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Dynamic Pricing Returns
TwP writes: "That new computer will cost you $1,200 - wait no $1,300 - better make that $1,500 dollars! IBM, Compaq, and Dell are experimenting with "dynamic pricing" according to this article over at InfoWorld. Amazon tried a similar idea last summer and met with quite the negative response. Hope the computer makers can spin this idea in a better light." Amazon's experience didn't work out, and as far as I know, they've ceased doing it.
If this &@*&(* continues we need is a web site where buyers can post the price they see when they come to the site. Compare all the posted prices and ask them to honor their lowest price. If they don't, tell /. and that should fix the problem.
Is it just me, or has EBay driven the entire world into a "just a few dollars more" type of mindset? I've always shied away from places where prices weren't stable, because even if I end up paying a small premium, I know I'm not going to end up with the "but Bob just bought it from them for half that" blues.
Of course, it is somewhat irrelevant, since I'm not going to to be buying a prefab system anytime soon, but it will definitely make my job harder when it comes to giving recommendations to friends... "Yeah, a Dell's pretty good, but I'd wait until the Fed cuts the prime rate at their meeting next week, unless you think Compaq is going to post a strong earnings report Friday, which would drive the prices up for individuals who buy on Mondays and Tuesdays, which would make it cheaper to buy from a library terminal on Thursday."
(a) Price; selection of customers. It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered: Provided, however, That the Federal Trade Commission may, after due investigation and hearing to all interested parties, fix and establish quantity limits, and revise the same as it finds necessary, as to particular commodities or classes of commodities, where it finds that available purchasers in greater quantities are so few as to render differentials on account thereof unjustly discriminatory or promotive of monopoly in any line of commerce; and the foregoing shall then not be construed to permit differentials based on differences in quantities greater than those so fixed and established: And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade: And provided further, That nothing herein contained shall prevent price changes from time to time where in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned.
Look at auto sales, you get a different price for the exact same product from different dealers! GM's Saturn division is using this practice as a way to entice customers who don't want to deal with this.
[ Full disclosure: I work for a company that writes software to support "dynamic pricing" on web sites. ]
There's a nice site here in the UK that kinda of lets you do this - computerprices.co.uk.
Say you wanted a 1Ghz T'bird - they show you the comparison shopping prices for a few retailers and (scroll down a bit) the price history for that product, based on the best price each week. For this particular product, you'll see the price has come way down since launch (as expect).
Looking at RAM prices, you'll see they fluctuate a bit more.
I thought they also had a feature that would email me when a particular product got below a price you had entered, but I can't find that now.
...j
Ya know, diamonds are a really bad example here -- because in reality, the supply *is* quite elastic -- or, at least, it would be were DeBeers not artificially restricting it.
Nonetheless, that's a conversation for another time. With regard to your other objections: If a hospital acted that way in their ER, consumers would either decide to go elsewhere, or decide that paying all their assets for the emergency surgery is worthwhile. Either way, it's the customer who makes this decision -- why complain? If there's only one hospital in working distance, then this may constitute a monopoly -- but such a situation would encourage other providers of medical care to come in and set up shop, competing for customers on the basis of reasonable pricing.
Hence, the free market works either way.
People would kick the hell out of those machines.
They already rough up machines without something like this. Somewhere I read that 2 people are killed in the US each year by vending machines falling on them.
Wansu, th' chinese sailor
"It's hard to see the benefit to the customer," Andren said.
That's because there ain't no benefit to the customer. It ain't nothing but a java driven shell game. I know a bunch of people who are put off from online shopping. This will slow acceptance further. I ain't shoppin' there. Where I come from people who do this are described as crooked. I hope they had the same experience Amazon did.
Wansu, th' chinese sailor
I would think the price would go up rather than down the more you clicked it. "Hey, this guy is REALLY interested in this laptop. Let's raise the price for him $50 and if he comes back to view the page again a few times raise it some more since he's really hot for it." Now THAT is evil.
hawk
Also, reaction to them varies: Is it charging more on a hot day, or is it offering steep discounts on cold days? People tend to oppose the former and support the latter, even though they're the same thing.
hawk, economist
Under a capitalist system, ownders of the capital receive the proceeds. This just isn't the case there--the managers of the firms get the proceeds, and currently the shareholders have absolutely no way to force them out. Additionally, the state is massively involved to favor its own industries (Just look at the current takeover of the media).
Russia is currently a mix of industrial feudalism and fascism. The markets are not free, and the owners of capital are not entitled to the proceeds.
hawk, econ professor
the man once got the price down on a bucket of chicken at Col. Sanders . . .
hawk
> some pricing rationale and history. You could click on an item's price and see that yes, it
> is $100 more expensive today than yesterday, but that's because the price of RAM has just
> gone up, say.
http://www.pricewatch.com tells you whether prices went up or down for certain parts. I've seen similar things for other industries also.
I know that isn't exactly what you are talking about, but some companies do provide this info, or there are other 3rd parties that help.
--Michael
Agreed, for the most part. It would be nice to see a "pricing history" on Dell's site, so perhaps you can see if the system you are quoting is $10 cheaper than it was yesterday, and $45 cheaper than last week, and the price drop is caused by CPUs going down $5.50 and memory dropping $4.50. But, I doubt it will happen :-(
-Michael
> And it is closely related to "price discrimination", which is illegal under Robinson-Patman. Price discrimination is when you charge different prices to different individuals without having different costs.
Like when DVD's have the same production cost but a different price with a different region code?
--
rant
Why is this insightful? from USAToday ''We've never tested and we never will test prices based on customer demographics,'' founder Jeff Bezos said in a news release late Wednesday.
SO If the company negotiates EXCLUSIVE access to the park, and THEN begins 'dynamically' raising prices, what would you call that ??
errr....umm...*whooosh* *whoosh* Is this thing on ?
The theoretical problem is that Fairness is seen from the buyers perspective however rationel the pricing looks to the seller. Humans have an inate sense of fairness. As social beings we have been selected for that as a mean to better survive in a group setting. Dynamic pricing goes against this fairness sense and we consequently finds this appaling. Professor Rabin recently won the MacArthur price (same as Stallman won earlier) for incorporating this Fairness sense into modern economic theory.
Help fight continental drift.
Staples doesn't charge _me_ differently based on my zip code. I never pay list at Staples. I just decide what it should cost and print out a web page with that price :-)
Robert
Awesome furniture, accessories and cabinetry in Santa Rosa, CA: http://humanity-home.com/
People will do it all day on SlashDot because they are bored.
