The other day I helped my mother-in-law reserve a rental car for several days using Avis.com.
As we moved through the check-out process of finding a suitable vehicle and then comparing pricing to others, I noticed an interesting phenomenon. The first prices were something I thought to be fairly reasonable and then – when we selected the car – came to the subsequent screen which saw an overall price increase.
What at first was a fair price soon became over $300 on the very next screen!
So, what gives?
I realize that taxes are a part of the deal when ordering something online today. But, an extra $35 in fees? Terrible.
And, the way they did it left a bad taste in my mouth.
What is drip pricing?
This process of slowly revealing the real price to customers is called drip pricing. A retailer initially presents a headline price of – for example, in my case – their rental vehicles (the $248 price) and then later on in the check-out process reveal their hidden fees (in the above case, an extra $35 + taxes).
While you may be thinking “What gives, Aaron – I see this all the time when I'm ordering something…” – but in some parts of the world (like Europe) – drip pricing is illegal. Retailers must disclose the “all in” cost of something upfront when selling online.
In America, it's called clever marketing. And, I think we've gotten so used to this practice, we don't think anything of it.
Plus, it works.
Consumer Reports cited a 2018 study conducted with data from online ticketing website, StubHub, which ran a pricing experiment “in which one group of shoppers was shown the full ticket price upfront, including fees, and a second group saw those charges only at the end when they made a purchase. People who saw fees at the back end spent almost 21 percent more than those who received all-in prices at the start.”
In another study in 2004, it saw that going from a 6% surcharge to a 12% one – while leaving the customer a bit more dissatisfied – did not cause them to spend any less.
“…even with the high surcharge of 12%, the consumer's purchasing intentions did not change, even if their satisfaction levels did. This suggests evidence that drip pricing could be an effective pricing strategy, as it lures consumers in with a low base price and adds smaller charges, which the consumer does not recognize, as they are focused on the base price.”
This is amazing to me. Even when we aren't happy with a fee, we often will pay it if we've gotten far enough into the buying process.
And, when an experiment proves to be that effective, marketers are going to add it into their toolbox.
Who are the bigger culprits of drip pricing?
According to Wikipedia, many of these industries actively practice drip pricing strategies (and you may be already familiar with their pricing structures):
- Event ticketing
- Hotel and resort booking agents
- (Car rental sites)
What can you do about drip pricing?
While there is no all-out crackdown on drip pricing in the US, the FTC has issued some warning letters to hotel operators, citing their practice of drip pricing and warning them to reveal all resort fees upfront.
So, what can be done about these fees?
If you note that what you initially see is not what you are seeing at the end, it's important to let your opinion be heard. Connect with the retailer and let them know you weren't happy about the price to reveal so late in the game. Request the “all-in” pricing upfront.
Also – if you have options – feel free to leave the cart. Many retailers know when a customer has abandoned their cart. And, if they see it often enough they'll likely get the hint to back off their drip pricing strategies.
We can also take our concerns to the Better Business Bureau or government agency. In the past, I've had great success with reaching out to the respective state attorney general office with a complaint.
Lastly, keep your head about you and be a smart buyer. Go through the buying process to ensure you have all the info needed to make the best shopping decision. You may have to get further into checkout before you get the whole price.
What are your thoughts?
So, what do you think? Is drip pricing that big of a deal and you just accept it as the price of shopping online today? OR would you like to see something done about it?
Update 6/20/19: Even after thinking the price of a rental car we ordered for a short trip was going to be a certain pre-paid price, we got hit with more fees after using Avis. Just beware that what you think you are paying, may not be the full price.