TITLE: Johnson & Johnson Boasts Big Earnings After Suing to Keep Prices High
https://accountable.us/johnson-johnson-boasts-big-earnings-after-suing-to-keep-prices-high/
EXCERPT: After suing to block the Biden administration’s cost-lowering Medicare Drug Price Negotiation Program, pharmaceutical giant Johnson & Johnson announced $21.38 billion in Q1 2024 sales, exceeding Q1 2023 and bringing in $5.35 billion in profit.
Medicare is currently negotiating lower prices on Johnson and Johnson’s Xarelto, Stelara, and Imbruvica. Between June 2022 and May 2023, Medicare spent more than $11 million combined on the three drugs to benefit more than one million patients.
TITLE: Welcome to Pricing Hell
https://www.theatlantic.com/ideas/archive/2024/04/surge-pricing-fees-economy/678078/
EXCERPT: Modern pricing “innovation” took off with the airlines. From the late 1930s through the 1970s, airfares were set by the government, so airlines competed on the basis of amenities. (In 1977, the syndicated columnist George F. Will reflected on his preference for United Airlines because it offered macadamia nuts instead of peanuts. “The macadamia nut is one of God’s more successful efforts,” he wrote. “It has a cachet that the pedestrian peanut cannot match.”) That changed with the Airline Deregulation Act of 1978, which preceded decades of “fare wars.” Discount carriers like People Express were soon undercutting the legacy airlines and encroaching on their routes. This forced the old-timers to revamp their pricing practices.
In his book Revenue Management: Hard-Core Tactics for Market Domination, the pricing consultant Robert Cross recalls watching a Delta employee hand out discounts for the last empty seats on a flight in the early 1980s. Cross knew the plane would fill up with business travelers at the last minute, so he suggested holding those seats and charging a higher fare. This idea—selling seats for a lower price if you book early and a higher price later—transformed the airline industry, and saved the legacy airlines.
From there, the field of revenue management, or adjusting price and availability based on real-time shifts in supply and demand, boomed. Multitiered pricing spread to airline-adjacent industries like hotels and cruise lines, and then beyond to telecoms, manufacturing, and freight. Companies adopted sophisticated software to track real-time supply and demand, and started hiring pricing consultants or even in-house pricers.
The internet, as you may have heard, changed everything. Consumer advocates hailed it as the great leveler, predicting that online shopping would facilitate price comparison and push prices down. Like many early forecasts about the internet, this one looks painfully naive in hindsight. Companies wasted little time making it harder for customers to compare prices. In 2004, the MIT economists Glenn and Sara Fisher Ellison found that online vendors were advertising the cheapest version of a product, then steering customers toward a pricier one. Websites also learned to block web crawlers that allowed their competitors to detect price changes.
One of the more powerful forms of price obfuscation was the fee. Retail platforms often listed products in order of price. “So, of course, certain retailers realized they could charge one cent for a video camcorder, and shipping would be $250,” Sara Fisher Ellison told me. Fees were often obscured until the end of a transaction—a practice dubbed “drip pricing.”
The airlines, having pioneered the use of dynamic pricing, now refined the art of the fee. In 2008, American Airlines began charging $15 for checked luggage. The practice spread and soon became a major driver of airline profits. In 2023, the airlines raked in $33 billion from baggage fees, and even more from other ancillary fees like seat selection, meals, and in-flight Wi-Fi. These add-on fees drove down the prices that were displayed to customers, thus making the offerings look more competitive. It was a win-win arrangement, with both wins going to the airlines.
The rest of the travel and events industry followed suit. Mysterious “resort fees” appeared on hotel bills. Car renters burned time poring over “facility fees,” transponder fees, and third-party insurance. Ticketing websites charged markups as high as 78 percent for concerts. Some fees sounded like jokes. In 2014, an airport in Venezuela charged customers a fee to cover its ventilation system, a surcharge widely mocked as a “breathing tax.” And fees mingled with the broader trend of digitization-enabled unbundling. Want to “unlock” your Tesla’s full battery life? In 2016, that cost an extra $3,250.
