Drip pricing

Drip pricing is a pricing strategy used by merchants to gradually increase the cost of a product or service through the addition of various fees or charges. It is a common practice in many industries, such as hotels, airlines, and car rentals. The goal of drip pricing is to attract more customers by offering an initially low price, and then adding on additional fees and charges as the purchase process progresses.

The most common form of drip pricing is when a merchant offers an item for a low base price, then adds additional fees for items such as taxes, delivery costs, or processing fees. These additional fees can add up quickly, as customer goes through the funnel, resulting in a total price that is significantly higher than the initial advertised price (Russel Brunson 2015).

Legal limitations of Drip pricing

This pricing strategy can be unfair to customers, as it does not provide a clear indication of the total cost of the product or service. It can also lead to confusion and frustration for customers, as they may not be aware of the additional fees until it is too late.

To protect consumers from unfair pricing practices, many countries have introduced legislation to regulate drip pricing. In the UK, the Consumer Rights Act 2015 makes it illegal to advertise a price that does not include all additional fees and charges (CRD UK Parliament, 2016).

In Poland, this type of pricing has been subject to increased scrutiny and regulation, in order to protect consumers from unfair and deceptive practices. In 2017, the European Ministry of the Economy issued a regulation prohibiting the use of drip pricing. The regulation states that, when advertising a product or service, the seller must include all fees, taxes, and other charges, so that the total cost of the product or service is clearly and accurately presented to the buyer.

The regulation also states that any additional fees, taxes, or other charges that are added after the advertising must be clearly and accurately stated. This gives buyers the opportunity to make an informed decision about the price of the product or service, and prevents them from feeling misled or taken advantage of (Alexander Rasch, 2018).

The goal of the regulation is to ensure that buyers are able to make an informed decision when purchasing a product or service. By making it mandatory for sellers to include all costs, taxes, and other charges in their advertising, the Polish government is helping to protect consumers from unfair or deceptive pricing practices

How businesses avoid legal limitations of drip pricing

Despite the introduction of these laws, some businesses are still trying to find ways to avoid the limitations on drip pricing.

• This includes using tactics such as bundling services together, using discounts and promotions to encourage people to buy, or using additional charges and fees that are not disclosed until the very end of the purchasing process.
• Businesses can also use subtler tactics such as dynamic pricing, which involves charging customers different prices based on their behavior or past purchases. For example, if a customer has previously purchased a product or service, the business may offer a discounted rate to encourage further purchases. This type of pricing is not always transparent and can be difficult for customers to understand.
• Another tactic used by businesses to avoid drip pricing laws is to use "add-on" fees and charges. These fees and charges are often optional and can be added or removed at the customer’s discretion. However, they can be difficult to identify, making it difficult for customers to make an informed decision.

Presumption of drip pricing

The use of drip pricing can be beneficial for both merchants and consumers. By offering an initially low price, merchants can draw in more customers and increase their sales. For consumers, it can mean getting a better deal, as long as all fees and charges are clearly disclosed.

Ultimately, the use of drip pricing is, in a way, legal and effective way for merchants to attract more customers and increase their profits. However, it is important that merchants follow all applicable laws and regulations and provide clear and conspicuous disclosure of all additional fees and charges. Doing so will ensure that consumers are able to make informed decisions, and that merchants are not engaging in deceptive or unfair pricing practices.

Drip pricing — recommended articles

Bait and switch advertising — Trade allowance — Tying arrangement — Resale price maintenance — Push money — Parallel importing — Trade discount — Captive pricing — Manipulation advertising

References

• Brunson R. (2015) "DotCom Secrets", Morgan James Publishing.
• CRD UK Parliament (2015), "the Consumer Rights Act", TSO publishing.
• Rasch A.,Thöne M. (2018), "Drip Pricing and its Regulation: Experimental Evidence", Düsseldorf University Press.

Author: Mykyta Bitkov