Imagine what they would to do potentially get a better price on Hardware. Perhaps a Perl script that tries all kinds of User-agent strings, language settings, and anything else you can vary in the request process, then tries every combination many times, all looking for the best price Dell offers on a widget.
People *do not like* the feeling that the next guy got a better price than they did.
Sadly, a more likely outcome is increased vandalism of vending machines.
Amazon's dynamic pricing failed, IMHO, becuase it turned the book/cd/etc buying experience into something akin to buying a car. The price you pay depends on which saleman you talk to or how successful you were in negotiating a better price. All in all, an experience that makes you feels as though you were ripped off or that there was a better price but that your bargaining skills were inadequate and no one likes that experience. Don't the airlines use something like dynamic pricing? I don't know of anyone who feels like they got the best possible or even a fair price on their airline tickets.
Just wait until Compaq and IBM owners start comparing notes and find out that they bought the same computers but at wildly difference prices. I wouldn't count on a consumer buying another computer from a vendor that adopts this pricing scheme.
--
CUR ALLOC 20195.....5804M
Actually what's going is that there's a PC price war brewing.
Now normally (unlike our friend the clone builder), Dell has to build in a percentage markup that represents the risk factor of RAM going up or hard drive shortage. Essentially an insurance policy against commodity fluctuations. When RAM prices stay the same and the hard drives come in, Dell pockets that money.
Their margins are already so thin that this insurance is about the last thing left they can cut into. So, they're moving the burden of the commodity risk onto the consumer, and essentially doing what Animgif does with a daily price sheet. Sound great because it will lower prices? Wait until you put in an order for $X and the invoice comes saying $X+Y. That's not so much transparent as it is changing the traditional roles of seller and customer in the big PC market.
In short, transparency is a good thing, in pricing as in many other areas.
In my personal view, price wars and this sort of desperate "transparency" indicate the the commodity PC industry is on it's way out due to nearly invisible, or shall we say transparent, margins. Expect the big guys to retrench to corporate markets or very dedicated [read, locked-in] customers. As Lou Gerstner said in a recent Register article: "Starting a price war when you don't control the product is stupid" (paraphrased). Unfortunately, many small vendors are going to get squeezed in the middle.
--
Business. Numbers. Money. People. Computer World.
What Dell is doing is essentially turning their corporate desktops into loss-leaders (well maybe they arent' actually losing money, but close) for thier server division.
I've worked at many places that have standardized on Dell desktops and Compaq servers. Word has it that apparently Dell isn't so generous with their volume discounts unless there's a commitment to switch to their servers. They are also handing out lots of freebie servers.
Dell knows that the server machines are higher profit. What they apparently don't understand is that its the same commodity parts situation as the desktops. The net result of all of this is that x86 servers will be sold at similar lame profit margins as the desktops.
While it's tough to complain about a price war and cheap hardware, there's the real risk that your favorite vendor will self-destruct.
In the past, Compaq (for example) has done a lot of custom engineering work to get Windows NT to run stably on their hardware. In the distant past they used to do the same things with their desktops. Now Compaq desktops are crap -- how long will it take for the servers to get there? If Dell/Compaq start pushing commodity servers with standard Intel boards and standard Phoenix BIOSes and bolt on cooling, it may serously damage the x86 server business' (and OSes such as W2K and Linux) ability to move up scale.
Then again, maybe this is all preperation for the upcoming "encouraged" Itaninum upgrade. At least Compaq bought a midrange business that they can fall back on.
--
Business. Numbers. Money. People. Computer World.
...and the local gas station raises prices _the next day_ citing OPEC as the cause of new shortages. You know for a fact that the gas in the holding tanks was purchased at pre- OPEC-induced shortage prices, as was just about everything at the refinery and most any of the oil already currently in the United States. Yet somehow an action taken at a meeting in Vienna for a product that travels on a boat for 45 days before it reaches the US is instantly felt on main street? C'mon!
The same thing is true of computer parts. In spite of JIT no-inventory management systems, most of the components Dell et al buys were bought on contract for a fixed price/unit from Intel and others. Adjusting the price to account for the cost of what components cost NOW rather than what was paid for them WEEKS AGO doesn't make any sense AT ALL.
And I have seen WITH MY OWN TWO EYES Dell do dyamnic pricing ala Amazon. A 2450 rackmount was nearly $1000 more expensive Monday morning when I logged in with our corporate account than it was Sunday night as a random web user. I immediately saw that I was getting raped for being a "corporate" customer.
All of these schemes are nothing more than excuses for charging the MAXIMUM amount of money, they have no basis in supply-demand.
That is called price-fixing, and many if not all companies do adjust based on competitors' pricing. Just now that factor will introduced real-time. Take the example of petrol prices, most are changed when the other nearby ones have changed their prices. Exactly what in the UK, Esso (Exxon) pledge in their adverts "Pricewatch".
It's one thing to vary the price with availability, demand and the cost of components. To feed in discounts as the order expands to encompass more items or extras.
Thai is quite different from Amazon. They were essentially using past-purchase information and website activity to determine your ability to pay more (IOW how rich you were) and boosting the price on you based on that.
If the price of RAM goes up, I expect to pay more. If it drops later, I'll groan when my friend gets the exact same machine for less. But that's the way in the industry. OTOH, if I save up and buy an expensive book, I don't want all subsequent purchases to be charged at an inflated price, because I've now proved I can afford it!
But in real life, things like this can do enormous harm because it isn't really possible to keep it secret. If you found out that someone else had bought the same product that you did from the same place on the same day at a lower price, how would you feel about it?
My point is that if companies are going to be changing prices from moment to moment, they should help the customer by giving some insight into what's going on. Having to go to a third-party to figure out things that your vendor isn't telling you isn't conducive to good customer relations.
Your argument sounds like one of "buyer beware", which is always good advice, but I'm talking about customer relations, and saying that vendors who ignore these issues are being short-sighted.
What would be good from the customer perspective is if websites actually provided some pricing rationale and history. You could click on an item's price and see that yes, it is $100 more expensive today than yesterday, but that's because the price of RAM has just gone up, say.
Otherwise, pricing is just a black box and customers have no way of knowing if they're being discriminated against.
