Pricing Gets Personal at JetBlue

A JetBlue customer posted on X: “A $230 increase on a ticket after one day is crazy. I’m just trying to make it to a funeral.” The airline replied, suggesting trying “clearing your cache and cookies or booking with an incognito window. We’re sorry for your loss.” The response went viral, igniting accusations of “surveillance pricing.” Now JetBlue faces a proposed class-action lawsuit alleging it used customer data to influence fares.

The Temptation Of Consumer Surplus

At the heart of this type of pricing is something economists call consumer surplus. Imagine we each pay $200 to attend a tennis match at Wimbledon together. I’m a tennis fanatic and would have gladly paid $500; you were dragged along, but figured the strawberries-and-cream Instagrammable moments would be worth $250 to you. My consumer surplus is $500 – $200 = $300. Yours, using similar math, is $50. What the tennis tournament would like more than anything else is to charge me $500 and you $250 – because we are perfectly happy to pay up to that amount. That’s perfect price discrimination, and it’s pretty hard to do. Note that most events practice imperfect price discrimination – the bleachers cost far less than courtside seats.

In Search Of A Better Price

Airlines have long tried to chip away at consumer surplus. They pioneered yield management—prices that shift by the hour, fare classes that separate the price-sensitive from the price-insensitive, and fees that quietly extract more value. But for all their sophistication, these systems are still blunt. They estimate your willingness to pay—they don’t know it.

That’s what changes in a world awash in data. The same engines that power personalization in marketing can power precision in pricing. We’ve handed over much of this data ourselves—buried in terms and conditions, amplified through digital behavior, and broadcast across social platforms. The more a company knows, the closer it can get to your exact willingness to pay—and the more consumer surplus it can capture. That’s not illegal. It’s economics.

Manage The Pricing Narrative

If you’re looking to find analytically creative ways to optimize pricing, a few realities to keep in mind:

  • Pricing Is Powerful. Pricing’s power to impact profitability is huge. Especially in today’s world of chaotic supply chains and higher input costs, better pricing can provide much-needed profit relief. There is a major upside to doing this right.
  • The Means Must Be Defensible. The information that feeds the pricing model must be above board. The variables that go into the algorithm must be obtained fairly, consensually, and legally.
  • Expect Backlash. In a climate of crumbling consumer sentiment and deep suspicion of companies trying to pull a fast one on consumers (think shrinkflation), any hint of surveillance pricing will raise a stink. Just because it’s legal doesn’t make it palatable.
  • Narrative Matters. Wendy’s faced significant backlash after announcing dynamic pricing, widely interpreted as price gouging. Then they quickly clarified that they did not intend to raise prices during peak times, but rather to use the technology to offer discounts during off-peak hours. Potato Potahto. But one of those narratives sounds way more agreeable to consumers.

———————————————————————————————————————

Follow my research: Go to my Forrester bio and click “Follow.”

Chat with me: If you’re a Forrester client interested in discussing these topics, please schedule time with me for an inquiry or a guidance session.

Plan a session: If you’re a Forrester client looking to host a strategy session on a related topic, please contact your account team or email me at dchatterjee@forrester.com.