If you’re selling online, you’re probably selling in New York City – in the Bronx, in Brooklyn, in Manhattan, in the Queens and in Staten Island. Imagine for a moment that you are walking down the streets of New York, trying to sell your products and services door-to-door, instead of doing it online. When it comes to price, I guess you would soon understand that it wouldn’t hurt to raise your prices a bit in some neighborhoods of Manhattan, while you should rather keep them low if you want to sell in Brooklyn or in the Bronx…
Income Inequality in New York City
In fact, New York City has a problem with income inequality, which reflects in a dramatic way the income disparity in the United States. The income gap between the richest 20% and the poorest 20% in the borough of Manhattan is as big as the one you have in countries like Sierra Leone, Namibia, and Lesotho, for instance. Although the free market is at work on the one side, while corruption and political violence are active on the other, the outcome is the same in both cases: The wealthy and mighty are always accumulating more and more advantages at the cost of the rest of the community. A story as old as our civilization.
Implementing a Geo-Targeted Pricing Strategy
What does it mean for your eCommerce? If you are selling your products and services at the same price in all boroughs and neighborhoods of New York, you are definitely leaving money on the table in Manhattan, while you are losing customers in Brooklyn and the Bronx. This is far from being optimal, and you are losing business day after day in favor of brick-and-mortar stores that have optimized their prices to drive the highest profits in the neighborhood.
There is a solution to improve the competitiveness of your online business: Geo-targeted price optimization. Based on the IP address of your website visitors, it is an easy thing to retrieve their zip code and to find out the mean household income in the neighborhood. This provides you valuable insights to start personalizing your prices and adjust them to your visitors’ physical location. And this can increase dramatically the profitability of your business.
The Ethical Way of Doing eCommerce
Since the free market alone produces increasing inequalities, there is a need to counterbalance its effects, and your eCommerce can be part of it. People tend to live in neighborhoods where they have the opportunity to meet like-minded people, sharing not only their interests but also their social situation. With the right geo-targeted pricing strategy, you can drive higher margins in neighborhoods where people have a higher willingness to pay, and use this supplementary income to sell at lower prices in other locations. This will not only increase your sales volume, but also the overall profitability of your business – and contribute to a fairer distribution of wealth within the society.