Tag Archives: consumer behavior

Jan 18 2025

DYNAMIC PRICING

As you read this, prices are changing and can vary several times today. Dynamic pricing makes use of machine learning and artificial intelligence to determine changes in the costs of goods and services.

Setting prices for a product of service is an economic art to ensure a profit from the sale of each item. However, a fair price as perceived by customers is also necessary for attracting repeat sales.

Dynamic pricing differs from price gouging, which involves exploitation often because of a natural disaster (hurricane, tornado, earthquake). When an extreme need for water, food, batteries and other necessities exists, a business may radically raise prices on those items: that’s price gouging and is prohibited in many states.

Examples of dynamic pricing include:

  • Online retail prices can vary several times during a day. These variations are based on supply, demand, prices charged by competitors, the season, and clicks for an item.  The price may also vary if purchased on your phone or on your computer.
  • Fast-food businesses and other restaurants may adjust prices based on customer tracking data, demand and peak times.  Dynamic pricing can encourage customer visits on less popular days and slow times.  A backlash can occur when customers know they are being charged more during lunch than at other times of the day.
  • Ticket prices for sporting events, concerts, and Broadway shows in great demand are often higher than other events.
  • Airlines are a major user of dynamic pricing. Weekend airfares are often more expensive than weekdays as are holiday travel prices.  The fare can vary by day, location, weather, and other factors.  Flexibility of travel dates, checking online sites at different times, and viewing online calendars provided by airlines can result in savings.  
  • In addition, dynamic pricing is used by hotels, local stores, supermarkets, gas stations, car rental companies and others.

In the future, expect companies to continue to use technology to change prices many times each day. Consumers need to be smarter, shop around, and be diligent. Bottom of Form

For additional information on dynamic pricing, click here.

Teaching Suggestions

  • Have students monitor prices several times over two weeks to determine changes in an item in a store or online.
  • Have students identify online sites and apps that monitor prices to assist consumers in getting the best prices for various items.

Discussion Questions 

  1. What factors commonly affect price changes for items you buy regularly?
  2. Describe actions a person might take to get the best prices.   
Apr 29 2023

ARE YOU BEING TRICKED INTO BUYING?

Retailing and marketing strategies are designed to encourage you to spend more than you plan. You can avoid these tactics by being aware of the tricks used to make you buy.

  • “5 for $5” implies that you must buy five to get the deal. However, you most likely can buy one for $1.
  • Taller, narrower packages are often viewed as holding more product. Be sure to check the actual weight. Also beware of smaller packages for the same price as before, or even higher.
  • “Up to 50% off” usually means many items in the store are being sold for a discount of less than 50 percent.
  • “A small $5 fee,” instead of “A $5 fee,” may influence you into thinking that is more reasonable than it really is. Also beware of prices that exclude shipping and taxes.
  • Rebates attract customers, but not everyone submits the needed paperwork to receive the refund.
  • Many prices end in 9 to create the impression of a lower price.
  • Beware of promotions that emphasize low payment; be sure to calculate the total price.

Remember: items may not always be “on sale,” but they are always “for sale.”

For additional information on avoiding marketing tricks, click here.

Teaching Suggestions

  • Have students talk to others to obtain suggestions for wise buying.
  • Have students create a visual summary (slide presentation or video) with tips for wise buying.

Discussion Questions 

  1. What actions can a person take to prevent spending money unwisely?
  2. Describe actions you use to make wise buying decisions.    
May 2 2020

Beware: Subscription Services

With growing numbers of video streaming services and product box programs, these subscriptions are becoming the newest budget buster. These seemingly small monthly charges add up, lowering a person’s ability to save along with a potential for increased debt. These ongoing financial commitments leave people with a lower percentage of free cash flow, or unencumbered income.

Subscription service spending is often overlooked especially when the payments are on auto pilot. A $4 or $8 monthly fee may not seem like much. However, research indicates that subscription services are an increasing financial burden as most people underestimate the amount. In one study, 84 percent of respondents estimated monthly spending on these services at about $80; the actual amount was over $110. In addition to video steaming services, people sign up for automatic monthly shipments of beer, wine, contact lenses, cosmetics, meal kits, pet food, razors, vitamins, and other products.

For additional information on subscription services, click here.

Teaching Suggestions

  • Have students survey several people to determine the types and amounts of subscription services being used.
  • Have students create a financial analysis for amounts saved over several years by reducing or eliminating subscription services.

Discussion Questions 

  1. What factors influence a person’s decision to use a subscription service?
  2. Describe suggested actions that a person might take to reduce or eliminate subscription services.