How Companies Use Drip Pricing to Charge You More

Imagine you need to buy a plane ticket to your cousin’s wedding. You find what you think is the best price available for your destination. But the airline you choose charges for carry-on luggage, which is not included in the base price, so you add that as well. You also pay extra to get a window seat. Oh and wait, you need to check your bag and of course there is a fee for that. By the time you get to the counter, you’ll have to pay other fees you didn’t expect, such as fees for printing your boarding pass, in-flight services, and more. The price is much higher than what you were originally offered, but now you can’t back down. You’ve already done all this work. And plus, it can’t be much more than any other airline, right? You book your flights and move on – because honestly, who has time to open another tab and repeat this whole process with another airline?

You’ve fallen right into the trap of drip pricing.

How Companies Use Drip Pricing to Charge You More

According to the Federal Trade Commission, businesses are using a technique called ” drip pricing ” to take advantage of people who shop online. “The term drip pricing refers to the practice of a seller advertising a portion of the price of a product or service and then revealing additional fees/surcharges after the purchasing process has already begun,” says Dr. Shelle Santana, assistant professor of marketing at Bentley University.

Essentially, people will compare the starting price of a product to the competition, but then when you start adding other amenities like a well-earned window seat, you’ll be less likely to open a new tab and compare the final price to the price. competitor. So, you’ll likely end up paying more money, often unnecessarily, because the hassle of comparing final prices is too tedious. Harvard Business School says we often don’t think it’s worth starting over —and we pay for it.

According to a study in the Journal of Economic Behavior & Organization , consumers may become less willing to shop around for better deals due to drip pricing, which results in increased profits for companies that practice it. How much depends on the business, but for example, a Marketing Science study found that StubHub increased its revenue by 20% when using drip pricing.

How to stop falling for drip pricing

President Biden is working to do something about trash collections in general, but we don’t have to depend on the government to start doing something about it. The good news is that drip pricing is a psychological tactic, so we can combat it. The term for this feeling of resistance to starting over is called present bias preference . You value what’s right in front of you more than what’s in the future. Half the battle is won if you understand how present preference works and can make informed decisions.

Maybe it’s the threat posed by Biden’s promise to eliminate trash fees, or maybe it’s all the bad publicity drip pricing has received, but some apps notorious for drip pricing are implementing methods that let you see prices more transparently. Airbnb has a toggle option to “show total price before taxes,” and Gametime , a last-minute event ticket resale company, has an “all prices” feature in Settings that you can turn on to see prices including taxes and fees upfront . .

If you know that drip pricing influences your purchasing decisions, try to avoid purchasing from companies that engage in this practice: UberEats, eBay, Lyft, Instacart, Etsy, Ticketmaster, Postmate, and StubHub are some of the well-known companies that use drip pricing . According to the Wall Street Journal . If you notice drip prices while shopping, find another company to give your money to.

Also, try to make it easier on yourself. If you know you won’t want to compare prices on your phone, shop only on your computer. And use tools like Honey and Camelcamelcamel (Amazon only) to check prices across multiple websites and even price history to determine if now is the right time to buy. For travel, you can use tools like Travel Arrow or these websites to make sure you’re getting the best deal.