An accidental observation has got me thinking - or more aptly, it's got me nervous about what others might be thinking. Specifically, a multivariate test of a design treatment that gave greater prominence to pricing and payment options had a drastically different conversion ratio during one week than the next.
Specifically, one week there was a large take-rate difference in the design option that made a favorable payment option more prominent, and the following week the take-rate difference was significantly less. Someone instantly recognized that the second week was a pay week for people who are paid bimonthly, on the first and fifteenth, and reasoned that people are less attentive to cost or financing options when they are flush with cash.
It wasn't long before someone suggested that people might even be willing to pay more for a product after a recent payday than later in the month. It was one of those things that's said with the kind of smile that suggests "if anyone questions the ethics of this I will play it off as being just a joke, but if nobody glares at me then let's give it serious consideration." Fortunately, it was set aside, but I have the gnawing sense a seed has been planted.
Ethical Quagmire
There is likely some truth to the matter: that many people fail to budget personal expenses and spend more liberally when they have more money in their bank account. And as such, it would likely be profitable to increase prices after paydays (as many companies issue paychecks on the first and fifteenth of the month, or every two weeks, it follows a fairly predictable pattern). Especially in smaller towns with a few major employers who are all on the same pay schedule, local merchants are likely able to predict when they will get a rush of customers whose temporary wealth has put them in a spending mood.
But at the same time, I have the sense that the practice is ethically dodgy. Payday price discrimination has nothing to do with the value of goods or the cost of supplying them or even the value that customers place on the benefits of ownership, but merely predicting when customers will be less mindful of their budget so that a merchant can take advantage of a moment in which they are cognitively vulnerable to making reckless spending decisions. It seems to me in the nature of taking advantage of a customer who is drunk or mentally impaired, in that it has nothing to do with the value of the benefits being provided, merely exploiting a moment of inattentiveness for money.
It's particularly disturbing to me in the digital age because it is now much easier to raise or lower prices in an instant without any evidence of the price having been different just days or moments ago. In the pre-digital world, items carried price tags and sales promotions were done with ink on paper, meaning it would represent considerable cost to change prices (to re-label merchandise in a store or print up a price list) such that there would be some hard evidence that something sketchy was done. If products have no physical labels and prices are disclosed on a website, they can be changed with a click of the mouse, and unless customers undertake the effort to record price information, they will be unaware of the change or assume it's their own memory that is at fault for having imagined the price was lower yesterday than it is today.
The ability to instantly change prices is compounded by the ability to profile users as individuals, to track their online behavior and gather information from various sources in order to detect a single individual's price sensitivity and predict the moments in which their judgment may be impaired, such that a price may be instantly changed for one specific user, rather than all customers at once, such that the price that is offered to a specific shopper at a specific moment can be based on a very accurate prediction of their vulnerabilities. To some in the marketing industry, that is highly interesting - but to the consumer, it is highly disturbing.
It's Already Being Done
There is the argument that such things are already being done - again facilitated by technology that reads demand of the moment and adjusts prices accordingly. A CX practitioner who works for a rental car company openly admitted that his firm flexes the pricing of rental cars according to inbound flights - such that prices are higher at times when flights are arriving and travelers are likely to be in desperate need (anyone who failed to reserve a rental in advance, or whose plans have changed at the last minute, is going to get seriously gouged). And I have personally experienced fluctuations in airline ticket prices - checking airfares during a break at work, returning home to purchase the ticket at a higher price, then checking the price the next morning to find the price had gone back down.
However, I don't have the sense that these vendors are adjusting price according to my failure to consider value, but merely adjusting to a perceived demand pattern without considering the reason for the pattern itself. That is, the system that decides when to raise or lower prices is based on the demand of the moment but does not consider what is driving that demand. That's pretty much how the stock market and commodities exchanges have always done business. And it's often times done in slow motion - consider that a hotel at the beach does not generally change its prices by the moment, but it is certainly known (and accepted) that prices are higher in seasons when there is elevated demand.
The difference here is that reacting to demand in the market is different to exploiting moments of weakness in individual consumers. To raise the prices of all automobiles for all consumers during the early months of the year because people often go car-shopping with their tax refund seems like a reasonable business practice - but to raise the price for a specific customer because she is female, uneducated, young, recently divorced, and just got paid last week seems highly questionable.
However, a practice is not to be deemed ethical simply because it's already being done or because people seem indifferent rather than outraged by it. Common practice and emotional response are poor metrics for ethics. Likewise, the covert nature of an action does not necessarily mean it is unethical, though such is often inferred. If anything, the fact that sellers are more knowledgeable should translate into an ethical imperative for them to be more circumspect about their behavior, because they cannot claim ignorance.
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Even having meditated on the matter, I am still of two minds about the ethics of payday price discrimination. It seems to me a greasy practice, something that customers would strongly object to were they aware of it - and perhaps that is the more important consideration for customer experience.
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