Word of the week: Drip pricing

I’d never encountered the term drip pricing before last week, but I’m familiar withwhat it describes, and you may be, too.

Here’s how Los Angeles Times business columnist David Lazarus defines it: “a stealth price hike in the form of an added fee, rather than … a list price that reflects actual business costs.” In other word, the fees are dripped into the cost, one by one, and after the transaction is complete. Drip pricing is typically found in the travel and hospitality industries—see, for example, “resort fees” at hotels that are not in any way “resorts.”

Drip, drip, drip

The example Lazarus cites is of a 76-cent “service charge”—not a gratuity!—that a Pizza Hut restaurant in Venice, California, added to an $8.99 order for pasta and breadsticks. When the diner, Dave, clicked a link for “more info,” he was informed that “the service fee partially offsets the increased cost of operations in the state of California.”

Lazarus writes:

This is separate from Pizza Hut’s delivery charge and separate from state and local taxes. It’s a fee explicitly passing along part of the restaurant’s cost of doing business in California to its California customers.

And make no mistake: Pizza Hut and all other companies have every right to do that. First you recover your basic business expenses, then you set prices high enough to earn a fair profit. That’s capitalism.

But that’s not what’s happening here.

What’s happening here, Lazarus says, “is sheer dishonesty.”

And it’s not happening only in California. On Twitter, Mike Pope, who lives in Seattle, linked to an article on the Working Washington website about “businesses which have recently added small 1% - 5% ‘minimum wage’ surcharges to their bills in what seems to be an attempt to send a political message about their opposition to raising the wage.”

 

Photo of receipt with “4% surcharge” via Working Washington.

David Friedman*, a professor of consumer law at Willamette University, says he’s encountered the same thing in the Portland (Oregon) area. He generously answered my questions about drip pricing via Twitter direct messaging:

It seems that the concept and problem of drip pricing was identified in the behavioral economics literature in the 1970s. Then the problem was framed as one of how consumers behave when you divide pricing- “partitioned pricing.” Drip pricing is a subset of partitioned pricing that adds a temporal feature-- you find out about the extra charge, or extra compelled transaction, AFTER the transaction is underway. But then you don't see mention of the phrase “drip pricing” in common use until the 2010s. That's when you see regulators using the term, and start to see economists discussing it with that label. There is a lot of acknowledgement that the literature on “drip pricing” is thin.

He added that there’s a difference of opinion about whether drip pricing is illegal in the U.S.: “Private lawsuits have not yet yielded much success.”

You can read more about drip pricing in this October 2020 Investopedia entry, which notes that “in the European Union, regulators have mandated that taxes, fees, and surcharges may not be dripped.”

(UPDATE, 9:30 a.m. PT: Drip pricing is common in ticket sales. Via David Friedman, here are two stories about drip-priced tickets: “Stop the Hidden-Fee Ripoff,” an August 2, 2021, New York Times guest essay by Max Sarinsky, a lawyer; and “Ticketmaster Settles Canada ‘Drip Pricing’ Lawsuit for $4.5 million,” a June 27, 2019, post in Ticket News.)

“Drip pricing” is sort of the flip side of another term I learned recently—from the aforementioned Mike Pope, as it happens: skimpflation. “With skimpflation, prices for services stay the same, you just get less,” Mike writes.

Drip shows up in many other compounds. Drip coffee has been around since 1895; the medical intravenous drip was named in the 1930s. Drip painting (by Jackson Pollock et al.) was so named in 1958. The practice of drip irrigation originated in ancient China; its modern use was developed in Germany around 1860. The first drip tape (trade name: Dew Hose) was developed in the US in the early 1960s.

The slang usage of drip to mean “a stupid, feeble, or dull person” first appeared in print in 1932, possible from an earlier American English sense (circa 1919) meaning “nonsense.”

And there’s yet another slang meaning of drip—the opposite of stupid or dull—that was entirely new to me until I researched this post, even though its been around in one form or another for about 25 years. According to a 2014 post on Know Your Meme, it’s “a slang term used to praise one’s style or outfit” that “came to use through hip-hop culture and has been used synonymously with terms like ‘swag.’” (Read my own 2011 post on swag and schwag.) “To drip is to be a king. To drip is to be a winner,” rapped Sauce Walka in 2014. A 2017 Urban Dictionary entry for drip defines—well, describes—it as “when your bling is iced out but that shit melting from all your hot bars, you got the drip.” Well, of course.

Read more about this sense of drip—which suggests an entirely different sense of drip pricing—in Daily Rap Facts.

 

* I am related to a David Friedman, but not this David Friedman, whom I follow on Twitter but have never met face to face.

Comments

[Dan Freiberg]

Are packaged goods shrinking in size, while the prices stay constant a subset of "skimpflation"? For instance, the 1lb. can of coffee shrinking to a 14 oz. can, the 5 lb. bag of sugar reduced to a 4 lb. bag, while the prices stay constant. Or, was this called, "down-sizing?"