Thanks to everyone who voted in a recent poll concerning drip pricing practices. In this post I will go through the results.
I recently posted about the concept of ‘drip pricing’, namely, low cost advertising where the price incrementally increases as the consumer selects options in the transaction process. The practice is popular in a number of retail categories, including the purchase of online airfares. As I explained in the post, as a small experiment I started with a $29 Jetstar Internet sale fare which, by the time I arrived at the online checkout, would have cost over $100 had I proceeded with the purchase. That said, I also explained that consumer behaviour, and the extent to which we are educated about how drip pricing works, will inform whether any mistakes we make in the purchase process could ever attract the ire of the court.
The Australian Competition and Consumer Commission (ACCC) has recently ramped up interest in drip pricing by suing Jetstar and Virgin Airlines over some (limited) aspects of their drip pricing practices. The ACCC claims that the airlines’ conduct has crossed from ‘cheeky’ into the territory of ‘likely to mislead or deceive’ consumers. The court will make up its own mind in due course about who is right and who is wrong.
As for our non-scientific poll (so there’s no point relying on it people!), let’s have a look at the results and make some bold and no doubt unwise extrapolations.
The first question was intended to probe consumer preferences. Would respondents prefer to ‘check’ a box when making an online purchase, or de-select it? A clear majority of 75% preferred to ‘check’ the box, whereas 25% prefer to ‘uncheck’ it. Of course this is speculative, but perhaps the majority of respondents like to be in control by making active choices throughout the transaction. The minority might prefer to ‘uncheck’ because they enjoy the convenience and possible time efficiency in having some of the decisions already made on their behalf, even if each ‘checked’ box means that the overall price will increase.
Interestingly, some airlines spruik their decision to have pre-selected boxes as part of the online purchasing process on the basis that this is intended to meet consumer preferences. Based on the above result, this might be a tad of an over-statement.
The second question also went to respondent preferences. Interestingly, a very strong result of 94% considered that drip pricing was a problem because it made it harder to compare airfares. Only 6% had no issue, on the basis one could assess the cheapest option then add to it.
The third question was linked to consumer behaviour. Was the respondent more likely to de-select a pre-selected option in the online booking process, or go with it? 88% of respondents said they would de-select the option, and only 12% would go with it. Interestingly, this majority result indicates (amongst this group of respondents at least) that they either read the checked options closely or have been educated sufficiently to understand that pre-selected options are just that: Options.
The result of the fourth question is therefore a bit of a surprise. Asked whether the respondents had ever bought an airline ticket based on advertised price, only to be surprised at the checkout by the total sum payable, a large majority of 82% said “YES”! whereas only 18% said “NO”. This goes against all of you who say you pay attention to the detail…! In fact, another explanation might be that this experience took place some time ago, before the respondent was educated about how drip pricing works. In other words, whilst this is the kind of result which might raise a superficial eyebrow of interest, it is hard to take too much from this.
Case law in Australia is divided about whether ‘surprise at the checkout’, if the purchase does not proceed, is a sufficient error capable of leading to a finding that the conduct which induced this mistake was misleading or deceptive. Some judges have said that, by this point, the consumer has been ‘lured into the marketing web’, and so the conduct complained of is unlawful. Other judges have said that an actual purchase must have occurred before the consumer realised his or her error for the conduct to breach the Australian Competition and Consumer Law.
The responses to the fifth question were also a bit surprising. I’m impressed at the number of you who say you read the fine print! 31% said that “no 6 point word will escape my notice”. That’s impressive! 69% of you said your eyes glaze over at the terms and conditions.
Finally, again going to the question of consumer behaviour (and this question was asked in the present tense), 65% of you said that when confronted by a $29 advertised flight your instinct would be to query the price by the time you finished the transaction. However, 35% of respondents responded: “Awesome! Now I can fly to Sydney for $29.” This is interesting because it indicates that some of you are not yet educated about how drip pricing works, and that you will take the advertised price at face value.
Here, it is worth noting that only a minority of respondents were inclined to assess the (hypothetical) price at face value. Yet, the law does not deal in minorities and majorities. Conduct can be characterised as misleading or deceptive so long as the proportion of people impacted is significant in some way. However, the test for ‘significance’ often involves discounting anomalous outcomes. For instance, the person distracted on their phone whilst making an online purchase might be regarded as an outlier.
Thank you to the respondents, and see you for another poll soon!