Of course, there are tools to help customers compare prices across web sites, so in an absolute sense, it's not a problem. But vendors would be wise to consider the impression that these things leave on customers. If I want a Thinkpad specifically, I can't go to anyone but IBM or an IBM dealer to get it. If I suspect IBM is playing funky games with pricing, I may decide I'm better off with someone else.
In short, transparency is a good thing, in pricing as in many other areas.
Since most of us aren't equal to each others when it comes to preferences, I see no reason for me to pay as much for an item that I think I could live without as someone for whom its the "must have" item. I don't want to pay for someone elses desires .
This in mind, I also acknowledge the fact that I will have to pay more than someone else for items I really want. But that's not a problem, because since I really want the item, I value the item more - up to a certain limit. At some price, it simply won't be worth it anymore!
All this in consideration, I might end up paying more than my friends for some item, but they wouldn't buy it if it cost more than they paid anyway, and the seller obviously was unable to sell it to anyone willing to pay more (since in that case my friend wouldn't be offered it at such a low price). After a while I might have ended up paying a lot for the few items I really desired, but I probably have gained a lot of stuff that I liked but could have been without (if I would have had to make a choice) at a bargain price, so everything would have been evened out. I wouldn't have lost anything, but the seller have gained.
Thus, summing it all up, there is a total gain, which is good for everybody.
Actually, I just went and tried this using several zipcodes, and couldn't see any changes in pricing. They claim to use it to display inventory differences in the local areas. As far as I can tell, that looks to be true. Anyone got an example they can point out to prove prices change on staples.com?
---
- Give a man a fire and he's warm for a day, but set him on fire and he's warm for the rest of his life.
As the previous poster explained, this process maximizes revenue for the seller.
But in order to perform perfect price discriminiation (which every retailer would love to do), 2 conditions must be met:
1) The various groups must be clearly identifiable
2) The groups must have different elasticity of demand (econ talk for their willingness to pay higher prices for an item).
So the problem for IBM is how to associate what little informaion they can glean from your web habits to associate with your elasticity of demand and to ensure that that information is accurate. Oh, and they have to be able to prevent resale (not too difficult; just void warranties). But since there is no surefire way to identify who is on the purchasing end, and since the internet makes for an almost pure market wih nearly ideal communications, I can only see this backfiring.
-- "I am disrespectful to dirt. Can you not see that I am serious!"
Dell has a policy that if you see your PC for a lower price within 30 days of purchase, you can call them and get a refund for the difference.
> Michael Sims is an information tyrant of the worst type and now he is a slashdot editor. He censors posts he disagrees with, he mods down others that don't march to his beat.
Funny, it looks like he found your post (+1, interesting).
--
Sheesh, evil *and* a jerk. -- Jade
Actually, the book question is a bit more complicated than that, albeit in a way that helps prove your point. Libraries also buy hardcover books for reasons that are probably pretty obvious, so part of the hardcover premium is really a "library tax". Then some publishers really cracked wise and started to offer special "archival quality" editions of books with better bindings and completely acid-free paper and the like. And a nice little business this was until somebody figured out how to dematerialize the books completely...but that's another story.
Babar
Oh, they certainly do. You're just hanging out with the wrong crowd. :-) More seriously, things
got to the point where nobody had a problem with
flights getting more expensive the closer you got
to the flight time, and everybody understood the
necessity of matching a competitor's low price
for a particular route.
But the latter point still leads to some really screwy things. We live in Columbia, MO, which is half-way between KC and St. Louis. When pricing a flight back to Boston recently, we found out that the KC-Boston routes were cheaper. Fair enough, demand might be lower or competition more severe. But many of the KC-Boston flights were actually KC-St. Louis-Boston, and you were paying almost $200 less to take the whole route compared to the St. Louis-Boston chunk. Intellectually, I know why that happened, but that didn't make me feel happy about it.
Now, the real fun came the evening when my wife and I were tag-teaming the travel agency websites from our two computers. At one point, we realized that the more we looked at fares, the higher they seemed to be getting. It got really tempting to believe that we were the culprits by making so many queries...somebody's code decides that X/100 of all queries become sales, so when Y queries come in, you raise the price for query Y+1. This could get really ugly.
Me, too. But the most surprising lack of dynamic pricing is for (in-season) ticket sales for sports teams. Why on earth should a ticket to see the Hated Yankees cost the same as a ticket to see the Tigers?
Babar
If the price of gas changes, a gas station will change the price in the middle of the day. In these times in the US, whatever the price at your favorite station is in the morning, there is a good chance that it will be different by the afternoon.
How is this different?
Once I got caught in a price change. One worker was changing the prices on the sign outside. Another was changing the prices on the pumps on their computers inside. I started pumping gas and discovered at the end that I was being charged $.04 more than any other pump. Either the prices on the computer were reduced on the other pumps before mine or they were changed between the time I started pumping and the time I finished.
The clerk couldn't understand why I was upset.
Ok 1500-1499=1
1 * 20,000 = 20,000
Where did you get 244,850 I really want to know?
Ok sorry, I had thought your point was that if they had sold them all at 4,999 then they would have lost X amount of money, Which is actually 20,000. Now the kicker here is how do you know they will pay 5,000 over 4,999 as you could easily misprice a dollar over what they will pay and therefor lose 150 customers ak (224,850-cost) as opposed to getting all your customers at 4,999 and only loosing 20,000. Though I guess that could be benificial if your cost is too high enough, its a balancing act in and of itself
IIRC, someone tried something similar not long ago with battery acid, although they were aiming to get the cash, not the coke, from the machines.
Along these sames line you used to be able to (maybe you still can, I don't know) dump salt water into the coin slot in a soda machine. The machine would wig out and start giving you sodas and change.
The nice thing for petty vandals/thiefs about salt water is soda machines are often at swimming pools, which come up an unlimited supply of water on hand. They just need to supply the salt and a jug of some sort. Battery acid would just be a pain in the ass to deal with.
There are any number of things that could keep the price of tickets constant for sports events in a certain venue. The two biggest ones are local laws, and desire to have a certain mix of people at the event. Indeed, there is nothing stopping an arena from charging higher prices for tickets in the same area of the venue as demand rose, but then they would risk either not selling tickets, or getting a bunch of people who don't care much about the event, but get the tickets as something to show off around the country club.
Anyone who has gone to a Billy Joel concert where they practically check for your Volvo keys before you enter can attest to this.
--Ringel
The problem with your example in the first paragraph is that you have the sign wrong.
