DRIP PRICING

Disclaimer: Copyright infringement not intended.

Context

• The Centre recently warned about “drip pricing”, saying it can surprise consumers with “hidden charges” and advised them to seek assistance if they encounter such surges in charges on a product's MRP (maximum retail price).

What is ‘Drip Pricing’?

• Drip pricing is a strategy where only a portion of an item's cost is initially displayed, with the full amount revealed later during the purchase process.
• The charges often involve withholding essential fees like local taxes or booking charges, or omitting necessary add-ons like internet access or amenities, which may be required for product or service usage.
• The price advertised, whether in print, email, or on a website (referred to as the “headline price”), may not accurately reflect the final cost to the consumer.
• Companies prefer to present a lower initial price and later disclose mandatory fees to avoid alarming customers with unexpectedly high prices.
• Drip pricing complicates comparison shopping and disadvantages sellers who provide more transparent pricing structures.

How does it work?

• The rationale for employing drip pricing is that shoppers who are invested in the shopping process may commit to a purchase once additional fees are revealed, even if they had not initially factored in.
• Businesses might employ a drip pricing tactic to attract customers into initiating the purchasing process, banking on the likelihood that once started, customers may be less inclined to restart their search upon discovering additional costs.

SOURCE: HINDUSTAN TIMES