any signs that the nternet marketplace will become closely regulated in terms of pricing practices, or is it just too far-flung and fly-by-night to be fairly monitored?

Joseph Turow: Differential pricing at retail is quite legal and I see no signs that governments are interested in changing that. Making changes would raise sensitive business and political issues.

_______________________

Ithaca, NY: Prof. Turow,

Thank you for the well-reasoned and thorough article on the subject.

From an economic perspective, won't we reach some kind of equilibrium? If customers begin to object to all the behind the scenes price obfuscation, won't they then be drawn to new entrants who are more clear and consistent? It would seem that the worse current retailers behave, the greater the backlash from customers and the bigger an opportunity there is for a more open and transparent retailer to step in and capture market share. Shouldn't that create an environment that provides options for everyone? Those that don't care so much about transparency (and privacy) can go do business with those companies that have byzantine and targeted promotions, whereas those that want transparency may have to pay a little more for it but would be able to get it. One would think, right?

Joseph Turow: Thanks for the compliment. I'm not so sure that this straightforward distinction will happen. Price differentiations are not the only types of "discriminations" going on. High-end retailers treat certain customers much better than others. Sites show certain customers different products than they show to other customers. The issue is not just pricing. It is the panoply of customer-retail relationships.

_______________________

Springfield, VA: Sometimes when I'm shopping on-line and find a product and a price, but decide to comparison shop at another site, I get a pop-up window offering me 15-20% off if I immediately go back and buy. How prevalent is this practice? If they can offer me this good deal as I'm leaving, I alsways wonder why they did not offer me the better price up front.

Joseph Turow: To be honest, I have not personally seen this happen. It sounds a bit like spyware at work. But it *is* an example of price differentiation at work.

_______________________

Cambridge, MA: Unfortunately we have evolved into a culture of arbitrage. We seek the best price without giving value to sustainability or growing valued business. IMHO, "Walmartization" of American culture is happening everywhere in our culture from residential retail to commercial services.

Do you think that this will lead to a bi-polar split in targeted markets (1) no-service at rock bottom pricing vs. (2) all service with no price constraint?

Joseph Turow: Everyday Low Pricing is indeed a major force in retailing. To compete, stores that cannot do that are going toward the kinds of pricing/service relationships you describe. But for much of the population it won't be either/or. For certain things they will go EDLP; for others, they will go toward the more high-end relationship retailing.

_______________________

Arlington VA: Differentiated pricing was a not uncommon practice used when mail order catalogs came in print. I found out about it while visiting a friend in another part of the country- same catalog-but mine had big-city prices.

Joseph Turow: That's interesting because a few years back Victoria's Secret got into PR trouble when it release catalogs with different prices for the same goods. A retailing rule of thumb, by the way, seems to be that stores reserve lower prices for the web, intermediate prices for the brick and mortar stores and the highest prices for their catalogs. At least, that's whtat the trade press says.

_______________________

Harrisburg, Pa.: Do you have any advice and thoughts on whether states should accept the multistate agreement for charging state sales taxes on Internet purchases? Will state revenues be threatened if states do not start collecting sales taxes on Internet sales? Or, should Internet sales be exempt from charging states sales taxes?

Joseph Turow: This is a bit off topic, but I do believe in state sales taxes on the internet. The reason is that these taxes support a lot of local activities, and there is no reason that states should be deprived of the revenue.

_______________________

Beachwood, OH: Pricing online or otherwise can't be fair when every price ends in "9": e.g., $999.99 for a computer, $2.129 for a gallon of gasoline. (I have received catalogs where every single price ends in 99 cents.) Surely, the "fair price' most have been boosted or (rarely) knocked down to achieve the ".99" standard. Is there any way to put a stop to this idiotic practice?

Joseph Turow: This activity seems to have existed for many decades; it's clearly a psychological ploy. No chance it will disappear.

_______________________

Alexandria, VA: Is there a winning strategy for getting the best price on airline tickets, or is it hopeless for the consumer?

I even read that sometimes the on-line sites sell first class tickets for less than coach.

Joseph Turow: I know of no airtight winning strategy. Some metasites that bring together information from airline sites and travel sites claim to find the best deals, but I haven't found that to be always the case. Spending a lot of time over many days can help, but even that is no guarantee.

_______________________

Falls Church, VA: What about grocery store cards?

Joseph Turow: Grocery store cards are basically vehicles that allow your supermarket to gain enormous information about what your household buys. Supermarket chains are using these data for many thing, including the Catalina coupon printers I mentioned in my article. But they haven't begun to scratch the surface of the uses they can and will make of what they know about us. Of course, you can choose not to have a frequent shopper card. But you will pay a lot more than people who do.

_______________________

Vienna VA: Resistance is futile... Everytime you log on the internet. They monitor what Web sites you go to and know what you are thinking. They know how to make you spend your money. If you want them to know less of you, use cash. The same goes with renting movies and checking out books at the library.

Joseph Turow: Very few people in the US still use only money for their purchases. Far more than 50% of US shoppers use shopping cards in supermarkets, even when they use cash. It's probably unrealistic to exhort people to try to be anonymous. What is needed is more openness by retailers about exactly what information they have about us and what they do with our information. That may cause them to be a bit more cautious than when so much is hidden.