... $20,000! Leaving a net *increase* in revenue of $204,850. This is the same principle that led to the industrial revolution... Selling one item at a high price returns a much lower profit than selling thousands (or millions) of items at asomewhat lower price (while still covering the costs).
20,000x$1,500=$30,000,000.00
20,150x$1,499=$30,204,850.00
Look at it this way: 150 customers who wouldn't have bought before, purchase machines at $1,499. This bring in $224,850 in revenue. The loss caused by lowering the price one dollar on the previous 20,000 people is
Just more evidence that politics and economics are philosophically opposed to each other. In a free market, price discrimination helps to lower prices for everyone, and it's more fair, even though that conclusion is not obvious.
Take the upper end -- someone who values the item at more than its price. They would happily pay more for it, even though it's the same thing. So effectively, they're getting more value than someone who's buying it at the median price. It would be more fair if the seller received more of the value.
Take the lower end. That's someone for whom the value of the item is less than the price, so they don't get the produce. If, on the other hand, the seller could discriminate and take a lower profit margin on just those buyers, the low end buyers could enjoy the product.
Robinson-Patman exists only because of a mistaken concept of "fairness". When you actually look at it, though, it's the law itself which creates the unfairness.
-russ
Don't piss off The Angry Economist
I mean, why charge ANYONE a lower price?
Because more people will buy at a lower price than a higher price. You'd really like to fill the entire space under the price-demand curve, rather than the rectangle delimited by a single price point. That's why hardcover books sell at a premium, and that's why hardcover books come out before the paperback version. What you're *really* paying for is the earlyness, not the hard cover. It's called "price differentiation".
In a competitive market, it serves to lower prices for everyone. Yes, even the people who pay the higher prices.
Economics is fun! You can learn more about this kind of thing from David Friedman's _Hidden Order_.
-russ
Don't piss off The Angry Economist
Quaker merchants pioneered the idea of a single price for all buyers. Prior to that, only a competent negotiator could get a good price on something. So you couldn't send a child to buy something at the corner store.
So in time, people sought out Quaker merchants, because they knew they would get a fair deal.
-russ
Don't piss off The Angry Economist
I worked at one during High School and to avoid these problems we changed the sign first. That way any new customers would see the new price on the sign. Once all customers who were filling before I got done changing the sign we changed the price. No source of argument. Drove up saw old price got, Drove up new price up got it maybe got lucky and got old price. But no one who saw older price got newer price. Did the reverse when lowering, change pumps first then sign.
Remove the spam reference to email
Gee folks, it's the Bazaar model! When you go to the bazaar, there are no fixed prices - the price depends on what you want to pay, and what the vendor wants to sell for
(I seem to remember a software movement based upon open knowledge, something like this )
-- 73 de KG2V For the Children - RKBA! "You are what you do when it counts" - the Masso
Wrong. It's called gouging. Soda supply is elastic and is not affected by the weather. So price is based on demand alone - that's gouging.
My god, you would fail Economics 100 so badly... When demand increases, the price increases. This is a basic fucking principle of microeconomics. It's entirely natural. If you don't like it, buy Pepsi (or drink water).
The only time this kind of price increase becomes immoral is when the seller has a monopoly. Coke is big, but they have plenty of competition.
Right now, you're just ignorant. Go read a microeconomics text, then make up your mind as to whether you're capitalist or communist. No informed person who is even slightly capitalist would believe that Coke's temperature-linked price increases are immoral or should be made illegal.
Airlines have done this extensively for years. The price of a ticket varies tremendously based on how full the flight is. The guy or gal sitting next to you may have paid twice what you did -- or half.
It is a bit of a different situation, since there's only X seats on a given flight. But still, I'm surprised that people don't find this objectionable. (Though I'm more surprised that TicketMaster hasn't started using this approach for concert tickets...)
Wrong. It starts snowing, so 5 different stores all raise the price of snow shovels.
So? Buy mail order from the opposite hemisphere (New Zealand?) where it's summer and snow shovels are on sale. (Work fine unless micro$hovel has a world monopoly or the SIA has zone disabling...)
"Don't like it? Move to Russia and see if you prefer standing in line for 6 hours "
You mean before they switched to capitalism, or after? Answer: Both.
"in subzero temperatures"
While capitalism does encourage global warming, (see "The Tragedy Of The Commons" for details) that's not why Russia is so cold.
Become a FSF associate member before the low #s are used
I'll reply to this, the highest modded reply.
You're right. But consider this: people buying PCs now will pay $1800 for a PC if that's what it's sold for. They will pay $1500 as well, but if they can't find a $1500 computer that they want, they'll pay $1800.
The PC market recently devoured itself, so I think the big guys can safely price computers a little higher and not worry about losing sales to cheap competitors, most of which have died off in the past two years. It sounds like collusion, but in reality, none of these manufacturers can afford to be loss leaders for much longer - market share and service contracts previously buoyed up these companies' stocks, which made it look like they were all ridiculously successful. Now they're all in the tank, and it's time to charge more for their products. Now that I'm moving on from being a poor college student and going into the real world making real money, $1800 for a solid computer doesn't sound so bad. Except I still know how to build em much cheaper, so more power to me.
Yea, there's lots of stuff in economics and accounting that would help these companies set their prices right, but let's look at it this way... they've been ignoring economics for years anyway. For all the computations that PCs can do, they still haven't calculated how to make solid profits and generate stable economic figures.
Just like Yahoo! should now start charging modestly for all the news, e-mail, games, clubs, etc. they provide, since I'd rather pay for them than see them go away... but that's offtopic.
I mean, why charge ANYONE a lower price? They should just sell all their computers to everyone at the highest price they're willing to sell at.
No, this is not a troll.
These are businesses that survive on profit margins... and who sell to a lot of middle-class individuals and corporations. If they just keep the prices at the highest level, people are gonna buy from these companies ANYWAY... people are not knowledgeable enough about computers, and it's too much of an inconvenience, for people to be able to tell when they're paying a bit more than they should. While this sounds kind of slimy from a consumer point of view, computers are rather useful machines, and I always thought that the benefits of a factory-made computer justified the higher prices.
This won't affect hobbyists. They never buy from these companies anyway. And it doesn't affect poor people, either... they can't afford such a computer anyway (I know, that's not the way things should be, but let's face it, poor people should be getting a PeoplePC or an eMachine or something like that... and that's only if they're able to eat first. Otherwise, a computer is a convenient luxury... like an in-house washer and dryer set).
