Drip pricing

Source-This post on Drip Pricing is based on the article “Centre issues warning against ‘drip pricing’. What is it?” published in “Hindustan Times” on 8th May 2024.

Why in the News?

Consumers often faces drip pricing while purchasing any commodities or services. Considering this, the Department of Consumer Affairs asked consumers to reach out to the ministry if they observe ‘drip pricing’.

About Drip Pricing

1. About Drip pricing: It is a marketing strategy where initially only a portion of a products or service’s total cost is shown. The full price is disclosed progressively as the customer moves through the purchase process.

2. Strategy used: This strategy often involves concealing essential fees like taxes or booking fees, or excluding necessary add-ons such as internet access or amenities that are essential for the use of the product or service.

The price advertised in print, emails, or on websites, known as the “headline price,” may not accurately represent the total cost that the consumer will ultimately pay.

3. Why companies indulge in Drip Pricing- Businesses use drip pricing to attract customers by starting with a lower price, and hoping that they will continue with the purchase even after seeing additional costs later.

4. Impact on Consumer Behaviour: Drip pricing can make it difficult for consumers to compare prices effectively.

5. Sellers offering transparent prices at disadvantage- Drip pricing may put sellers who offer more transparent pricing at a disadvantage.

UPSC Syllabus: Indian Economy