If you buy a pint at two PM on a Tuesday, you’ll pay £3 a pint, and you’re probably an alcoholic. Fast forward to eight PM on a Saturday night, and that same pint in that same tub cost you £8. Although I don’t drink alcohol, so this doesn’t really affect me. But that’s not really the point. We don’t ignore things don’t affect us on this channel. This is known as dynamic pricing or surge pricing. On paper, it’s like taking in the woods in the middle of winter. A bit of a pain in the ass, but ultimately nobody got hurt. But now every company and their dog is trying to incorporate it into their business model. And during a cost of living crisis where people are trying to budget more than ever, it’s causing more headaches than speed eating ice cream. Let’s look at how it works, when it’s applicable and when it really isn’t.
Part 1, the price is right. Dynamic pricing or surge pricing is where a business changes its prices when market conditions change its basic supply and demand economics. More people want thing price go up, few people want thing price come down. Another great example is egg shaped chocolates. In March before Easter Sunday. You’re gonna pay a premium, but after Easter Monday, you’re gonna get shed loads of the stuff for pennies on the dollar.
Way back in the day, market vendors would adjust their prices based on factors like the time of the day, seasonality and local demand. This would all be done by hand, the first industry to embrace the modern dynamic pricing techniques that we’re used to today was the airline industry. In the 1970s, airlines used algorithms and so called yield management systems to adjust their ticket prices based on factors like seat availability, time and till departure and your historical booking data. Next up was e commerce when some smart ask realized that all of our shopping experiences are different. So it would be a piece of piss to show custom deals to each of us, but it would be equally as easy to spike the price when the algorithm thinks they’re able to shake more money out of us. Like a high school bully and a lunch room. When Jeff first launched his little bookshop, if a book went out of print but you had a copy to sell, the dynamic pricing algorithm would assume that people would pay a Scrooge Mcduck amount of money for that book. And if that didn’t put you off, the free 99 delivery price would. Yeah, but that was 200 years ago. They’re not gonna conduct business like that today. Hope, wouldn’t they? Me and a half, because this says differently, as does this article about the FTC’s current investigation into Project Nessie. Not that one, the modern version of Amazon’s original dynamic pricing algorithm that in 2023 made them an extra $1 billion that $643 in today’s money. Then Google and Yahoo. Took out patents, which allowed them and them alone to use our search history to change the prices of the things we want to buy.
A prime example, this is used to be charged for if you were browsing for products on an iPhone or a MacBook because they assumed you had money to burn, which, you know, is a fair Assumption. Most Mac fan boys would buy a if it had the apple logo engraved into it. And yes, even though I had a business account, they wouldn’t let me record in the store, which is where the camera is outside.
And this shot looks weird. Then in the 20 ride sharing apps like Uber and Lyft realize this was a great way for them to make more when the demand went out, like during a hostage situation when people are fleeing for their lives.
I’m Ron Burgundy. You stay classy, San Diego.
And go yourself. Uber, as with the subscription economy, it work for one company. So now everyone is trying to get in on the action from housing to public transport. And Sadik, I don’t think only it the Taylor Swift style system is the look you actually want to go for. Swifty’s weren’t exactly happy about paying $800 or more for a ticket just because everybody else is trying to buy one at the same time, we’ll make you think people are gonna wanna pay more for train tickets just cuz everyone wants to get home at the same time.
Part 2, quakers. Now it’s worth flagging where price tags came from. You see, before the late 19th century, most retail goods did not have a fixed price, and customers were expected to haggle with the store owner. The Quakers found it immoral for different customers to pay different prices, or what we now know as price discrimination. It was yet again the legendary John Warner maker who introduced Quaker honest pricing in his stores in 1874, saying he believed that if everyone is equal before god, then everyone should be paying an equal price. Other stores then followed suit, not only because it was more moral, but because it cut down on the time and cost to train staff in haggling. If only they had robots back then, they could have cut down the staff cost completely.
