Ofcom is taking a look into 'personalised pricing'

Ian Scales
By Ian Scales

Aug 14, 2020

via Flickr © cea + (CC BY 2.0)

via Flickr © cea + (CC BY 2.0)

  • The use of online trickery to shift product, hook subscriptions and so on is already widespread
  • But arm an online seller with user profiles and AI to steer customer interaction and the sales process and things may start to get ugly
  • To clamp down in advance or not, that is the question: Ofcom says it first wants to find out what the pubic considers is ‘fair’

UK regulator Ofcom says it’s starting to take a close look at so-called ‘personalised pricing’ in telecoms. This is where the seller or provider varies pricing and T&Cs in real time depending on what it knows about the buyer. Ofcom says it wants to ensure that where personalised pricing is being done, it’s being done ‘fairly’. 

As you can probably already tell, this is likely to be a highly contested issue since, in a commoditized market such as telecoms and broadband access, being able to monkey about with pricing and contract terms is one of the few ways to differentiate services and, in many cases, squeeze out a margin. As a result, defining ‘fairly’ is bound to be a topic of hot debate. 

What’s it all about?

Being able to vary pricing between groups of customers is pretty-much standard practice and passes off without much complaint seeing that it’s usually a way of offering an advantageous deal to customers dependent on certain conditions (t&cs apply).

The problems come when and if each customer is offered a personalised price calculated against what the provider knows about him/her - credit history, past buying behaviour, age, and so on. 

What’s changed is that today, or very soon, a service provider will be able to analyse personal data and basically assemble a useful profile in real time. This creates a powerful asymmetry in the power balance. In effect, with modern tech and profiling info (thanks Google, Facebook Amazon etc ), a high tech online sales process can put all the cards in the virtual hands of the seller. 

The seller has a data centre and powerful analytical software, the buyer his or her wits and what they already know about the product and maybe some retail pricing data. 

Simple example

Think how well a salesperson (or an ‘intelligent’ sales process), might assess the likely optimum price-point for a particular customer based on what they know about him/her?  

In the real world a good salesperson uses instinct and/or existing customer info (sales history, credit rating, age, marital status etc) to make an educated guess and start a bargaining process. 

But with modern technology working for the seller, the sales process has the whip hand. 

The danger is that while in the real physical world, full-on salesmanship would likely only be deployed for relatively high ticket items - cars and furniture, for instance - online it can be deployed at full throttle all the time complete with customer profile information and a range of  ‘tricks of the trade’.

Some of those tricks already have their online versions. Here are three: 

#1 There’s the ticking clock. Real salesperson: ‘If we can get this signed today it means I can get you this deal.’ The online equivalent does the same with ‘Offer runs out in 20 minutes’  or something similar flashing up on the screen

#2 “I know we have other people looking at this...  That one turns up online as ‘X people are currently looking at this room’ (usually a complete lie), ‘book now’. 

#3 My favourite is the difficult exit or Hotel California option where signing up is easy, exiting a subscription, say,  requires a time-wasting and patronising conversation some of which may be with a bot, with a real person coming in to seal the deal (or rather seal the continuation of the old deal). 

Imagine these techniques and many more, with ever-increasing sophistication (machine learning) being deployed online continuously to present and negotiate personalised pricing.  As the technology involved in  products and services become more complex - options and discounts, special deals, technology breakthroughs, extra features offered and so on - the humanly-brained buyer might find itself completely outclassed. At the very least a buyer will need a virtual shopping and negotiating assistant on hand to ensure fair play. 

Given all this I suggest that Ofcom will have its work cut out defining the limits (if there are any) of personalised pricing, but it’s a conversation that clearly needs to be had.

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