Maybe if these companies set higher prices, and they prove people are willing to buy at those higher prices, the computer manufacturers don't have to keep dipping prices below profit levels, and you won't see the carnage that existed in the industry over the past few years. Yea, it's not the best short term solution for the consumer, but it's better long-term for the consumer and the industry. Besides, it's a wise investment for any consumer, and perhaps people will be more inclined to price shop and become knowledgeable about the machines themselves if they have to think about the price more... getting a whole computer for $300 after the MSN rebate doesn't require a whole lot of thinking for most people, after all...
"Gouging can only happen when there's a monopoly"
Gouging is only illegal when there's a monopoly.
(And then - likely - only when it's an illegal monopoly. Indeed, gouging may make it an illegal monopoly.)
From a moral or legal prespective, you are correct, there was nothing wrong with it. From a business prespective, it was wrong because, as you said, "it looked bad".
My point wasn't that what Amazon did was unethical. I was just trying to point out that the IBM implementation is different from Amazon's so we can't use Amazon's experiment as a prediction for the outcome of this experiment.
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
My old econ book is packed away so I can't check it for any specific studies done to support it. However, it is used in the real world every day. Stores hold sales to increase traffic or get rid of inventory. People jump jobs for higher pay. etc.
Using "supply and demand" to justify corporate gouging is a bit like using Darwin's theory of evolution to justify killing short, skinny people for fun.
Aha! I now realize what your objection to "supply and demand" is. I will leave it to others to debate whether "maximizing profits" is morally correct. But, I will point out that even if people did kill short, skinny people for fun and justified it by using Darwin's Theory of Evolution, it would not invalidate Darwin's Theory.
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
Not according to the article in Computerworld. I don't use Amazon so I do not have any firsthand experience. Do you have a link that shows it was 50/50?
The whole point was to directly measure the demand curve by testing two prices simultaneously, and that requires that the experiment and control groups be as demographically identical as possible.
Even if they did it by assigning prices to customers on a random basis, it still left a bad taste in the consumer's mouth since it was easily verified that different customers got different prices. When stores try these experiments in the brick and mortar world, they usually do it by geographic locations. Customer's are accustomed to the fact that the same product will be priced differently in different parts of the country.
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
Then you disagree with a fundemental tenet of economics. "Supply and demand" states that, all other things being equal, there is a direct relationship between the quantity of goods offered for sale and the price of those goods while there is an inverse relationship between the quantity of goods bought and the price of those goods.
There are several well known excepts to the "supply and demand" curves.
Snob appeal: The sale of some goods, e.g. perfumes and designer clothes, may drop if the price is dropped. This is because the buyers are buying more then functional clothes. They are buying cachet by owning goods others can't afford. Dropping the price will drop this value.
Labor: The supply of labor will follow the normal supply curve until it reaches a certain point. At that point, the supply of labor will start to drop as the price increases. This is because the workers start to place a higher value on leisure time as their wealth increases.
The money supply is tinkered with frequently ,. . .Supply is frequently altered through subsidies and tax breaks. . .Prices are often highly regulated for many of the most serious needs. . .Finally, the government assists and prohibits businesses rather often.
These fall in the "all other things being equal" category. In fact, some of them demonstrate the validity of the supply and demand curve becaue they are using "supply and demand" to obtain the desired effect.
Federal Reserve lowering interest rates: Credit is a "product". Increase the cost of borrowing money, and less people will borrow. Decrease the cost and more people will borrow.
Tax breaks and subsidies: This is an attempt to increase the supply by decreasing the cost of the item.
I agree that "supply and demand" is not the total story. However, I disagree that it has nothing to do with "reality".
please don't let reality get in the way of your ideology.
Ideology has nothing to do with it. Even Kensians agree that "supply and demand" exist.
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
From the article:
It sounds like a bunch of Amazon customers got together one day in a chat room, checked prices, and compared notes to see what factors affected the quoted price. They concluded that pricing wasn't a random 50/50 proposition.
Even the quote from the Amazon spokesman doesn't support your 50/50 interpetation.
Exactly what in the above implies a 50/50 split?
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
From a consumer acceptance standpoint, it might if the web site can articulate a rational reason for the diffentiation, e.g., shipping costs, taxes, higher liability risks in a given geographic region, etc. From a practical standpoint, probably not.
The real problem I see is that it was differential pricing by individual computer, not by individual consumer.
Agreed. Under certain circumstances, consumers accept and/or expect price differentiation, e.g. Ladies Night, Happy Hour, Car dealers, etc. In others, In others, they will not accept it especially if it appears to be for arbitrary reasons.
I'm trying to ask if dynamic pricing for each individual consumer is unethical if geographic boundaries for all intents and purposes do not exist as a factor in the transaction.
Ethically? Depends on what set of ethics you are using. Practically, consumers will accept price differentiation if they can see a rational reason for the differentiation: volumn disconts, increase customers in off peak hours, etc. They will not accept it if they precieve it to be based on irrational factors, e.g. the color of shirt you are wearing.
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
There is a difference between what these computer manufactorers are doing and what Amazon did.
IBM will adjust its pricing "in real time based on metrics such as customer demand and product life cycle." They are using the same parameters to determine price as brick & mortar stores. The only difference is that it is done in "real time".
Amazon's scheme used a differenct set of parameters: which browser was being used, whether a consumer was a repeat or first-time customer and which Internet service provider address a customer was using. All of this was done without informing the customer. It would the equivelent as going into a store and getting a different price quote depending on the color of your shirt, your height and weight, etc.
The customer's experience will be different. Under Amazon's implementation, a customer would get one price will surfing at work, get a second price when he goes to place the order at home, and gets the first price again when he double checks it later at work again.
Under this implemtation, the changes in pricing would tend to follow a trend. Check at work and get one price. Order at home and get a higher (or lower) price. If the customer double checks the price again at work, he will either get the same price as the price he ordered it at home, or it will follow the trend of going higher (or lower) as the last time.
I don't see the customer's having the same reaction to this scheme as amazons as long as the web sites explain the factors that will effect the price and give the customer of getting a firm, fixed price quote.
I feel like picking a fight with everyone who thinks they are right. - Rainmakers
Tom Swiss | the infamous tms | http://www.infamous.net/
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
"When demand increases, the price increases."