Part 3, what’s the big issue? Well, voiceover Simon prices usually don’t change that off them. And the reason for that is actually beneficial to both the customer and the business. If I wanna take my fictional family bowling, I don’t expect it to cost $500 for a single lane just because it’s half term. Equally, if I wanna get away from my fictional family for a few hours and drink away the pain, I don’t expect pub chains like slug and lettuce and yeast to charge me more during peak hours. This gives me a reason to dynamically take my business elsewhere. And Coca Cola tried a vending machine that would increase the cost of a nice, cool drink when the temperature outside of the machine went up. As if selling 20,000 bottles a second wasn’t enough for them. So what everyone should just become a Quaker now?
Actually, no. Me and a hat. Dynamic pricing has its place, just like the subscription economy. Hell, I’ve got a subscription service linked below. The problem is when there’s no cap on how high the prices can go and when industries, particularly ones that sell essentials like supermarkets, start to use it, that’s when you know you’ve gone full late stage capitalism. And I’m the conspiracy theorist.
Well, me in another hat I purchased in the summer because it was half the price. It was during the winter. Supermarkets are installing digital price tags so they can change the price of products quicker than your iPod changes its tune. Couple this with how they’re mining our data through their loyalty card scheme and boom, you’ve got a shareholder’s wet dream. And it’s not just them. Take Ticketmaster, for example. They’ve given an artist a choice to turn on dynamic pricing, and record labels are loving it.
Now, you might be thinking, surely this is just a free market system. If apps wanna make more money, their prices will go up in line with demand. And you know what? Me and a hat, I half agree. Really? Yeah, I feel dirty saying it, but I half agree with you. Artists only have a certain number of shows in them in their lifetime. So of course, they should be at a premium. And if they can make more money, they can and should, but there still needs to be a cap on those prices or else only the 1% or even the not point one % can enjoy live music and everyone else has to remortgage their home to get a seat at the metaphorical table. It’s worth flagging that Billy John has been fighting this fight for years, and I’ll let him explain how. You don’t.
Sell the first couple of rows. No, I got tired of looking down the first row. Tickets are always scalper tickets. So there are always somebody who paid way too much money to be a big shot and sit in the front row. Donna, go, you know what is. The real fans are in the back. So we decided we don’t put the front rows. The first two pros on sale. The road crew fans out to the back of the room before the show and they find kids all the way in the back and they bring them to the front to.
Row pure class. And look, at the risk of repeating myself, dynamic pricing can work in some industries, but not all of them. Once more for the people at the back, just because you have more money or a class by the app as a desperate old man doesn’t mean you should be charged more.
Kinder. Part 4, Uber, as I’ve already mentioned, Uber jacks up their prices during crisis events and weather warnings. Now, in fairness, they did pinky promise to stop doing this, and in theory, they did. Although to be even fairer, they now just give you an approximate end price and don’t let anyone know when their prime times are, which, you know, basically results in the same thing for customers. So, you know, swings and roundabouts. Uber also jacks up the price every single New Year’s Eve, which, you know, black cabs have been doing for years.
Now, according to former Uber board member Bill Gurley, surge pricing incentivize 70 to 80% of drivers to work later into the night cuz they knew the fees would be higher. Although this sounds great when you are financially incentivizing something, people will gain the system. In this case, drivers collectively held off accepting rides in certain areas until the price went up to a level that they were happy with, leaving loads of people alone in the early hours in the morning without a ride home. Oh, and in totally unrelated news, Uber knows when your phone battery is about to die, and so are most desperate for a lift. So they Jack up the price.
Then part 5, what can we do about it? Not a lot. This is usually the point in the video where I like to say that we can vote with our wallets and just not play their games. The problem is a lot of dynamic pricing is coming to household essentials, which, you know, are hard not to purchase if we, I don’t know, want to eat. It’s also in a lot of industries where we’re buying on emotion. So we’re willing to pay a little bit extra for that experience like a concert, which again is really hard to avoid. Like, what are we supposed to do? Not support our favorite singers? I don’t think so. Ultimately, dynamic price thing is here to stay until we, the great unwash demand that it’s removed industry by industry. Got speed.