ZIP Code based pricing

About a month ago on November 14, 2011, Nydia Han (link), a television news reporter for the local ABC Channel 6 Television affiliate WPVI in Philadelphia, reported on that station’s nightly news program about the auto glass replacement pricing by zip code strategy that, according to the station, Safelite® Auto Glass was utilizing in the local market.  It was certainly interesting and entertaining to watch the 4+ minute “Action News Investigation” segment that Ms. Han presented on the television stations ABC News Channel 6 “Special Report” (link).  During the segment she asked this question:

“Is it fair for a company to charge you more for its services based on where you live?” 

ABC Channel 6 visited a Safelite® store location in Cherry Hill, New Jersey, asking about replacing a windshield and reported that they were told – “So book it online” – by the store.  She did just that by getting on a computer and going to the Safelite® “Get a quote” web page. It was there that she found that she first had to put in a zip code as required by Safelite® in addition to other required fields detailing the make, model and year of the car; along with the piece of glass she wanted quoted.  Based on her report she then started to put in a number of different zip codes in the area serviced by Safelite®.  Ms. Han reported that what she found was that “for the SAME windshield replacement on the SAME car at the SAME Safelite® shop” she got a number of different prices, depending upon the zip code used for the quote.  She reported that the prices varied about $ 80 for the same windshield replacement on the same car and the question she asked was does that pricing strategy model seem fair to consumers?

Based on the television stations investigation and report, the director of Philadelphia’s Consumer Affairs Lance Haver believes that it is not.  As Mr. Haver said in the report:

“It’s just wrong.  There is no two ways about it.  This is just wrong.  It should be one price for everyone; it shouldn’t depend upon where you live and how much they can gouge out of you.”

So why did Safelite® use zip code pricing?  Their spokesperson Melina Metzger was quoted in a glassBYTEs® article¹ as offering the following in response to WPVI’s investigative report saying:

“Pricing strategies are confidential.  This is a case of an investigative journalist attempting to create scandal where there is none.

Like all businesses, Safelite uses a dynamic consumer pricing model that fluctuates based on many variables, such as what other competitors the customer might choose to repair or replace your vehicle glass, the availability of a technician in [an] area, and the availability of the right part in [an] area. At Safelite, we believe our consumer pricing model to be fair and offer value.”

Okay, Safelite® certainly has the right to use any pricing model it would like to achieve its goals as does any other company.  It is an interesting model when someone on one side of a street who has the same car as someone on the other side of the street can be charged different amounts for the same item quoted and installed by the same store.  But in Safelite’s® defense, doesn’t every company have the right to price its products and services anyway it wants?  Even if the same store location actually does the work and/or those two different people in two different zip codes who might live across the street are sent the same installer to do the work on the same year, make and model of car?

I looked at a number of other auto glass repair and replacement retailers operating in a variety of markets as Safelite® and each of the retailer web sites I visited asked for a variety of customer information along with details of the car and what glass was needed to be replaced.  The web sites I looked at asked for zip codes only to determine what store was closest to the customer.  None offered quotes online.  Each of those web sites also said that a customer service representative would be in touch via email or the telephone to follow up on the quote request from the customer.

Then I visited a number of other web based auto glass replacement quoting sites.  Each of the web sites I visited requested zip code information (In all fairness to them it appeared that none of the ones I looked at actually operated auto glass shops themselves and were aggregators selling customer replacement opportunities to others who would do the replacements).  Those sites require the zip code in order to know where the customer asking for a quote for auto glass replacement service is located. This is so that the web site can make contact with the appropriate retailer(s) who will actually be doing the work for their price quote.

I’m not sure what other businesses use zip codes in pricing models, but since I had some spare time I did a little unscientific survey of local Chicago area businesses where I live by walking around to a number of Walgreens Drug Store locations in different zip codes in the downtown Chicago area where I did a store-by-store price comparison on a variety of non auto glass products.  For my very unscientific survey I chose three different products

1. a 7.8 ounce tube of Crest® Pro Health Fluoride Toothpaste Clean Mint ($ 4.99),
2. a 6 ounce box of my personal favorite GOOD & PLENTY® Licorice Candy ($ 1.59),
3. and a 100 count bottle of Genuine Bayer® Aspirin 325 mg Pain Reliever ($ 6.79).

Granted those retail items aren’t even remotely close to windshields, but I did say my survey was unscientific so I took some latitude.  Anyway, I found that with all of the Walgreen stores that I visited in my survey area, the prices were actually the same for each of the products surveyed.  I also checked their online web site where I found prices were the same. 

I then extended my survey to a few other online web sites.  I visited two very popular retail web sites called Amazon® and the iTunes® Store.  Neither asked for my zip code to determine pricing for the products I checked.

One last observation I made when visiting the Safelite® “Get a quote” web page.  I found it interesting and wondered why they asked the question:

“Are you thinking of filing an insurance claim?” 

If you respond – yes – you’re then asked to provide the name of your auto insurance company from a long alphabetized drop down listing.  Under that drop-down box there is a statement:

“Asking your insurance provider about your policy coverage and deductible is not considered filing a claim in most cases. We can help you with information regarding your insurance coverage. (You can always change your mind before your appointment.)”.

It was easy getting a quote when I didn’t say that it was an insurance claim.  It wasn’t as easy when I answered that I was filing an insurance claim.  Do you think that the price would be the same if you said it was for insurance versus if it wasn’t for insurance?  I was just wondering and I’m…..

Just sayin’………

 

1  Articles reporting on Ms. Han’s ABC Television affiliate WPVI in Philadelphia’s report that appeared in glassBYTEs® Auto Glass and Insurance Industry News on November 15, 2011, and on November 16, 2011.