Will Delta Airlines' AI Pricing Trigger A Customer Trust Crisis?

Delta Airlines is on the cusp of revolutionizing its pricing strategy with the help of artificial intelligence (AI). The airline plans to expand its use of AI-determined pricing from 3% to 20% of tickets by year's end, generating individualized prices for each passenger based on their unique data. While this move may boost profits in the short term, it raises significant concerns about customer trust and loyalty.

Delta's long-term goal is to create a price that is available on a specific flight, at a particular time, and tailored to each individual passenger. This approach may seem convenient for airlines, but it poses a risk of alienating their most valuable customers - business travelers who prize predictability. The airline industry has historically operated on a principle of inequality, with prices varying based on factors such as booking time, fare type, and availability.

However, Delta's AI pricing approach destroys this perception of fairness. When an algorithm determines your personal price without transparency, you're likely to feel cheated. This is because AI pricing targets individuals based on masses of data unique to them but with no clear understanding of the factors involved. The asymmetry in information between the airline and the customer can lead to feelings of exploitation.

The problem with Delta's approach is not unique to airlines; it reflects a broader issue in business and commerce. Research in behavioral economics shows that consumers have an innate sense of fairness that, when violated, triggers stronger negative emotions than almost any other commercial transgression. This means that companies must be transparent about their pricing strategies and data collection practices to maintain customer trust.

Marketers considering similar AI pricing strategies should understand the potential risks of trust erosion. The process typically unfolds in three phases:

  • Phase 1: Discovery Shock
  • Phase 2: Behavioral Adaptation
  • Phase 3: Brand Loyalty Breakdown

This means that customers may initially be shocked by the realization that their prices are being determined based on their individual data. As they try to adapt and game the system, airlines may eventually require logged-in purchases or other measures to access personalized pricing. Ultimately, this can lead to a breakdown in brand loyalty as customers view every interaction through a lens of suspicion.

Some experts predict that brands that maintain transparent, predictable pricing could gain significant competitive advantage in the long term. Others warn that the short-term revenue gains from AI optimization may be offset by long-term customer defection to "fair" competitors. The key question for marketing leaders is whether maximizing revenue from each transaction is worth risking the psychological and emotional foundation of customer relationships.

Delta Airlines has assured Fortune that it has "strict safeguards in place to ensure compliance with federal law," but the lack of transparency around its pricing strategy compounds the trust problem. CMOs implementing AI pricing without damaging customer trust must be transparent about how the system works, what data it uses, and what protections exist.

Ultimately, the success of Delta's AI pricing experiment will depend on whether it can balance revenue gains with customer loyalty. If the practice sparks a trust crisis among customers who feel manipulated or unfairly treated, those gains could be offset by defections and bad publicity. As more companies adopt AI pricing, brands that maintain transparent, predictable pricing may find themselves at an advantage in the long term.

Conclusion

The rise of AI-powered pricing strategies in industries beyond airlines poses significant challenges for marketing leaders. While these approaches may offer short-term benefits, they must be carefully considered to avoid eroding customer trust and loyalty. By prioritizing transparency and fairness, companies can maintain a strong emotional foundation with their customers and reap long-term rewards.