tag:blogger.com,1999:blog-2980246226076317453.post2495568946313514365..comments2024-03-19T04:28:05.042-07:00Comments on Done by Forty: A Defense of Price OptimizationDone By Fortyhttp://www.blogger.com/profile/06246597867355460723noreply@blogger.comBlogger41125tag:blogger.com,1999:blog-2980246226076317453.post-36035825040333611192018-07-12T08:32:20.125-07:002018-07-12T08:32:20.125-07:00The price is the financial value set by an associa...The price is the financial value set by an association at a level they accept is deserving of their advertising. <a href="https://www.thepricer.org" rel="nofollow">the price</a><br />Ashleyhttps://www.blogger.com/profile/11077951382759715984noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-1183623481446604732015-07-06T13:08:36.818-07:002015-07-06T13:08:36.818-07:00I work for one of the major insurance companies an...I work for one of the major insurance companies and haven't heard of this practice at mine, but then again I'm not the one making those decisions. What's interesting is many people don't consider the rate increases and why they happen. While you may not have had anything bad happen near you to your car or house, you have to consider what the entire nation looked like and how a storm may impact you even though it's thousands of miles away. Think about hurricane Sandy an East Coast based storm that essentially shut down a lot of New York. The number of policies in force in that city and the payouts directly correlates with your premium as they have to spread the risk in order to remain solvent. It also doesn't help that interest rates are at historical lows as many companies use the profits from investments to remain solvent and able to pay out claims as well.Duncan's Dividendshttps://www.blogger.com/profile/09459824700149392365noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-86206760294199214402015-07-02T08:19:22.676-07:002015-07-02T08:19:22.676-07:00I've noticed several of my insurance premiums ...I've noticed several of my insurance premiums going up lately. People really need to shop around to make insurance a truly competitive market. I will be spending the weekend comparing car and homeowners to find a better policy.Dane Hinsonhttp://www.financialtourguide.comnoreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-52404705891761599602015-07-01T06:52:05.462-07:002015-07-01T06:52:05.462-07:00The more I think about it the more shaky I am on m...The more I think about it the more shaky I am on my opinion. Because of your point; is there room for me to negotiate BECAUSE they're gouging others? Blah, I don't know! You always make me think!!<br />I've never had any luck negotiating on car insurance mostly because my providers rates are so far below the norm other insurance companies tell me to just go with them because there's no way on earth they can match them. Ha.Femme Frugalityhttps://www.blogger.com/profile/07258982361804942329noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-65455195604413938882015-06-25T11:37:33.593-07:002015-06-25T11:37:33.593-07:00You're bringing up some interesting points.
J...You're bringing up some interesting points.<br /><br />Just because there is room to negotiate, does that mean the supplier is gouging a customer? What level of profit is acceptable? At what point are consumers getting one over on suppliers?<br /><br />I agree that in a monopoly it is a different story (and the monopoly itself is really the issue). But in the case of car insurance, I'm not aware of any situation that would be close to that: the industry is highly competitive.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-4671569623260135312015-06-25T11:35:48.882-07:002015-06-25T11:35:48.882-07:00I hear what you're saying, Andrew, and it has ...I hear what you're saying, Andrew, and it has a feeling of being unfair. The irony is that this is probably happening, in general, to people who wouldn't have any idea or who wouldn't care.<br /><br />Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-90593102516771527322015-06-25T10:36:26.077-07:002015-06-25T10:36:26.077-07:00I get your point, but I don't necessarily agre...I get your point, but I don't necessarily agree. The fact that there is room to negotiate in the first place just tells me that they're already gouging me. It depends on the company, too. Is there actually competition in the area? In many places in the country, at least when it comes to telecom/internet providers, there's still not. Or if there is, your other option is dial up Juno. Yeah, that happened to me once. In major metropolises where there ate options, maybe you could say this isn't unethical, but I have this creeping suspicion that it happens when there's an essential monopoly on the region, too.Femme Frugalityhttps://www.blogger.com/profile/07258982361804942329noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-76677122886275554722015-06-25T07:09:28.871-07:002015-06-25T07:09:28.871-07:00I work in the same industry, DC, and I completely ...I work in the same industry, DC, and I completely agree: it's not a truly free market. Though, I'd say we're a lot closer to a free market than the opposite idea.