How Online Marketers Use Your Personal Data to Set Prices
Most people who walk into the same store on the same day, expect to pay the same price if they pick out the same item. But it's a whole different story for online shoppers.
Many online marketers are changing the price in a flash to capitalize on how much they think you're willing to pay. They're gauging it by knowing where you live, what you buy, and estimating how much you make. All of this information is collected from your history on the Internet.
ABC News discovered that companies known as data brokers are putting online shoppers into consumer categories with names like "shopping addicts," "frugal folks," and "high spenders."
Personal data such as your home location is then being used to offer prices they think you'll pay.
We decided to put it to the test. Two ABC producers, both in our New York office, attempted to purchase one pack of pens from Staples.com at the same time. The price on one computer was $15.19 and on the other $13.79.
ABC News viewers from all over the country are getting a variety of different prices for the same pens. The pack was $14.49 when a Charlotte, North Carolina, viewer attempted to buy it and it was $13.79 in Los Angeles.
If you're in a city where prices are generally higher, you're also likely to see higher prices online.
Staples tells us if you find a lower price, they'll match it.
"People are saying, hey wait a minute, this is a problem. I don't want companies discriminating against me and showing me different prices without my knowing," said Maneesha Mithal, associate director of the Federal Trade Commission. "It's a pretty wide web, and I think a lot of consumers will be fairly surprised to hear that this is going on."
What are consumers to do about this?
One way is to hide who you are when shopping by using free software like Tor. But make sure to check the price uncloaked in case it's cheaper that way.