Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Drip Pricing” Drip pricing is where a headline price is
advertised at the beginning of an online purchasing process and additional fees and charges which
may be unavoidable are then incrementally disclosed or ‘dripped’.
This can result in paying a higher price than the advertised price or spending more than
you realize.
Drip pricing is frequently associated with the hospitality industry.
Airlines may show the price of having a seat on a plane, but may exclude baggage fees,
seating fees, taxes, and other costs that consumers associate with being part of the
typical travel experience.
Hotels may show room pricing that does not include local taxes or resort fees, or may
not include the cost of services such as access to the gym or pool.
Companies use drip pricing for products that may face heavy price competition.
This is because consumers are most likely to shop around for the best price for these
types of items.
This creates an incentive for companies to try to show the lowest price possible, even
if the price that they show is not what the consumer will ultimately pay.
Companies may utilize this pricing approach in order to entice a customer into starting
the purchase process, at which point the customer may not want to restart his or her search.