Thoughts on Personalised Pricing

As e-commerce web sites and mobile apps collect more data on their consumers, it’s inevitable that the data will trigger the start of a personalised experience.

Personalisation has enabled more relevant products and offers being shown to consumers (increasing conversion), but rarely does it impact price – it often changes order or bias.

Personalised pricing isn’t a new concept, its quite common in enterprise software.  Prices are not published, you engage with sales who will  “sell you a product for as much as they think its worth to you”.   We’re probably more familiar with insurance  where our premium is very much specific to our circumstances and history.  Prices may be quite different for renewal vs a new premium.

For most airlines, the price you receive is the same as any other consumer. However personalised pricing is about to be rolled out across many airlines.

Today, airlines and OTAs often offer personalised offers, a discounted cross-sale (ota) or a discounted upgrade (often post sale) just before departure. But personalised pricing will be a tailored price from the off-set.

In the travel industry, a number of partners (Datalex/Google/etc) have created products to help airlines price dynamically, this has enabled airlines to create products which can be personally offered.

Subject to your browsing and/or booking activity, your price might be different to another user.  No doubt this is a way for airlines to differentiate themselves from OTA and encourage the customer to buy direct.

This will impact the user flow, its likely we’ll see a request for our email address before we get a price so that all pricing can be personalised. OAuth or shared auth models such as facebook, etc, will have a edge as consumer identity will already be readily available.

The concept of personalised pricing should be good (on the assumption that a reduced base fare unique to a consumer is offered but it could well offer a higher cost). The change in consumer flow is likely to be challenging as many consumers visit multiple sites to research their holidays, and this adds another dynamic to the decision making process.

For personalised offers to be personal, the consumer will need to be identified, I wonder how that will work if Mrs Lever is searching for a booking for our holidays but I’m eligible for a personalised offer (discount).

The questions which enter my mind are;

  • Will airlines use this technology to “price as much as your prepared to pay” ? I hope its only ever a discount, but a revenue management’s target is to achieve the best return.
  • Personalised pricing should help airlines maximise utilisation, by managing and promoting for increased segment purchases.
  • Customers who have a high probability to book, are likely to be targeted with different fares.  This should be good for the consumer.
  • Today loyal customers buy the most flights, and often are prepared to pay for premium cabins, they earn points and benefits – personalised pricing could damage the loyalty of these customers, as they may no longer remain loyal if other airlines offer a personalised deals to try to win their business.

Personalised pricing will take some time to mature, the airline’s empowerment to target specific consumers for better yield should benefit both consumers and airlines, but it will add complexities and may back-fire if the UX/flow isn’t well considered.