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-59178780189105061782015-06-25T06:34:21.581-07:002015-06-25T06:34:21.581-07:00When I first heard about it, I thought it to be ve...When I first heard about it, I thought it to be very unfair and shady. I also immediately called to get price quotes for my car insurance as I was up for renewal. Apparently Geico is still the cheapest. Anyways, I see your point that maybe it should go both ways as I also like to get a deal. I'm still unsure how I feel about this policy and honestly I'm not sure penalizing a loyal customer is a good thing in the end...especially if they hear about this.Andrew@LivingRichCheaplyhttp://www.livingrichcheaply.comnoreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-56861333956871751842015-06-24T20:41:59.183-07:002015-06-24T20:41:59.183-07:00I work for a health insurance company (all opinion...I work for a health insurance company (all opinions are my own, of course) and I can tell you it is SO far from a free market. When I read your statement "When I say I believe in a free market, doesn't that apply to the actions of a company as well?" I immediately thought of how heavily regulated my industry is. DC @ Young Adult Moneyhttp://www.youngadultmoney.comnoreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-33694603802428894872015-06-24T13:39:58.977-07:002015-06-24T13:39:58.977-07:00Well, the way the linked stories use the term soun...Well, the way the linked stories use the term sounds more like price discrimination. The reasons why the insurance industry would prefer to call it price optimization is obvious.<br /><br />I definitely think the linked NPR story is worth a listen if you have a couple minutes.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-44084628628686564732015-06-24T12:52:39.393-07:002015-06-24T12:52:39.393-07:00Are you actually referring to the practice of pric...Are you actually referring to the practice of price discrimination? (ie- Getting people to pay more or less for essentially the same thing?).<br /><br />Price optimization is choosing the price that maximizes something at a single price point given a single goal (long term profitability).<br /><br />Price discrimination assumes that a company has enough information to maximize profitability across multiple price points.<br /><br />Since I actively consult on both, I think both are wonderful practices that every company should seek to do. That way I will make more money, and understand how I can get the best deals, even though I am too lazy to deal hunt or negotiate often.Hannahhttp://unplannedfinance.weebly.comnoreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-29678999176304621892015-06-24T06:49:06.616-07:002015-06-24T06:49:06.616-07:00I agree, Abigail, and wish I'd thought of that...I agree, Abigail, and wish I'd thought of that point in the post. I'm actually contributing to the companies' need to use these sort of tactics, by negotiating down rates.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-9203144492661406982015-06-24T06:48:02.606-07:002015-06-24T06:48:02.606-07:00Thanks, Jason. I'm typically of the opinion th...Thanks, Jason. I'm typically of the opinion that consumers really need to be responsible for their own behavior. While I like the idea of an entity watching out for them, ultimately it's a better & more effective solution if people learn to watch out for themselves.<br /><br />The rub is that small segment of consumers who aren't lazy, per se, but actually have some limitations that might prevent them from picking out the bad suppliers.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-44495741876948068882015-06-23T16:08:15.210-07:002015-06-23T16:08:15.210-07:00That's a comparison my wife brought up, Even S...That's a comparison my wife brought up, Even Steven: the surge pricing from Uber. It's a lot more transparent w/Uber than it is with a car insurance company though.<br /><br />The closest comparison I could think of would be airline tickets: where certain customers who aren't really on top of their stuff (e.g. - waiting until the last minute) end up paying a lot more for the same seat & in-flight beverages than those who plan ahead and comparison shop.<br /><br />Is that pricing structure immoral or sneaky?Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-9098822328077317332015-06-23T16:06:04.214-07:002015-06-23T16:06:04.214-07:00It's depressing, but I think you're right ...It's depressing, but I think you're right on about there not being a ton of loyalty in the marketplace anymore. As a consumer, I'm likely to leave a good supplier if a better one comes along, even if the old company has treated me well and service hasn't declined.<br /><br />I also like your take on the reasons why: it's easier than ever to compete suppliers in the information age. Seems reasonable that suppliers would get an edge, too.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-12046913413420873492015-06-23T15:26:11.455-07:002015-06-23T15:26:11.455-07:00I think it's somewhat shady, but you have a go...I think it's somewhat shady, but you have a good point. We can't ask for better prices, then be made when companies we're already with try to compensate for that. Still feels greedy, though.Abigail @ipickuppennieshttp://ipickuppennies.netnoreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-66443656860288016802015-06-23T14:42:05.245-07:002015-06-23T14:42:05.245-07:00I actually really like this strategy by the compan...I actually really like this strategy by the companies. It really puts the onus back on us as consumers to really be in control of our lives, which unfortunately many of us now expect governments and other agency's to do on our behalf. Its also a bit like salary negotiations - there's rarely a fixed salary cost for all employees, and the 'laziest' negotiators will usually get the worst deals.<br /><br />But I do get a little torn depending on which customer I picture - the savvy shopper like you vs the ignorant (or perhaps unfortunate) customer who is being taken advantage of. Probably also depends on the product or service.<br /><br />Fascinating topic DB40, really enjoyed this one!<br /><br />Cheers, <br /><br />JasonJason @ Islands of Investinghttp://www.islandsofinvesting.com/noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-45644184804130477272015-06-23T12:58:33.548-07:002015-06-23T12:58:33.548-07:00I wonder how customers would react if they found o...I wonder how customers would react if they found out about the price optimization. Would people leave or just chalk it up to part of doing business. <br /><br />I always think price surges with companies like Uber and Stubhub and have declined to buy, but being subscribed to a service could be a big difference in my future choice.Even Stevenhttp://evenstevenmoney.comnoreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-18256776593798100462015-06-23T12:05:41.752-07:002015-06-23T12:05:41.752-07:00This is pretty interesting and not surprising (at ...This is pretty interesting and not surprising (at least, to me). As others have said, businesses need to make a profit. If certain customers aren't going to fight a higher bill, then companies can get away with it. <br /><br />Then, as you said, we as consumers have a responsibility to check up on these things. I always check my premiums and I go back and forth between old and new statements to see what, if anything, has changed. If we don't like something, we can leave, as much of a hassle it might be. <br /><br />Honestly, it doesn't seem like there's such thing as loyalty in the market anymore, period. As consumers are looking to pay the least, or be savvier with their purchases, they're going to choose whichever option suits their particular situation the best. Businesses need to make up for that somehow (by preying on those that don't watch their money). It's disheartening, but with so many tools advising us how we can get the best deal, the landscape has changed over the years. Erin @ Journey to Savinghttp://www.journeytosaving.comnoreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-60688909749504043912015-06-23T11:46:14.528-07:002015-06-23T11:46:14.528-07:00I like hearing that I'm not the only one who w...I like hearing that I'm not the only one who waits to talk to a loyalty department to reduce our bill for the next 12 months. :)<br /><br />For whatever reason though, I've found that the bigger the company, the better a deal I can negotiate. I suspect that part of this is due to their scale: they simply have more wiggle to play with than a small company. I also suspect that I am not as aggressive with a mom and pop shop. My emotions get the best of me, as I don't want to cut into the thin profits of a guy and with three kids he's trying to put through college someday. When it's a faceless corporation, the kid gloves come off.