If the rise of the fee broke the expectation that prices are transparent, dynamic pricing challenged the assumption that they’re fixed. When Uber rolled out surge pricing in the 2010s, the company billed it as a way to lure more drivers when demand was high. But the phrase was perhaps too honest. It evoked a sudden price increase in response to extreme circumstances, and riders accused the company of gouging during emergencies. “It’s a term I tried to stamp out when I was at Uber,” said Robert Phillips, a pricing expert who worked there for almost two years. “It sounds like a digestive problem—I’ve got a little surge going on.”
At least old-school dynamic pricing applies equally to everyone at a given moment. That’s not the case with personalized pricing, which is made possible by the explosion of customer data available to firms. Everyone knows that companies use our data to target ads and decide which products we see. But the use of that data to set prices—to charge each person a different amount based on their calculated willingness to pay—is still taboo.
That doesn’t mean it’s not happening. Back in 2015, for example, The Princeton Review was caught charging higher prices to students who lived in zip codes with large Asian populations. Since then, the data that can be used to customize prices have become more fine-grained. Why do you think every brand suddenly has an app? Because if you download the Starbucks app, say, the company can access your address book, financial information, browsing history, purchase history, location—not just where you live, but everywhere you go—and “audio information” (if you use their voice-ordering function). All those data points can be fed into machine-learning algorithms to generate a portrait of you and your willingness to pay. In return, you get occasional discounts and a free drink on your birthday.
“Often, personalized pricing is embedded as part of a loyalty program,” Jamie Wilkie, a partner at McKinsey & Company who advises consumer and retail firms, told me. “If there’s a high-value customer who’s price sensitive, you may be able to give them a personalized offer. If they’re a lower-value customer, you may just want to reach out to them.” The New York Times recently reported that airlines—of course—are migrating to a ticket-sales platform that allows them to target consumers “with personalized fares or bundled offers not available in the traditional systems.”
Perhaps you don’t like the idea of being designated a lower-value customer, and missing out on the best deals as a result. Perhaps you don’t want companies calculating the precise amount of money they can squeeze out of you based on your personal data or a surge in demand. That’s a perfectly natural way to feel. Unless, that is, you’re an economist.
TITLE: Save yourself $925 dollars by not buying Balenciaga's "towel skirt"
https://boingboing.net/2024/04/16/save-yourself-925-dollars-by-not-buying-balenciagas-towel-skirt.html
EXCERPT: Why do people spend so much money on such ridiculous items? Sociologist Thorstein Veblen, writing in 1899, would have called buying and wearing the towel skirt a form of "conspicuous consumption"—a term he coined that refers to the visual display of luxury goods and leisure activities that signal wealth.
Others might simply answer, "Fashion, baby!" Hannah Jackson at Vogue provides some context and history of the use of towels as high fashion:
The eyebrow-raising skirt comes months after Balenciaga's creative director Demna told Vogue that he was planning to turn away from gimmicky pieces and pare down the brand's image. "It's a serious job, you know, to make clothes. It's not about creating image or buzz or any of those things," he said in a February interview.
And this may not consciously be a gimmick at all. While plenty memed already, Balenciaga is far from the first to present towels as a high fashion. For spring 2020, Prada, Fendi, and Ludovic de Saint Sernin sent towel skirts down the runway, while Miu Miu and Acne Studios did it in 2017 and 2015, respectively. In 2018, Donatella Versace even revived a butterfly-printed terry cloth ensemble from Gianni Versace's 1995 collection. Marc Jacobs made a sequined take on a towel dress that was featured in the February 1989 issue of Vogue.
Julia Hobbs of Vogue gets philosophical about what the towel skirt might mean in our current times:
If the towel skirt is to be read as a comment on our times, my sense is that it hints at a modern human desire to linger in the chrysalis phase of our day—those moments before we are confronted with the news, the emails, the noise. Swaddled in a bath towel, we get to suspend the outside world a while longer. Would I wear it again? Perhaps. There is something rather beautiful in the idea of an outfit that lets you take the most peaceful moments of your day with you…
I'm not sure I buy it, though (pun intended!), as it seems incredibly wasteful, privileged, and indulgent to buy a beige towel that costs $925 simply because it has the word "Balenciaga" embroidered on it.