_______________________

Washington, D.C.: Recently I made the mistake of going through what was a extended data capture exercise for a free Costco card. True, the card itself was free but only if you applied for several (at least 2) non-free (but cancellable) offers. This is Gotcha! marketing at its worst and seems pervasive over the Internet.

Joseph Turow: The point, of course, is that nothing is totally "free." And a key point to remember is that increasingly people are paying with their information. Much of that is quite valuable to retailers and so they are willing to use quite attractive offers to entice people to give it to them.

_______________________

Washington, DC: Please comment on sites that comparison shop for you.

Joseph Turow: Comparison shopping sites can be helpful but there are pitfalls. Some require retailers to pay to participate, so they don't have a full range of retailers. Also, be aware that retailers do not always list their most attractive "packages" on the sites for expensive products such as cameras. Their goal is to be among the lower priced stores so they will be noticed. Often, they have special sites connected to the comparison shopping sites that are different from their regular sites. Say you are looking for a high-end digital camera. On the comparison shopping site the store might show you one "package" with body and lens for a particular price. But if you go to the actual store site, you might see sveral packages--more expensive on the surface but perhaps offering better value.

In other words, comparison shopping is not nearly as straightforward as it may seem.

_______________________

RE: Supermarket Cards: Isn't it possible to opt out of the research and still get the discounts?

Joseph Turow: Perhaps. At the Acme near Philadelphia where I tend to shop, the clerk will sometimes can a generic frequent shopper card if you tell him you forgot yours. But I was in Santa Barbara last year and a clerk at Ralph's said to get a discount on the Coke bottle I wanted I would have to apply for a card. I was visiting there for 3 days, but those were the store rules!

_______________________

Atlanta, GA: Please explain more about the grocery store cards. I use them, but other than my willingness to buy what's "on-sale" what could my card say about me? I just don't feel like my privacy is invaded at the supermarket.

Joseph Turow: The stores store information about everything your household buys with the card. That can tell them enormous amounts about your lifestyle. It's even better than going through your garbage.

_______________________

Beachwood, OH: We are sometimes offered the opportunity to "opt out" of information sharing. Why isn't it required that we "opt in" before our info can be shared?

Joseph Turow: Some advocacy groups would love to see that happen. So far it hasn't. In Europe, EU requirements disallow the sharing of data in ways that are legal in the US.

_______________________

Cold Spring, NY: Quoting from an earlier comment, "High-end retailers treat certain customers much better than others. Sites show certain customers different products than they show to other customers."

This is not uncommon in traditional brick-and-mortar establishments. Try skipping a shave and a shower for three days, wearing your rattiest old jeans and a T-shirt, and then go shopping at Tiffanys. See how much service you get...

Joseph Turow: Clearly this is something that probably has always taken place in "real" space. Now, though, it can take place in virtual space. Instead of an unshaven face, the criteria afre now numerical and often unknown to you.

_______________________

Washington, D.C.: Could the same type of software that shows only some products to some customers be used at news sites as well? What if the default start page for a major news organization used cookies to tailor news offerings and make the site stickier to conservatives and liberals simultaneously? That would enhance revenue and avoid offending peoples' political sensibilities.

Joseph Turow: What you are talking about is not at all outside the realm of possibility. In fact, I would argue it will happen. You already can customize your own news on various sites. Down the line, that customization might be enhanced by what the sites know about you. It may happen on TV as well. Same with commercials.

_______________________

Columbus OH: I recently ordered a couple of items from Amazon which were clearly on sale and had prices that were very good but not clearly ridiculous, such as a set of Calphalon cookware for a penny. A couple of days later, I get an e-mail informing me that the order for one of the items was cancelled because it was a price mistake. The other item disappeared totally for perhaps the same reason.

I've seen price mistakes, and my gut tells me these weren't really mistakes but deliberate marketing tests of some sort by Amazon. One of them had the notation "on Sale" and made you add to your cart to see the price. As best I can tell, the only price they have shown is list price, other than the "mistake" price. Any thoughts?

Joseph Turow: It may very well have been a mistake, given how weird the incident was. As Freud said, sometimes a cigar is just a cigar. Of cours, we don't really know when that is. (Neither did Freud, really...)

_______________________

Alexandria, VA: Of course one can always make it more difficult for the marketeers by applying for and using multiple cards, not giving complete information, etc. While that may be somewhat satisfying it doesn't get to the heart of the matter which is strategies one might use to game the system in their favor. How can a user tailor their behaviors to maximize the likelihood of always getting the best price?

Joseph Turow: Many consumers lie about themselves, especially online, but publishers and retailers try to figure that out and sometimes even buy information about you. Also, consider that they lie may become part of your file somewhere. Your point at the end, is exactly what merchants want you to conclude--that the only way out is to try to give them the information that will make you look good. That will lead you to ask if your friend has given "better" information than you to get better deals. And so we have the "culture of suspicion" I wrote about.

_______________________

washingtonpost.com: The discussion has concluded. Thank you for all your questions, and we're sorry they couldn't all be answered.

_______________________

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.