The difference? The vast shopping data Safeway maintains on both women through its loyalty card program. Ms. Sanford has a history of buying Refreshe brand products, but not its bottled water, while Ms. Vanek, a Smartwater partisan, said she was unlikely to try Refreshe.
So Ms. Sanford gets the nudge to put another Refreshe product into her grocery cart, with the hope that she will keep buying it, and increase the company’s sales of bottled water. A Safeway Web site shows her the lower price, which is applied when she swipes her loyalty card at checkout.
Safeway added the personalization program to its stores this summer. For now, it is creating personalized offers, but it says it has the capability to adjust prices based on shoppers’ habits and may add that feature.
Airlines, hotels and rental cars have offered variable prices for years. Those prices, however, are almost always based on capacity and timing, or are given to groups — seniors get one discount, frequent users another.
Now grocers like Safeway and Kroger are going one step further, each offering differing methods to determine individualized prices. Hoping to improve razor-thin profit margins, they are creating specific offers and prices, based on shoppers’ behaviors, that could encourage them to spend more: a bigger box of Tide and bologna if the retailer’s data suggests a shopper has a large family, for example (and expensive bologna if the data indicates the shopper is not greatly price-conscious).
The pricing model is expected to extend to other grocery chains — and over time could displace standardized price tags. Even though the use of personal shopping data might raise privacy concerns among some consumers, retailers are counting on most people accepting the trade-off if it means they get a better price for a product they want.
“If our consumer information is right, personalization is really a consumer desire right now, not so much a consumer fear,” said Michael R. Minasi, president for marketing at Safeway.
There are skeptics. Joseph Turow, a professor at the Annenberg School for Communication at the University of Pennsylvania, said shoppers should be cautious. The pricing at grocery stores and other retailers is not transparent enough to give consumers any real power or choice, he said, and “there’s a sense of fairness that’s derailed here.”
In a 2005 survey conducted by Professor Turow, most adult respondents did not know that retailers could legally charge different prices, and more than 90 percent said they would dislike it if their supermarket charged different prices to different people within the same hour.
Retailers say the groundwork has been laid with individualized coupons, which are resoundingly popular. Sites like Amazon have also made consumers comfortable with custom offers and varying pricing, they say.
Kroger, the Cincinnati-based grocer, has long been sending its frequent customers specialized coupons with the help of dunnhumbyUSA, a consumer research firm.
A Kroger spokesman, Keith Dailey, said that 70 percent of customers who received the coupon mailings redeemed at least one of the offers, a high response rate. Kroger has had 34 consecutive quarters of same-store sales growth, which both it and analysts attribute in large part to the coupon offers.
Kroger calibrates prices by studying when someone redeems an offer for, say, ketchup at $1.70 but not for ketchup at $1.80.
“It comes down to understanding elasticity at a household level,” said Stuart Aitken, the chief executive of dunnhumbyUSA. The companies also track how frequently someone buys a product, at what times of the year and when the last purchase was made.