Everyone has heard the joke about one size fits all clothing, “One size fits most”. But what about personalised pricing models for things like home loans or airline tickets? What happens when one price fits most?
This year at an airline industry conference it was announced consumers may soon be charged based on the wealth of the area they live in, which sparked anger from consumer groups. The question needs to be asked, what are corporations doing with consumer’s data? And more importantly what should they be allowed to do with it?
Industry experts agree the move toward personalised pricing of airline tickets has been a long time coming. The current strategy is likely to be based around offering deals and packages to targeted people much like a customer loyalty program. The intention is to retain existing frequent flyers rather than charging someone extra because the airline knows they really want to be on a flight.
The other industry looking at adopting personalised pricing is lending. One major bank has recently entered a partnership that will offer consumers’ discounts on home loans and credit cards based on their credit score.
The banks see it as offering smart consumers with a good credit score deals, which act as a loyalty program. Offering risk based quotes on lending is not new, but the way in which the data is collected to offer those quotes are.
According to Australian Broker, G&C Mutual Bank CEO Dave Taylor said this will drive much needed innovation and competition in the lending market, “What we have tried to do is be a lot more transparent. We started talking to SocietyOne about six months ago and we’ve restructured some of our products in a more transparent way to acknowledge and make clear to consumers that they will get a better deal if they have a better credit score.”
Offering different prices to different customers is a double edged sword. If a consumer is smart and understands the power of their choice in the marketplace and how to use it, it can be empowering. The other side of the coin is making sure that personalised pricing is used in an ethical way and people are not offered better deals based on their influence on social media or higher prices because of the wealth of their neighbourhood.