* because there is less of a given resource per person *
The poster was saying that soda is an elastic resource. Unlike gold, or diamonds, if more people want soda, soda manufacturers can just make more.
Soda machines jacking prices up due to temperature has nothing to do with the scarcity of the resource. It's jacked up because it can be jacked up.
I sure wouldn't want to foot medical bills for ER doctors who operated under that premises. "Let's see, how much money do you have? Why, what a coincidence, that is *exactly* how much your emergency surgery costs!"
It's 10 PM. Do you know if you're un-American?
In the real life, a gorgeous girl will get the stuff for free. With a drink and extra money.
A salesman will buy it at a high price, but he will tell his boss he had a 40% discount. But he had to pay the restaurant to his partner for this (thanks to the company's credit card) .
A programmer will try to reverse-engineer the product/price crypto hash, he will finally find this is just another random() function, so he will buy the product at a random price.
A kernel hacker will wait until the price increases over 2^31-1 so that he would finally be negative, and the kernel hacker will be rich.
A hardware hacker will think that variable prices are due to variable electric intensity and consensators filling. He will get it from a californian reseller (without electricity, prices should be lower) .
Microsoft will think that variable prices shouldn't exist in May 2001. Because piracy is illegal and Windows XP is not released yet.
{{.sig}}
My brother's the same way. He habitually offers 50% to 75% of the asking price, even at large chain stores. And often gets at least some discount. He is 6'4", muscled, and and be somewhat menacing, tho...
- - - - -
Napster-to-go says "Fill and refill your compatible MP3 player", which is a lie. It's not MP3. It's WMA with DRM.
So while you might get annoyed, they still have your cash. You get hot and bothered, annoyed.. so you need another Coke. Well come to capitalism.
An Eye for an Eye will make the whole world blind - Gandhi
pfft.. first, order a couple computers. then order the one you want at a lower price. cancel orders for high price. problem solved, everyone happy.
//rdj
No one can understand the truth until he drinks of coffee's frothy goodness.
--Sheikh Abd-Al-Kadir, 1587
I remember a microeconomics class in college in which we discussed Victoria's Secret using price discrimination with gender being the price-determining factor. Apparently, men were being granted a greater discount than women on catalog purchases. I suppose (and hope) that most men are more reluctant to purchase lingerie than women, and Victoria's Secret decided to lower prices for men accordingly. Victoria's Secret was sued by a woman who alleged illegal price discrimination, and was eventually forced by the FTC to halt the practice. For those who want more information, check out Evaluating the Antitrust Risks of the Internet Entwined Business (cached by Google)
Sort of like how I got an email from netforward.com with 'Exciting News', the news being they were changing from a free service to a pay service. Oooh how exciting!
You don't need sensors to jack up the price when demand rises or supply goes down. Merchants have always done that, and always will. Heck, consumers do the same thing, and pay less when there is bigger supply.
And it's a good thing. It's how resources get allocated to where there is the biggest demand for them, and how a market system avoids shortages and surpluses. In the coke machine example that would mean that you got to the machine that hot day, it charged $1.25 as always, and was completely out of coke.
BTW, I thought those "evil coke machines" were an urban myth from a year or two ago?
Even at 75 cents it's a ripoff. The product costs about a penny and the bottle costs 3-5 cents.
Gamingmuseum.com: Give your 3D accelerator a rest.
Usually sales are done at the highest possible price achievable - per transaction. I've yet to have a seller knock off 20% after I've already agreed to the price.
/. folks don't just buy that new drive, monitor, etc. by going to one vendor and paying whatever is asked.
The thing that bothers me the most about this pricing approach though is that the intent appears to be to obscure and confuse the prospective buyer, primarily with the goal of preventing comparative shopping.
This predatory practice aims to get an extra buck by denying the consumer the ability to add a powerful, rational analysis tool. I'd expect most
Instead, you'll shop around a bit and see which vendor has the best price. This is a natural opportunity when you're purchasing goods that are of comperable value (e.g. more like commodities).
I'd doubt that it'll have much effect though. They'll get a few suckers who are easy marks regardless of where they shop. The fact that they're selling the same Intel processor, 3rd party motherboard, 3rd party drive, etc., the primary differentiator is price. Attempting to block consumers from evaluating that differentiator should only result in additional loss of market.
*scoove*
Prices change all the time. They're dynamic anyway. This just sounds like "real-time supply & demand". It's how things work anyways, just updated more often.
Jason
Presumably: unless both parties are willin to renegotiate. Which must be what's happning here (unless the vendor goes chasing after her, shouting "Fraud!")
--
Too stupid to live.
Too stupid to live.
Too stubborn to die.
Because both sides have verbally accepted does not mean you have to go through with the deal, which was the original claim.
You've always got the choice of simply backing out completely. It may be because the other side has made fraudulent claims, but you do have that choice.
Bait and switch relies on the fact that it's preferrable for the customer to pay the increased price than it is for them to go and purchase elsewhere (preferrable is a highly subjective term).
I'd expect a haggling market trader to be able to back out with no particular loss of investment. And if they are acknowledging "the cheek of it" then they are, in effect, renegotiating the customer a preferential rate just for the sheer affrontery.
--
Too stupid to live.
Too stupid to live.
Too stubborn to die.
It's gonna cost you more than 15 cents to drive 15 minutes.
When you're shopping for the best deal, you have to consider all the costs, not just the absolute cost of that item. I once saw a great deal on a refubished monitor online, only to discover that when you add shipping, the total was only 5 bucks less than a brand new one (including shipping). Both on the same website.
If I'd needed a new monitor, I would've bought the brand new one. For 5 bucks more, I get a full factory warranty and probably a couple more years of service.
BTW, I won't deal with online merchants that make you give all sorts of personal information before telling you what shipping will be.
Give me my freedom, and I'll take care of my own security, thank you.
this is just another reason why it's better to build you own servers.
E.
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This Post has been brought to you by the letter "E".
I don't like the idea of different prices for the same item or service, based on who the customer is. I like the idea that one person's money is as good as another's.
I realize that this practice is very common. Companies that sell software and service packages (I am thinking of SGI and IBM and some lisp vendors) often even ask for financial information from their corporate customers before they will give you a price quote. In the consumer realm, think of Intel purposely damaging some chips to sell them cheaper to lower end consumers -- it obviously cost them MORE to make the processor and then burn out the math co-processor, but the idea is to charge all the market will bear at the low end, and all the market will beat at the high end too.
