We have become accustomed to prices surging for plane tickets as seats fill up or for hotels during peak travel seasons. While enraging, it has become normal practice. Similarly, we know that certain products are cheaper when demand is lower. But what if retailers are ratcheting up prices based on a profile that’s unique to us, taking into account our age, location and personal spending habits? What if the cost of a product is based on how much we desperately want or need it?
This is surveillance pricing and according to a study from the Federal Trade Commission (FTC), the US government consumer watchdog, it happens all the time.
In July 2024, the FTC asked eight companies, including Mastercard, JPMorgan Chase and Accenture, to hand over information about the data they collect on customers and how it is used to influence pricing. These firms work with at least 250 clients that sell goods or services, ranging from grocery stores to apparel retailers.
The study reveals that these retailers frequently harvest people’s personal data to better understand their spending behaviour, then use this information to tailor prices accordingly. They track everything from demographics and postcode to mouse movements on a webpage. Even the type of product, left unpurchased in an online shopping cart, is used as an indicator of how much they’re willing to pay.
The legal landscape around surveillance pricing is murky. While current laws prevent retailers from raising prices following a major event such as a natural disaster or public health emergency (which is known as price-gouging), there are no laws that explicitly ban surveillance pricing.
In the US, the FTC has the power to regulate surveillance pricing. Following last year’s study, then–FTC chair Lina Khan recommended that the agency continue to investigate surveillance pricing practices in the US. However, following Donald Trump’s re-entry into the White House earlier this year, Andrew N. Ferguson has replaced Khan as chair and it’s unclear if the investigation will continue.
A balancing act
Price differentiation is a powerful concept in pricing strategy and the ability to improve it is a major opportunity for businesses. This data-tracking technology can be used to deliver more relevant pricing for consumers. It also has the potential to increase revenues and margins and can reduce costs by enabling businesses to operate more efficiently.
However, surveillance pricing also opens the door for unethical processes and fuels existing fears people have around data privacy. A survey by the Pew Research Center found that 81% of respondents were concerned about how companies use the data collected about them and 67% had little to no understanding about what companies did with their data.
Businesses must tread a careful line between granular price differentiation and ensuring customer privacy. Retailers will always want to know how to target their customers more effectively. Surveillance pricing offers a tempting solution, but businesses must also consider what happens when trust is betrayed: people might simply stop coming back.
We have become accustomed to prices surging for plane tickets as seats fill up or for hotels during peak travel seasons. While enraging, it has become normal practice. Similarly, we know that certain products are cheaper when demand is lower. But what if retailers are ratcheting up prices based on a profile that's unique to us, taking into account our age, location and personal spending habits? What if the cost of a product is based on how much we desperately want or need it?
This is surveillance pricing and according to a study from the Federal Trade Commission (FTC), the US government consumer watchdog, it happens all the time.
In July 2024, the FTC asked eight companies, including Mastercard, JPMorgan Chase and Accenture, to hand over information about the data they collect on customers and how it is used to influence pricing. These firms work with at least 250 clients that sell goods or services, ranging from grocery stores to apparel retailers.
