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Amazon Charging Different Prices for Same Items?
Rambo writes "Amazon is apparently researching consumer's buying habits by arbitrarily changing the prices on DVDs and other products. Computerworld has a story here about it. Amazon refused to say when they would halt the practice, or what criterion they used to set the different prices." Of course I haven't spent a nickel at Amazon since that whole one-click shopping thing, but I can imagine ways that this could be good or bad. Imagine I buy a lot of Anime DVDs. They could note this, and raise the prices by a buck or something. I tend not to do real-time price shopping on items like this: I looked at a dozen online stores when I started purchasing, and I settled on the one that had the features & prices I want. But 2 months later they could jack the prices and it would be months before I noticed. Alternatively they could lower the prices, or lower prices on similiar items as an incentive to buy other things. Very odd possibilities and I'm not at all sure about how I feel about it.
I can go into Border's and receive 10% off any book because I'm a teacher. I have a card that identifies me as such.
A woman in line in front of me bought Elmore Leonard's "Pagan Babies" for the sale price. I bought "Pagan Babies" for sale price less 10 %. We got different prices on the same day for the same book purely based on some arbritrary criteria.
Another example: I go into Seattle's Best Coffee. A man in front of me gets a latte for list price. I go in, plunk down my frequent buyer's card, get the latte for free because I've bought ten lattes.
Same day, same item, same clerk, different prices.
Since we don't know Amazon's criteria, I'm not sure we can accuse them of discriminating against certian *people*, right? I mean, I've bought a lot of stuff at Amazon, and over the past few days as I've been following this story, I've noticed that I'm received the lowest prices for all the DVDs that they're listing.
They're not lowering the prices because my hair is brown, my eyes are blue, and I write left-handed, right?
They're not lowering it because I'm a democrat and I think the Shrub (Bush) is a dumb, loud-mouthed boor.
They're lowering the price based on whatever information I've given them, my ordered habits over the years, and the books (and DVDs) that I've ordered in the past.
Obviously, they've got some sort of criteria that they've established -- repeat customers, money spent over the past year, orders over the last month, whatever -- and they're applying it to me.
Or maybe they're setting random prices and seeing if it's enough to "catch" me based on my demographic.
Whatever.
But I know that I take one look at the list price, one look at the sale price, and make my decision there. If the sale price is too close to the list price, I won't buy it, period.
If the sale price is 30, 40% of the list price, I'll probably buy it.
I think the issue here isn't that they're doing it -- charging less for some customers, more for others -- but that we don't *know* the criteria.
And of course because we're all good little paranoid Pynchonians (see 'The Crying of Lot 49' or 'Gravity's Rainbow' to see what I mean) we suspect the worst -- that not only are they screwing us and fucking with our privacy -- they're also fucking with our heads.
Bad Amazon! Bad! Bad! Bad!
It's kind of a stupidity tax really. Browse with cookies on, pledge loyalty to a corporation or a brand and pay more.
A Dick and a Bush .. You know somebody's gonna get screwed.
War is necrophilia.
The airlines and hotels alter their pricing because they have a "perishable" product. An unsold airline seat becomes worthless as soon as the plane takes off. They call it yield management. They alter the price as it gets closer to the expiration date, in order to maximize their revenue.
The technique being used by Amazon is actually quite different, since books and CDs are not perishable. Amazon is altering the price based on who is doing the buying. If they know you are a loyal Amazon customer, they may charge you more because they think they can get away with it. If they know you are a price shopper, they may charge you less, because they think it is the only way they will get your business.
Auto dealers take a similar approach. If you are a loyal customer of XYZ dealership, you will pay more for a car, because that dealer knows you prefer to buy from them.. There is also research that shows women and minorities pay more for cars, apparently because the dealerships (on average) feel that women and minorities (on average) have less bargaining power. Essentially they are taking a profile of what they know about you (previous customer) or what they assume about you (male/female; white/black/brown/tan) and using that profile to adjust their pricing.
What is happening with online shopping is even more insidious. Because online retailers have the ability to create detailed profiles and automatically adjust the prices accordingly, they can really take advantage of the situation. The unfortunate thing is that loyal customers will often get the worst deal.
This is not that uncommon. For example, I think priceline.com does the same thing. The first time a new customer makes a "bid" on a plane ticket, they will usually "win" it. This creates goodwill (loyalty?) on the part of the customer. After that, Priceline will alter their acceptance/rejection of that customer's bids, to determine how price sensitive the customer is. Their subsequent pricing will take advantage of that information. This is not traditional yield management (Priceline does not own the commodity, so from their perspective the commodity is not perishable), rather it is profile-based price management.
So how can consumers protect themselves? The most important thing is to minimize the amount of information a retailer has about you. The less a seller knows about you the better. This is because companies that use profile-based pricing will almost always offer a "new" customer the best deal in the hopes of gaining your trust (so you will hopefully become a "loyal" customer and they increase their pricing and profit later).
Other things consumers can do:
(1) Do not patronize companies that practice this approach.
(2) Publicly condemn companies that take this approach
(3) Utilize price comparison services
(4) Be ruthless about price shopping
(5) Do not become loyal to a single retailer
(6) Shop as anonymously as possible
(6) Just say no
With services such as Priceline and EBay, we've seen the ability for buyers and sellers to come to a private agreement about pricing.
Perhaps fixed prices are a thing of the past, a relic of the old ways of doing business. Fixed prices are certainly needed at old-style bricks-and-mortar retail establishments (so the customer can quickly view the price while examining an item) but really aren't required online, where the webserver software can issue a different pricetag for each viewer.
In the future Retail Online Hell, massive server databases will track our every choice, become aware of our every weakness, and know what "must-have" preferences each of us has.
The result: I'll be charged top dollar for things like DVDs, and offered astonishingly cheap prices for, say, scented candles.
This is completely normal practice in the brick and mortar retail business, whay bash Amazon for it?
This is absolutely not normal business practice in retail stores. The issue here is not that Amazon is analyzing the buying patterns of consumers in the aggregate and changing prices based on this information. The problem is that they are using some secret criteria to charge people different prices as individuals.
Imagining going into Borders and being charged a different price for the same book as the person in front of you in the check out line. That is analogous to what is happening here.
Frankly, if this happened in a 'bricks and mortar' retail store and the store would not release the criteria it was using to make their individual pricing decision how long to you think it would take before someone filed a discrimination suit?
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