[Random-bits] by David Streitfeld: On the Web, Price Tags Blur

[James Love]

Another fine e-commerce story by David Streitfeld, this one on dynamic
pricing.  

http://washingtonpost.com/wp-dyn/articles/A15159-2000Sep25.html

On the Web, Price Tags Blur
by David Streitfeld

   [snip]


The Internet was supposed to empower consumers, letting them compare
deals with the click of a mouse. But it is also supplying retailers with
information about their customers that they never had before, along with
the technology to use all this accumulated data. While prices have
always varied by geography, local competition and whim, retailers were
never able to effectively target individuals until the Web.
 
"Dynamic pricing is the new reality, and it's going to be used by more
and more retailers," said Vernon Keenan, a San Francisco Internet
consultant. "In the future, what you pay will be determined by where you
live and who you are. It's unfair, but that doesn't mean it's not going
to happen."
With its detailed records on the buying habits of 23 million consumers,
Amazon is perfectly situated to employ dynamic pricing on a massive
scale. But its trial ran into a snag early this month when the regulars
discussing DVDs at the Web site DVDTalk.com noticed something odd.

One man recounted how he ordered the DVD of Julie Taymor's "Titus,"
paying $24.49. The next week he went back to Amazon and saw that the
price had jumped to $26.24. As an experiment, he stripped his computer
of the electronic tags that identified him to Amazon as a regular
customer. Then the price fell to $22.74.

"Amazon was trying to figure out how much their loyal customers would
pay," said Barrett Ladd, a retail analyst with Gomez Advisors. "And the
customers found out."
          
  [snip]

"Amazon knows who has the ability and perhaps the incentive to pay more
based on demographics, on purchasing history, on income and urgency,"
said Jupiter Communications analyst Mike May. "The variable that they're
deficient on is which customers won't mind paying more. They don't know
the level of outrage."

   [snip]

"This is a very strange business model, to charge customers more when
they buy more or come back to the site more," said one user who goes by
the online name Kuroiinu. "I have no problem with coupons for first-time
customers as marketing enticements, but I thought the idea was to
attract customers first and then work hard to keep them. This is
definitely not going to earn customer loyalty."

   [snip]

-- 
James Love  mailto:love@cptech.org http://www.cptech.org
Consumer Project on Technology, P.O. Box 19367, Washington, DC 20036
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