They would like to further sub-divide the market, all the way down to individuals, and make the most money off of each person they can. Sometimes that works out better for the consumer, sometimes better for business, it's not always one way or the other. I think that in products for which there is a huge initial cost compared to the item or marginal cost ( the R&D and capital investment in a fab plant in Intel's case, the cost of writing the software compared to the cost of burning a CD in other cases ) this tactic is most desirable; because the business can make some profit at a very low price, but needs a higher average price to justify the investment. So they go for every penny out of each consumer.
This probably causes at least some products that would never be available to make it to the market. It also probably works out to the small consumer's advantage, because the business will make a higher profit margin off of business and big-ticket sales, essentially subsidizing the consumer sales to some extent.
But customer-specific prices are almost always a bad idea even when the economics looks good. The reason is that they hide information. When Amazon was doing it's little experiment, looking up a book on their site didn't tell you "THE" price of the book.
I see a certain freedom in the commodization of products and services. I like the idea that my dollars are just as good as anyone elses. I think that areas of business that were enthralled with the "special price for each customer" ideas are also the places that limit freedom -- like the loan officers who evaluate every applicant and sub-consciously (or consciously) deduct points for being black, the salesman who charge a higher price to the low volume folks because they can afford to loose them, etc.
Personally I build my own computers, since that's the easiest way to control exactly what is put in the machine and also avoid the Microsoft Tax. Hmm. Maybe I should start auctioning them off...
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Surely you see your behaviour as an expected part of the dynamic pricing scheme.
It fits into the equation. If you are willing to buy at a high price, for whatever reason, then you are willing to buy at an inflated price. Nobody is holding a gun to your head. And nobody is saying that because you are joe schmoe, price $X is the only one you are going to get.
The key to grasping this whole deal is the keyword willing. The consumer has to already be willing to buy at a certain price. The seller may profile you, and think they can sell you a widget for inflated price $Y. If they are correct, then you are willing to buy it and you might just do so. If they are wrong, and you aren't willing to buy it at the inflated price, then guess what? No Sale. Then what happens? Maybe the price goes down? Maybe you find another seller?
No different than going to an auto dealer, and heckling the price down from the bloated one they quote you as you walk in the door.
Which is quite interesting, because @themoment, who is supplying IBM's software for this, got into the business of dynamic e-commerce (auction/RFQ/bid-ask markets) in the interests of increasing information flow to maximize efficiency in markets, not to fuck over people by concealing information. Hehe. We all sell out our technology to the highest bidder in the end though, and if IBM wants to pay to increase their margins, you'll sell to them.
This sort of thing happens all the time in major cities, but it doesn't involve microchips. You see little carts selling umbrellas for $2 (or whatever). Whenever it starts raining, they flip the sign over and the price jumps 2x or 3x higher.
My wife is shopping for a laptop, and a couple visits to Dell's web store left us both thoroughly pissed off.
First you have to pick what type of customer you are. Hmm...I'm in education. My wife is in healthcare. We both work for a large business. And there's always "home user". It turns out that not only are the prices radically different each way you try it, but so is the selection of models you can choose. And of course, following the exact same click path at home in the evening gave us a different price than doing it at work in the afternoon.
Sure, it's not in the Constitution or anything. But it's what we want, and we're definitely not buying Dell, even though their deal was equal to (possibly better than, depending on the price of the minute) our backup choice.
I run a computer parts store. When the price that I have to pay for things such as RAM and Processors goes up, I up my price...when they go down, I lower it. My price sheet changes every day, as does my website. I really don't see the problem with this from an economic standpoint. They are making all the money they can. As a consumer, if you are willing to pay that price for the server, then you will.
OTOH, if there isn't a great demand for the product you want, they this will help you get it cheaper. When less people want to buy it the price will automatically go down! It's just all in how you look at it!
------ This has been provided as a public service! ------
*sigh* Either you gotta be a hot chick or a menacing brute. No hope for us pale and skinny geeks I presume... UNLESS, we start wearing fangs and lipstick! YEAH!
- Steeltoe
http://www.debunkingskeptics.com/
How about a targeted DOS-attack, and in the middle of the storm you buy your Stinkpads for a nickel.
- Steeltoe
http://www.debunkingskeptics.com/
Well, one point is that this will give them the opportunity to maximize profits by lowering their prices when they need to get rid of old stock. By doing this, they can earn more money and be more competitive. Or the CEO might just stick the surplus money in his own pocket.
- Steeltoe
http://www.debunkingskeptics.com/
I'd rather willingly pay $5 for a Coke than have it cost $1 but not be available. Supply and Demand equalize, everybody wins. Here's something that's actually questionable.
How about when movie theatres FORBID you to bring your own food and drink inside, thus creating their own monopoly where they rip you off?
Well, it's not as if they can enforce it.
When Amazon did it they gave different prices to different people based on thier individual actions within the site based on cookies. This new system for changing the price of computer equipment is based on inventory and many other factors that arn't really related to the user's actions. To me this seems much more fair that what Amazon did.\ =\=\=\
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Where I am employed full-time, we are a hardware (hammer and nails) wholesaler to small retail stores. We price things differently for various reasons, essentially coming down to 10 standard prices and any customer can be bound to a custom contract which modifies pricing further at the customer level. Essentially you go from a landed cost and through a pricing matrix for the customer to get their cost. And it may be as high as normal retail or as low as half of retail depending on the customer.
When I do contracting, I also have different pricing schemes for each of my clients, depending on a much more arbitrary rule of whether I like them or not. :) Maybe not that arbitrary, but it's still different prices for different customers.
Now, no one has a problem with this, lots of companies work the same way. But why is it wrong in consumer space? Just because it is consumer space? I guess I don't see a problem, as a consumer, if I don't like a price I will go somewhere else. Whether or not my price is the same as someone else is nothing I've ever considered to be gauranteed.
Free Online Woodworking Resources Directory
Of course, the answer is - drink water that you bring with you.
--
-- @rjamestaylor on Ello
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-- @rjamestaylor on Ello
Yeah Brainiac, and as soon as all the snow melts, the deliveryman will be able to get you your nice shiny new useless snow shovels. Oh you're being funny. Zone disabled shovels HA! Of course, if they could find a way to do it, they would. And shovel subscriptions. "Your shovel license has expired. Would you like to debit your account and continue to shovel?"
Ok my karma is maxed out. When do I become Enlightened?
