Context:
The Centre recently warned about “drip pricing”, saying it can surprise consumers with “hidden charges”.
Relevance:
Facts for Prelims
Understanding Drip Pricing:
- Definition: Drip pricing is a pricing strategy employed by businesses where they advertise only a portion of a product’s price upfront and gradually reveal additional charges during the purchasing process.
- Nature of Additional Charges: Initially, certain unavoidable fees, such as booking fees, service charges, resort fees, credit card fees, local taxes, or add-ons like internet access, may be concealed.
- Disclosure Method: These undisclosed costs are then revealed one by one or “dripped” to the buyer as they progress through the purchasing journey.
- Common Usage: Drip pricing is prevalent in industries such as hospitality, travel, and online payments.
- Purpose: Companies may adopt this strategy to attract customers into initiating the purchase process, banking on the likelihood that customers might not want to restart their search upon discovering the added costs.
- Consumer Perception: Consumers often find drip pricing frustrating as they prefer upfront clarity regarding the total cost of a product or service. The gradual revelation of additional charges can lead to a sense of being misled.
- Impact on Comparison Shopping: Drip pricing can complicate comparison shopping and disadvantage sellers who opt for transparency in their pricing strategies.
- Example: An instance of drip pricing is the sale of an airplane ticket without including baggage fees, which are revealed later in the purchasing process.
-Source: Hindustan Times
