Personalize Pricing for the Nostalgia Prone

Personalized pricing—a form of adaptive pricing—can noticeably improve a retailer’s profitability. Different customers are charged different prices for the same item depending on what demographic and psychographic data indicate the customer is likely willing to pay. But chances are your customers will get upset if they discover they’re among those who paid more. Consequences could include complaints to the retailer, criticism of the retailer to potential customers, and fewer subsequent purchases from that retailer.
     After citing studies which demonstrated those negative consequences, researchers at Karlsruhe Institute of Technology and Bern University of Applied Sciences report a way they’ve found to ease the consumer disgruntlement: Stimulate nostalgic feelings.
     The researchers’ explanation for why this works begins with the idea that when someone discovers they’ve paid more than others, they feel the seller has isolated them. Nostalgia is a social emotion, in which the attraction to events and objects from one’s past includes thoughts of significant others from that time. When people are lonely, their interest in nostalgia grows. Nostalgia eases loneliness, and thereby the feelings of isolation which produce the negative consequences of personalized pricing.
     Study participants considered a situation in which they paid €350 for a weekend course and discovered that others paid €175. Some of the participants were also asked to reflect on a personally nostalgic event. Other participants were asked instead to reflect on a personally ordinary event.
     On the whole, the “nostalgic event” people reported less price unfairness. However, this was most true for the “nostalgic event” people who had previously been identified as prone to nostalgia. Nostalgia proneness was defined as disagreement with items such as, “Modern business constantly builds a better tomorrow.”
     The researchers advise that for shoppers likely to have nostalgia proneness—evidenced by their retro brand purchases, for instance—personalized pricing can improve your profitability while keeping the risk of shopper irritation relatively low.
     Nostalgia appeals generally loosen consumers’ purse strings. Researchers at University of Minnesota, University of Southampton, and Grenoble École de Management asked study participant in one group, selected at random, to think about their past. The remaining participants were asked to think about recent or future events. Then each participant was asked how much they’d pay for a set of items which were described by the researchers. The group who’d been asked to think about their personal past came in with higher bids overall.

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