Centre issues warning against ‘drip pricing’. What is it?
The Centre recently warned about “drip pricing”, saying it can surprise consumers with “hidden charges” and advised them to seek assistance if they encounter such surges in charges on a product’s MRP (maximum retail price).
On April 28, the Department of Consumer Affairs, on X, wrote, “Alert: Drip pricing can surprise you with hidden charges. If you come across such situations, reach out to NCH 1915 for assistance or WhatsApp 8800001915 . #DripPricingAlert #HiddenCharges #ConsumerAwareness #NCH1915” (NCH is National Consumer Helpline).
The department, managed by the Ministry of Consumer Affairs, also shared a sample demonstrating how drip pricing applies to a customer, with an example of a shoe priced at ₹4,700. After all the charges included in the drip pricing are added, it goes up to ₹5,100.
Earlier in March, US President Joe Biden said that his administration is working to end the practice of “drip pricing” and other “junk fees” that can “rip customers off.”
“Have you ever used a food delivery app to order a meal, but noticed a much higher end price than when you started searching? This is called “drip pricing” – and it adds up. My Administration is working to end this practice and other junk fees that rip consumers off,” President Biden wrote on X.
What is ‘drip pricing’?
– Drip pricing is a strategy where only a portion of an item’s cost is initially displayed, with the full amount revealed later during the purchase process, as defined by Investopedia.
– The charges often involve withholding essential fees like local taxes or booking charges, or omitting necessary add-ons like internet access or amenities, which may be required for product or service usage.
– The price advertised, whether in print, email, or on a website (referred to as the “headline price”), may not accurately reflect the final cost to the consumer.
– Companies prefer to present a lower initial price and later disclose mandatory fees to avoid alarming customers with unexpectedly high prices.
– Drip pricing complicates comparison shopping and disadvantages sellers who provide more transparent pricing structures.
How does it work?
The rationale for employing drip pricing is that shoppers who are invested in the shopping process may commit to a purchase once additional fees are revealed, even if they had not initially factored in.
Businesses might employ a drip pricing tactic to attract customers into initiating the purchasing process, banking on the likelihood that once started, customers may be less inclined to restart their search upon discovering additional costs.
