Will personalized pricing only lead to more discounting?
A study from Baylor University concludes the mere presence of a personalized pricing program may encourage some consumers to expect discounts all the time.
The study, published in the Journal of Consumer Behavior, defined personalized pricing, or customized pricing, as “basing prices on individual consumers’ unique purchase patterns, rather than more typical bases for changing prices, including known customer group, time and retailer differences.”
Based on a survey of more than 700 adults, the study looked specifically at how consumers’ “interpersonal attachment styles” impact their responses to customized pricing.
Two interpersonal attachment styles were identified:
- Securely-attached individuals: People who expect others will be available and supportive when needed.
- Anxiously-attached individuals: People with less positive expectations about interpersonal-related situations and constantly worry about relationships.
Securely-attached individuals tend to be older and have higher incomes versus anxiously-attached ones. In both styles, the notion of individualized pricing was viewed positively, according to the study’s findings.
For securely-attached individuals, however, personalized pricing may create the expectation of always receiving discounted prices and cause a large portion of these consumers to feel dissatisfied at paying shelf price. Said Meredith David, Ph.D., assistant professor of marketing in Baylor’s Hankamer School of Business, in a statement, “They like it, but they expect it every time they go to the store. If they visit and don’t receive a specialized discount, it becomes an unmet expectation and they’re disappointed.”
Anxiously-attached individuals, by comparison, “get excited about the attention” because they don’t expect it.” They were also “generally OK” with paying the shelf price or receiving the same discounts as other shoppers.
While stating personalizing pricing programs “could be costly” for marketers, the authors did not conclude they were ineffective. The research aims to provide a “deeper understanding of which market segments may be more or less receptive to customized offerings” and assist in developing campaigns.
“Given the global shift toward a more ‘social’ and interconnected world, we believe that attachment theory will continue to emerge as a useful theory underlying many consumer behavior phenomena,” researchers wrote.
- Everyone Likes A Discount. But Is Customized Pricing The Way To Go? – Baylor University
- Priced just for me: The role of interpersonal attachment style on consumer responses to customized pricing – Journal of Consumer Behavior
DISCUSSION QUESTIONS: Will personalized pricing lead shoppers to expect an individualized discount all or most of the time? Do you see more limited and targeted or broader applications for personalizing pricing programs?