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Michael Dunne: I’m Michael Dunne. I don’t want to be that guy who hearkens back to the good old days, but there is something to be said for the good old days of static pricing. You went to a store, you saw a price tag and you knew what you’d be paying. But those days are long gone. Today on the show, you’ll hear from a leading consumer watchdog about how dynamic pricing and data mining are gouging us in bold and new ways. From our rideshares to our airline tickets to our online shopping to our grocery store purchases, big companies are finding more and more ways to separate us from our money, and it’s exacerbating the affordability crisis we’re all experiencing. You’ll hear about how they do it and what we can do about it. Lindsay Owens is president and CEO of Groundwork Collaborative and the author of the book “Gouged: The End of a Fair Price and What That Means for Your Wallet.” Lindsay, thanks so much for coming on and talking with us.
Lindsay Owens: Thanks for having me.
Dunne: I actually heard you on our national program “1A,” and I really wanted to talk to you because you had some fascinating stuff to talk about, especially in this era of everything being very expensive and pricing being very different than what some of us grew up with. Let’s start with this: Can you explain what dynamic or surge pricing is and how it works?
Owens: Sure. Broadly speaking, I think pricing has changed a lot in this country. It used to be really simple. Companies figured out how much it cost to make an item. So if you were making lemonade, you needed to know how much the lemons were going to cost you, how much the sugar was going to cost you and how much you were going to charge for your labor. They added a profit margin on top and stuck it on a sticker. That’s not really how things work today. Today, pricing is a highly engineered science, and companies hire physicists and even buy up AI companies to help them do pricing. There are new pricing technologies like dynamic pricing, where prices change according to varying market conditions. That could mean a surge in demand makes prices spike, like for concert tickets or when it’s raining outside. Or it could just be that a company feels it can charge a little more in a certain area, and now, thanks to electronic menu boards at a drive-through or electronic shelf labels in a grocery store, it can change the price of an item. Then we also have technologies like surveillance pricing, which is a little different. This is really personalized pricing: companies looking at your data to set a price just for you. So that’s what surveillance pricing is.
Dunne: When did this start? Was there one industry that did this first, and then other industries and corporations followed suit?
Owens: Yeah, it’s a really interesting question. I’ll give you two answers. For the widespread application of dynamic pricing, I really peg it to 2011. That was the year Uber rolled out surge pricing. It was actually on Halloween weekend of that year. They said, “Look, we expect a lot of people are going to need rides this weekend. Everyone’s going to be out at Halloween parties or trick-or-treating. We’re going to charge more for rides to hopefully bring more drivers off the sidelines.” That same year, Ticketmaster rolled out dynamic pricing. When I was a kid, you waited in line for tickets, and if there were two tickets left, the first two people still in line got the tickets at face value. That’s not how things work anymore. If there are two tickets left, the price will go up thanks to dynamic pricing, and they’ll effectively auction off those final two tickets. But for most Americans, their first experience with dynamic pricing may have come before 2011 if they bought airline tickets. The airlines have actually used dynamic pricing for quite some time, really since they were deregulated under Carter. The price controls went away, and the airline companies had to figure out how they were going to set fares. They started building the early yield management and revenue management systems that became modern dynamic pricing.
Dunne: Interesting. So talk about how our personal data makes it easier for corporations to charge us different prices, oftentimes more.
Owens: Yeah, it’s a great question. Unfortunately, these days companies collect a lot of data on us, and they’ve been doing it for a while, really since the internet took off. You might remember the experience, many years ago, of doing some online shopping and clicking on an item for the first time, and then the very next day getting an email suggesting that you buy that item. The first time that happened to you, you were sort of like, “Whoa, what’s going on here? How did they know I was looking at that sweater?” Now we’re just kind of used to it, right? That’s sort of how companies handle their advertising. But now there’s a new frontier. It’s not just serving you a product they think you might like. It’s serving it to you at a price point they think they can get you to pay, and they do that by collecting a whole host of data on you: things like how long you hover your mouse over an item, how many times you click on an item and where you log on from. Your IP address gives them information about your geography, and because geography in the United States is fairly segregated, it often tells them a little bit about our income or our race. We saw a case of Expedia charging people more for the exact same Manhattan hotel room when they logged on from a more affluent area like the San Francisco Bay Area than people who logged on from a less affluent area. So there are lots of different types of data that companies collect. And of course, we sometimes hand over really detailed data on our purchase history when we sign up for something like a loyalty program and use it to log all of our purchases, which gives companies a really robust look at our buying habits and preferences.
Dunne: Talk a little bit about what Groundwork Collaborative does and how this all fits in with this idea that we’re under a lot of corporate pressure to spend more.
