The CX cost of surveillance pricing
Come on, we’ve all done it: walked into a store filled with merchandise we know we can’t afford, admire something on the rack and then, oh so discreetly, turn the tag around so we can squint at the price.
Imagine doing that but instead of a paper tag, you see a tiny LED screen that reads, “Calculating . . . “
Surveillance pricing doesn’t quite work like that, at least not yet. But the effect it’s having on customers, and the reaction it’s generating from lawmakers, demonstrates why it needs to be addressed with extreme care if brands want to maintain loyalty and trust.
A new kind of sticker shock
Earlier this month Consumer Reports announced it had testified at a hearing in support of a bill that would ban surveillance pricing in Colorado. A similar movement is afoot in New Jersey and several other states. A more in-depth investigation and regulation by the U.S. Federal Trade Commission (FTC) seems all but inevitable.
Though it is sometimes called algorithmic, dynamic or data-driven pricing, the approach is the same: a brand uses customers’ information to set pricing based on what they think someone will pay.
It should be obvious to any retailer why this wouldn’t sit right with people, but maybe they need to think through it via a customer experience (CX) lens.
Personalization at its worst
Surveillance pricing can happen in almost any category, but let’s use grocery stores as an example. What do customers reasonably expect when they walk in? That it be clean, easy to find your way around, self-checkout options, and plenty of merchandise with which to compare prices.
What if, instead of being able to choose an item based on a competitive price, the grocery store has implemented electronic shelf labels (ESLs) so that it can quickly adjust pricing based on the customer’s past purchases or other data?
Instead of cultivating a positive relationship that encourages the customer to give the grocery store more of their business, the impulse might be to somehow disguise themselves (or turn off their phone) as they approach the shelf.
Trust is replaced with wariness, and possibly a fair degree of anxiety. Beyond in-store experiences, it’s arguably even easier to this when consumers shop via e-commerce.
Customers will be watching, too
It’s one thing to adjust prices based on a metric like customer lifetime value (CLV). It’s quite another to use data and personalization technologies to squeeze customers for all they can afford.
Even if you’re not a brand that practices surveillance pricing, it matters to CX leaders because it may exacerbate existing concerns customers have about providing their personal data in exchange for an improved experience.
AI and related technologies will face significant opposition if customers believe it will be used against them. They may understand on one level that most loyalty programs are designed to work in a brand’s favor, but they could limit their engagement if they worry that personalization is being weaponized in some way.
CX leaders may need to ensure they explicitly communicate company policies that prohibit surveillance pricing as they digitize and automate various stages of the customer journey. Perhaps they need to provide more context around how products are priced in general.
Surveillance pricing seems so sneaky you shouldn’t be surprised if we see customers — and governments — spending more time watching the watchers.
