By Dylan Marks
With large corporations like Cineplex and TicketNetwork recently under fire for having hidden fees within consumer purchases, experts say drip pricing is leaving some customers feeling taken advantage of as more cases come to light.
The phenomenon of drip pricing is a strategy where only a portion of an item’s total cost is initially shown to the consumer.
Nicholas Li, an assistant professor of economics at Toronto Metropolitan University (TMU), said “drip pricing occurs when you are initially advertised one price, then by the time you complete the transaction there are a variety of other fees that get added in making the final price higher.”
Li also said that corporations tend to use drip pricing to hide price increases.
“Similar to shrinkflation, there’s the idea that consumers will be less sensitive to these kinds of price increases,” said Li. “Obviously customers don’t like hidden fees, but it’s clear they do like them more than ‘In-your-face’ price increases.”
Fourth-year arts and contemporary studies student Alexa Valente said she has caught on to the process of drip pricing and has noticed how it affects her purchasing habits. “From what I understand…when there’s a price, and then when you go to checkout, there’s all these additional add-ons to that price,” she said.
“If I’m buying something like a ticket to something I’m super eager to go to, then I don’t think that I would really let it bother me,” said Valente.
Michael Boutros, an assistant professor of economics at the University of Toronto, talked about how drip pricing tends to be a factor that persuades a customer to not complete their purchase.
“If you tell the consumer it’s only $10 and then down the road you add a $2 fee, you’re relying a little bit on the psychology of the mind to get them in at one price,” said Boutros.
“Obviously customers don’t like hidden fees”
He added that once a consumer has been through the process of selecting a product, they may already imagine themselves using that product which could make it harder for them to say no, even with the extra fees.
This is a phenomenon known as sunken cost fallacy. According to a report from the National Library of Medicine, “sunken cost effect is the tendency to persist in an endeavor once an investment of effort, time or money has been made.”
Li also stated that sunken cost fallacy occurs when nothing added to a fixed price can influence a consumer’s decision to complete a purchase. “Once consumers have invested time in the purchasing decision they are less likely to back out when they see the final price. This is businesses exploiting basic human psychology,” said Li.
“If it’s something that’s already going to be $100, what’s an extra dollar or two”
Fourth-year fashion student Gabrielle Rogozynski had similar experiences with sunken cost fallacy. “If it’s something that’s already going to be $100, what’s an extra dollar or two, especially if I already went through the entire process of putting my address in, putting my card in, etc,” she said.
“You’re not going to walk away from one of the movies that you’re going to see with your friends because they charge you an extra dollar,” Boutros said. He added that, for example, if 1,000 people watch movies that night, an extra dollar per person is an additional $1,000 for Cineplex to earn in hidden fees.
Drip pricing is against the law in Canada and is being constantly investigated by the Competition Bureau of Canada.
“This is businesses exploiting basic human psychology”
Recently, the Bureau has taken measures against companies that were alleged to be taking unfair advantage of consumers through the use of drip pricing. These companies include SiriusXM Canada, Discount Car & Truck Rentals Ltd., TicketNetwork and most recently, Cineplex.
According to a statement from the Competition Bureau of Canada sent to The Eyeopener, “The Bureau has taken action against drip pricing for many years under the Deceptive Marketing Practices provisions of the Competition Act, notably in the online sporting and entertainment ticketing, car rental and satellite radio subscriptions industries.”
According to the Competition Bureau of Canada, drip pricing is against the law unless the additional fixed charges or fees are imposed by the government, such as sales tax.
The Bureau also stated that, legally, reparations vary from case-by-case and that “the consequences associated with engaging in deceptive marketing practices depend on which provisions of the Competition Act the conduct violates.”
Justine Simoneau, a law associate at Gowling Wragge Lawrence Graham & Co’s Montréal office, said she can “foresee how the nature of drip pricing is the consumer seeing only the added fees when they get to the end of the purchasing process, which puts them in a difficult situation where companies make profit from that.”
Rogozynski said, “I was trying to get Taylor Swift tickets recently and I was looking on websites where there was no hidden fees.” She would prefer purchasing tickets from a company that’s more honest and transparent as it makes her feel more valued as a consumer.
“I would say it’s frustrating, because it almost seems like [companies] are trying to get away with charging more,” Rogozynski said.
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