How online sellers fool you into thinking you’ve got the best deal

The tricks to getting the best possible deal on a purchase aren’t what they used to be. If you’re over 50, you probably remember going to multiple appliance stores to compare prices on what you were about to buy.

These days, that’s an online exercise for most people, and thanks to what we call ‘algorithms’, the ‘best’ deal you find online might not be the best deal at all.

Such are the vagaries of the world of online buying. All the big online sellers use a practice known as ‘price discrimination’. Price discrimination might sound like an illegal practice, but in Australia – despite any arguments about the morality of that – it is perfectly above board.

Companies that use the practice prefer to use the less provocative term ‘dynamic pricing’ or ‘personalised pricing’, a term they will no doubt hope evokes a sense that you’re getting a deal they’ve set up just for you.

And in many ways, they’re right. The deal they’re offering will be tailored to you – or more specifically, to the highest price the algorithm thinks you are willing to pay.

Everything old is new again

Online price discrimination might sound like the latest step in the evolution of sales techniques, but the practice has its roots in practices more than 150 years old. According to Dr Rob Nicholls, associate professor of regulation and governance at UNSW Business School, fixed pricing has really been in place since the 1870s.

“Before about the 1870s,” he says, “almost all prices were set by negotiation. “To quote Life of Brian, ‘You’re supposed to haggle!’” 

The concept of a price tag has only really been around since the late 1800s, says Dr Nicholls.

Can you beat the system?

Now that you know about these practices – which some might describe as ‘nefarious’ – is there anything you can do to tip the scales back in your favour. The short answer is yes.

The algorithms set a price they think you will be willing to pay based on your internet browser history. These algorithms can collect data that goes right down to a granular level without infringing on your privacy rights (in a legal sense at least) and use that data to tailor a price ‘just for you’.

But there are things you can do to lift your chance of getting a truly better deal. 

1. If you’re a regular internet user, you’ve probably seen a notice about ‘cookies’ when visiting a new website. This notice will usually give you an option of rejecting or accepting some or all of these cookies, which are little behind-the-scenes add-ons used to collect data. Selecting the option that reads something like ‘Use only cookies needed to navigate this site’ will help keep your habits – spending or otherwise – private.
2. Use ‘private’ mode when browsing. All the major web browsers provide this option. Firefox gives you the option to open a ‘new private window’, while Google Chrome uses the term ‘new incognito window’.
3. When doing an online search, rather than going straight to Google, try using a search engine that does not optimise advertising. Duck Duck Go is one such engine.

Turning the odds in your favour when it comes to making a purchase has become more complicated and sellers will undoubtedly find more new and different ways to get you to pay more in future. 

For now, there are still ways to get the best deal, but it might take a bit of extra hard work, at least for your computer or phone keyboard fingers.

Have you been burnt by an online purchase? What tips do you have for getting a better price on a purchase? Why not share your thoughts in the comments section below?

Also read: Curb your enthusiasm – a guide to winding back online shopping