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Drip pricing: Three psychological reasons we fall for the technique - and how to resist the it

Drip pricing costs online consumers in the UK 拢1.6bn a year, with hidden obligatory fees boosting the price of things like flights, concert tickets and train rides. Here, author Patrick Fagan explains how psychology makes the technique so successful for businesses.

Drip pricing
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The practice of drip pricing - where only part of a product's price is originally advertised, but hidden obligatory fees push up the final cost - has become "widespread" in the UK, according to the government.

Here we explain how companies use the practice effectively and how you can resist the techniques.

On 4 September, the government put forward a proposal to crack down on hidden charges for online consumers.

It came after new research from the Department for Business and Trade (DBT), which said drip pricing has been used by 54% of providers in the entertainment industry, rising to 56% in hospitality, and to 72% across transport and communication sectors.

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A prime example of drip pricing is a cheap flight that only looks good because the airline has hidden extra costs for things like luggage fees, offers of faster boarding, travel insurance and picking your seats.

As a result of the practice, UK online consumers are being charged £1.6bn a year, the government said.

The DBT is now consulting on what action Whitehall should take to clampdown on the technique.

This could mean the adding drip pricing to a list of commercial practices considered to be unfair and so prohibited under the Digital Markets, Competition and Consumers Bill, or making it a requirement that information about mandatory fees is presented to consumers at the start of the purchasing process.

But, how does the practice of drip pricing actually entice consumers?

Patrick Fagan, co-author of , says drip pricing works because it exploits psychological weaknesses.

The book, which explores the most deceptive techniques in an attempt to expose the hidden tactics used to influence people, explains that as humans, we are all cognitive misers.

This means we have relatively small brains for dealing with the universe's infinite choices, so we have to rely on fast, subconscious shortcuts to make our decisions, Mr Fagan says.

And drip pricing exploits three of these.

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Firstly, it relies on anchoring and adjustment. When you see that £20 flight to France, you anchor to the first price you see, and fail to compensate when the extra fees are revealed. None of us are very good at doing the maths in our heads, and the fees are small enough to not feel painful.

Pic: iStock
Image: Pic: iStock

Secondly, it uses the foot-in-the-door technique. You're more likely to agree to something if you've already taken a small step towards it. The seemingly attractive price for that flight draws you in, which makes you more likely to follow through with the final, higher price.

Thirdly, it exploits the sunk cost fallacy. It takes time and effort to find the right day, time and airport for a flight. Once you've reached the later pages where all the costs are revealed, you'll probably feel like you don't want to lose your investment of time and effort by shopping elsewhere: it's just not worth the fuss.

How you can resist

Mr Fagan says that people are inundated with nudges like these every day.

And while the government's clampdown on drip pricing is a positive step, it is ironically "a drop in the ocean considering the sophisticated psychological tools used by retailers (and even the government itself)," he says.

Fortunately, it is possible to resist these techniques - we don't have to rely on the government to save us.

Mr Fagan says there are three things you can do:

  • You can get a level of immunity by learning about these techniques, so you're more likely to spot them in the wild;
  • You can plan ahead and set a budget, as having structure makes you less vulnerable to manipulation;
  • You can make sure you don't buy in a "hot" emotional state (for example, if a site says you have to buy in the next 15 minutes, take a breath and ask yourself why).