<br /><br />That said, I probably would feel better supporting local businesses. <br /><br />It's a quirk of my personality that I have an ax to grind with the buy local, buy small movements. I've always worked for big institutions, and now work for one headquartered in another state. So my personal experiences are shading my views on the topic, likely. I make my living from a Fortune 100, who is thankfully open to hire talent that is not local, and to send their dollars here to AZ's economy.<br /><br />Specifically regarding price optimization, I agree that this would only be the brainchild of a big company. Big data analytics thankfully haven't made their way to main street yet.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-47012600591867150072015-06-23T10:51:28.022-07:002015-06-23T10:51:28.022-07:00Wonderful article and thoughts on the topic, as al...Wonderful article and thoughts on the topic, as always. <br /><br />While I'm an avid fan of the free market, this type of scheme is always cooked up by giant corporate behemoths, who sometimes have a bit of an unfair advantage. <br /><br />Like most of you, I will switch services on a dime and I'm more than willing to sit on hold for 20 minutes with the loyalty department each year to work my bill down to a reasonable amount. <br /><br />However, whenever possible, I try to opt out of the presence of these schemes in my life. In many cases, a bit of research can produce a local or small business alternative. Those guys haven't even heard of "price optimization" and they wouldn't engage in the practice because losing a few customers to them means something. <br /><br />That's who I prefer negotiating with. Face to face, business owner to business owner. If I can't find a better alternative, I usually either opt out of the service completely (haven't had a TV for 8 years) or withstand the annual calls with the loyalty department - keeping them to a minimum (currently just my internet provider who gets my new "contract" taken care of each year in about 15 min). <br /><br />It's a big business world, until you start looking under rocks for the little guys. The initial bill might be a little more per month, but in my experience, they only raise the rate when it's absolutely called for (and long overdue). Plus, you get the feel-good effect of supporting family-owned, local businesses.Em Capito, LCSWhttps://www.blogger.com/profile/07690949620210399390noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-69139149540646952772015-06-23T07:48:04.507-07:002015-06-23T07:48:04.507-07:00Rich, we have the exact same strategy. Moving betw...Rich, we have the exact same strategy. Moving between suppliers (or, at the very least, being willing to switch and to use that as a point in negotiations) is one of the best defenses against any tactic a supplier can use. They are trying to maximize profits, sure, but retaining a customer who is paying regular invoices is at least as an important objective for any company.Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-49824315820515289652015-06-23T07:08:33.077-07:002015-06-23T07:08:33.077-07:00Even if it's a bad practice - they almost cert...Even if it's a bad practice - they almost certainly do this at every turn. Almost every year I receive new mail from companies saying that for one reason or another prices are going up and taxes are increasing, etc. etc. Last year Comcast tried to raise my bill from $185 to $215 by nickle and dime-ing every little thing on my plan. Instead I called their customer retention department and politely explained that I'd like them to cut my service. I explained to them that their recent mail trying to increase my bill by $30 was uncalled for and they no longer valued you me as a customer. Long story short he counter offered and gave me the exact same plan that I was currently paying $185 monthly for a new and improved $155 monthly... SO basically they wanted to up charge me $60 for something they could offer me for $30 cheaper than my original rate.(ironic it was the same proposed $30 increase that made them lose $30) I'll probably cancel next year anyways - the signup bonuses for new customers are too good to pass up, every 2 years I try to switch providers between Verizon FIOS, Comcast, DirectTV and Dish Network.<br /><br />Free Market = My freedom to choose, and I'm happy with that.<br />-RichAnonymoushttps://www.blogger.com/profile/15066375500846820271noreply@blogger.comtag:blogger.com,1999:blog-2980246226076317453.post-42509319989829578932015-06-22T15:03:55.568-07:002015-06-22T15:03:55.568-07:00That's a good way of framing this, middle clas...That's a good way of framing this, middle class. It a bit like a bait and switch (though I presume the increase would have to happen at a renewal).<br /><br />Done By Fortyhttps://www.blogger.com/profile/06246597867355460723noreply@blogger.com