Owens: We’re a think tank that analyzes anything that empties Americans’ wallets. That’s what we’ve been focused on for more than five years now. So we do things like analyze how expensive Halloween candy was this year relative to last year. In case you’re curious, it was 15% more expensive this year on average. But we also investigate corporate pricing practices, and we’ve taken a close look at Instacart, for example. Last year, with partners at Consumer Reports and More Perfect Union, we exposed that Instacart was running experiments on millions of Americans while they shopped for groceries. We’ve also done experiments on StubHub with the “Today” show, showing that StubHub was charging some concertgoers $60 more for the exact same concert ticket, the exact same row, the exact same seat on the exact same night, because it was experimenting with the fees it added on top of the ticket price. So we do a lot of different corporate exposés, and I think we also probably fit the bill of a watchdog in addition to a think tank for that reason.
Dunne: OK, I think of this story as an economics story, but it’s also a technology story. And in every technology story these days, we have to talk about AI. How is AI affecting pricing for consumers?
Owens: Yeah, you’re exactly right. This is a tech story. The tech is what has changed pricing, and that’s what’s contributing to higher price points throughout the economy. Of course, there are other reasons, like the war in Iran increasing energy prices and the new tariffs increasing the price of imports. But there is another culprit: corporate America using more sophisticated technologies to extract more from our wallets. And what kinds of tech are they using? It helps to have cloud computing to store all of the data they have on us. It helps to be able to use machine learning to process that data quickly. It helps to have AI-powered pricing algorithms, as Instacart did when it purchased Eversight. This was an AI pricing company that built turnkey pricing experiments you could add to your platform to get a better sense of how much you could charge customers for every item in their grocery cart. Similarly, Delta recently partnered with an AI company called Fetcherr, which helped it do more sophisticated pricing experiments and figure out how much it could get away with adding to its fares before losing customers to competitors like Southwest or American. So there’s really a cottage industry of AI companies that now help large retailers with their pricing. And in addition to partnering with AI companies or buying them up, retailers hire pretty sophisticated pricing consultants and even in-house physicists and engineers to help them with pricing.
Dunne: Yeah, as I was learning about surge and dynamic pricing, I thought, OK, maybe the last oasis away from that would be the good old-fashioned grocery store. And then I heard you on “1A” talk about how grocery stores are not immune to this. Talk about that.
Owens: Yeah, it’s interesting. When I started writing my book, I thought of personalized pricing in the grocery store as a bit more hypothetical. Sadly, by the time I finished my book, a lot of the hypothetical examples I had explored had become actual evidence of this happening in the world. There are a couple of ways you could imagine dynamic pricing working in a grocery store, but the best example is what companies call scan-and-go technology. You walk into a store like Sam’s Club or Walmart, you pull out the Scan & Go app, and you can scan your grocery items while you’re putting them in your cart. It makes checkout much more convenient. It really expedites it, because you don’t have to scan the items again when you get to the checkout line. We study a lot of patents, and we also study a lot of earnings calls, the kind of conversations companies have with their investors, to learn about their pricing technologies. Walmart had a patent to use scan-and-go technology to change the price of one item based on an item you already had in your cart. The example Walmart used in the patent was that once you had put tuna in your cart using the scan-and-go technology, if you then went for the mayonnaise, it could raise the price of the mayonnaise.
Dunne: Wow!
Owens: I should say that Walmart has said that even though it applied for and was granted this patent, it’s not going to use it and it’s not going to renew it. But this patent doesn’t expire until 2039. So I think it’s really cold comfort for most Americans to find out that these are the types of technologies companies are building, technologies that allow for things like personalized pricing even in a brick-and-mortar grocery store.
Dunne: Talk a little bit about how we’re tracked, maybe in a grocery store but also in our daily retail lives, and what that means for corporations’ ability to charge us more.
Owens: Shopping in a store’s app really makes you a sitting duck. Companies are probably tracking your location, since you’ve probably turned on location sharing. They’re collecting detailed information about your purchase history. There is an example of Uber using phone battery in pricing decisions. So you’re almost out of phone battery, your phone’s going to crash and you’ve got to get your ride home. Similarly, we explored a patent DoorDash had applied for, for something it was building called an “agitation index,” to figure out how hungry or “hangry” you were. That index included 16 factors, and one of them was your phone battery as well. So those are all sorts of things companies can use. We have an example of Target increasing the price of an item in its app when it sees that you’re closer to the store. Let’s say you’re going to buy in the app and then pick up at the store. Once you’re actually near the store, you’re probably certain to make the purchase, right? You’ve already taken the trouble to drive there. So the price point rises. All of these forms of tracking are possible. Walmart also recently updated its privacy policy, and it caused quite an uproar because it included biometric data that the company could collect and share. One of the examples was actually a scan of your retina, so really detailed information. Corporate surveillance is growing in scope and scale.
Dunne: I’m anxious to dive into your book. Talk a little bit about “Gouged” and what it’s all about.
Owens: I wanted to write a book about how pricing has quietly changed in a way that I think is quite unfair, and how it’s time to take a look at how comfortable we are with these new high-tech forms of what I view as gouging. So I started studying the history of pricing, and I learned a lot. For example, we’ve had the price tag in this country for about 150 years. For thousands of years across the globe, we haggled. There was no price on an item. We picked out what we wanted, and then we started negotiating, right? If the seller liked us, maybe we got a good deal. If we had a little dirt on the seller, we probably got a good deal, because we had some leverage. But it was the Quakers in the United States who said haggling is unfair and greedy, and all men are equal under God, so everyone should pay the same amount for the same items. They instituted the fixed price: the same price for you and me for a bushel of apples. And John Wanamaker, the iconic Philadelphia retailer who built the Wanamaker’s department store, instituted the first price tag in his store in the late 1870s. We’ve had it for about 150 years. The price tag provided fairness: You and I paid the same amount. It provided transparency: I knew how much something cost, and I could go look at another store and compare prices. And it provided predictability, which is helpful for budgeting. You used to be able to get a whole sheet of prices in a Sunday circular. You would know how much meat and milk were going to cost at a store for the whole week. Pricing has changed in ways that have made it more unpredictable, more volatile, less transparent and less equitable. You and I are charged different amounts based on a company’s assessment of how much it thinks we can afford to pay or how much we’re willing to pay. That has really eroded a lot of what we got 150 years ago with the price tag. So the book is in some ways an ode to bringing back the fairness in our economy that the price tag offers. But it’s also really a searing exposé of these new tools of corporate profiteering that companies are using, and a field guide to how to fight back as individual consumers, but also with policy at the state and federal level and with consumer movements. Consumer boycotts have been very effective in disciplining some of the worst corporate pricing practices.
Dunne: Well, that leads me to my last question, and I know we probably don’t have enough time to go into all the ways, but are there ways that a general consumer can fight back?
Owens: Personally, given where I come from and my training, I don’t believe it should be up to individuals to duck and dodge and bob and weave and beat the machine. I think it’s important for the economy to be fair, and for there to be laws that keep consumers protected and keep markets honest. So I’m eager for policy solutions here, and I’m happy to see some emerging throughout the country. But I also worked in Congress for many years, so I know how long it can take for lawmakers to get their act together. I know it’s an uphill battle. Industries fight these provisions tooth and nail. So there are a couple of things I recommend. The first is changing how you comparison shop. It’s not enough anymore to just look at the price of an item at two different stores. The price may be changing within the same store, depending on whether you’re in the app, on the website or in the brick-and-mortar store. So I recommend an expansive form of comparison shopping if you’re looking for a deal. It will also eat up your time, which is valuable. It’ll take a lot of time to do that. I also like the idea of turning these corporate pricing experiments back around on the companies. They figure out how much they can charge us by running little experiments on us, and you can do the same. Sit down with your spouse before you book your spring break airfare, and there’s a good chance that one of you will get a better price, that the price will vary between you. If you’re leaving a concert and heading to a bar with some buddies, everyone pulls out the Uber app, and there’s a good chance one of you will get a much better deal. So I recommend trying that as well, although, again, it’s exhausting to think about having to do this in our lives. I also caution about the use of loyalty programs. We’re starting to see loyalty penalties, where companies have better data on you and the discounts start to go away, because they know you’re going to buy certain items regardless of the price point, or that you buy them frequently. So I caution about in-app shopping and the use of loyalty programs, but I also know it’s sometimes unavoidable. There are grocery stores where, if you don’t use the loyalty card, everything’s more expensive, right? So it’s a tough balancing act. But there are some tips in the book, and we’ve proposed a shoppers’ bill of rights, which is 12 basic rights that we think consumers are owed in the modern economy. We’re advocating for those at the federal level and in statehouses around the country.
Dunne: She is Lindsay Owens, president and CEO of Groundwork Collaborative and author of the book “Gouged: The End of a Fair Price and What That Means for Your Wallet.” Lindsay, thank you so much for coming on and talking with us.
Owens: Thanks so much for having me.
Dunne: That’s the show for today. All episodes of “Oregon on the Record” are available as a podcast at klcc.org. Before we go, I wanted to read some comments we got on our show about the new CEO of PeaceHealth Oregon. Safe to say, a lot of people weighed in on the promotion of longtime PeaceHealth employee and former nurse Heather Wall to the top spot. Amanda said, “Congratulations, Heather! To see a local RN work her way up from the unit to the CEO position is incredible.” Melanie added, “She’s an amazing leader, kind, knowledgeable and understands the needs of the community and employees. Best of luck, Heather. Many stand behind you.” Sean said, “Interesting interview. She sounds like a better fit than the previous CEO. It’s time to fill health care management roles with folks who have patient care experience.” Steph said, “Good luck. I’ll be honest, she’s got a lot of work to do, but we need good, solid hospitals, and they need to be for the people, not for the profit, in the end.” And finally, Sandy added, “Hope she starts by lowering upper management salaries and putting patient safety first before profit.” Thank you so much for all of your comments. You can always reach us on our social media platforms and at questions@klcc.org. Tomorrow on the show, Oregon Speaker of the House Julie Fahey will look back on the midterms and look forward to the next legislative session. I’m Michael Dunne, host of “Oregon on the Record.” Thanks for listening.