Wrong. It starts snowing, so 5 different stores all raise the price of snow shovels. Or there's a hurricaine coming so plywood prices mysteriously shoot up...
Even if not all the stores raise the price, they know you're desperate and aren't going to be comparison shopping. I believe economists refer to this as 'got you by the short and curlies.'
Ok my karma is maxed out. When do I become Enlightened?
But I did! :)
:)
:)
I just felt like griping about contextual pricing because it bit my arse
I was rather happy to pay the money for the soda.. hehe.. saved me a 80 minute hike to my car and a 10 minute drive to the store, oh ida prolly dehydrated by that time. And it was actually water I bought. I was just showing the scenario
Jeremy
This is so bad IMO.
Anyone ever been to public parks.
Its the heat of the summer and your drenched in sweat desperately seeking a bottled water or coke machine because you forgot your drink.
You spot a coke machine and a bottle of coke (20oz of liquid) costs 3.75?!!?!?
Yes they call it "contextual pricing" just like from the article right? *cough*
Yet in the winter that coke costs oh say a mere 75 cents.
What gives?
The coke machines have thermometers in them and they jack the price up as the temperature increases / decreases.
How lovely.
When you are talking thousands of dollars this just is NOT going to work out. The backlash would be even more severe! Were no talking 5-10 bucks were talking 100-500 bucks here! Owch.
Id be annoyed enough about something like that.
Jeremy
How is this different than ordering memeory from crucial.com? They have a disclaimer on their site that basically says RAM is a volatile market so prices will change frequently. You won't get a refund if you order today and the price drops $10 tomorrow.
No, it is fraud already to offer a deal and then switch that deal to a worse one after the offer has been accepted. It is called "bait and switch", and is generally done by sellers, who advertise a product and then when you come to the store they are all out of that product but have a "newer, better" one available at a slightly higher price. Even if you agree to the new price, it is still fraud if they did not advertise the product as "limited supply".
ok then your [sic] infringing on my copyright! Could you as [sic] me next time before STEALING my comments for your own?
You can rest assurred that if i buy a computer from Dell that the price goes down later THAT SAME DAY that i'm going to be pist and that i'm going to want the difference back.
Yeah, I bought 100 shares of Yahoo back when it was $150/share, and the next day they lowered it to $100/share. I was very pissed and I called up my broker and told him I wanted the difference back, but he told me there was nothing I could do. Needless to say I never went with *that* broker again.
ok then your [sic] infringing on my copyright! Could you as [sic] me next time before STEALING my comments for your own?
Go shopping with this attitude: I want X, I am prepared to spend Y, if I can get it for less I'll feel happy.
Don't be worrying about what everybody else is getting, sometimes you'll be better off, sometimes worse, why stress?
Special Relativity: The person in the other queue thinks yours is moving faster.
Hell, at least it's better than reloading 500 times/min trying to get that magical "f1rst p0st!!!" (and always with a CID of >1). Dear God, the boredom those people must feel to resign to doing that all day long
That's it. I'm no longer part of Team Sanity.
Ah, the return of one of the basic tennants of "Whatever the traffic will bear"... That is, what the other guy don' know will profit you. After This much economic flux among the vendors, is anyone surprised that these companies yearn for the days of localized markets and price fluidity? Capitalism despises a level playing field like nature abhors a vacuum. When a fickle consumer can shave half a buck off a purchase with only the click of a mouse, and a switch of a vendor it's going to drive these guys nuts trying to figure out a new variant of "the prisoners dilemma" so they don't get left holding the zero sum.
In response to community outrage on dynamic pricing for sales conducted over the Internet, two online market makers, eBay and Priceline.com, announced that they will abandon dynamic pricing and go to fixed prices.
After this announcement, the price of eBay shares has been fixed to $61.25 on the NASDAQ.
It's not because you look like you can afford more. It's because their retail division pitched a shit fit when they realized that the web site was likely to undercut their bricks'n'mortar stores. So they make sure that you can't get a better price by using the web than you would get at the nearest strip mall.
politics, politics.
Wouldn't Marx argue that each computer user gets a computer according to his need for a computer and that computer makers should create computers according to their ability to design and manufacture them?
We tend to have a knee jerk reaction that this is a bad thing but it can work out pretty ok in the end for thoughtful consumers. Sometimes you can't get something for a good price, sometimes you'll get a fabulous deal. Just depends on what you want and when you want it. Try to get the same thing everyone else wants at the same time, expect to pay a premium.
In the end, the question is whether their terms will be favorable to consumers or simply a price gouge. Probably will be some of both. Don't like the approach, you always have the option to vote with your money about the approach you like.
I can see witing a little script to check the price pages untill the price drops below a certain point. Of course everyone will start doing it just like automated stock trading.
Any one want to give me a spot price for a June G6?
;)
I think I'll implement dynamic payment. That 1,200 check is in the mail! uh...uhh...wait a minute...I changed my mind. Here's 1,000. Did I say 1,000? I meant $800. Hey, if they can do it, why can't I?
"The IBM project, developed using software from @themoment in San Mateo, Calif., will allow Big Blue to automatically adjust pricing on its server line in real time based on metrics such as customer demand and product life cycle. As a result, customers will find that pricing will dynamically change when they visit IBM's Web site on any given day."
OK. So their going to try to apply real-time pricing based on perceived supply/demand. This seems to work best when there is only one clearinghouse where things are bought and sold, such as a stock market. In a stock market situation, everyone comes to ONE place to buy and sell. Prices are then set as trading occurs.
But in this situation, there are MANY, MANY places to buy computers. You can buy them from established sellers, from mom and pop places or assemble them yourself from parts. Futhermore, a large buyer is going to want a locked-in contract price - and is going to be able to better negociate a lower price. A smaller buyer will collect quotes from a number of sources and make an informed decision based on price/performance. Again, that smaller buyer will have a written quote. Most quotes have established time frames (ie 15 or 30 days). If IBM thinks that they'll win customers by suddenly raising their prices after 3 days, they're living in a dream world. Competition is such that MANY clearinghouses exist for computers and the buyer will just go elseswhere. Compounding this will be their OWN sales force. These people make money off commissions of products that they SELL. If there is a fine line between a sale or a customer walking away, the sales force will undermine the pricing system to make the sale.
Home users will shop for bargains just as they always do.
Given the razor-thin margins on hardware these days, I can't see great shifts in price for computer systems occurring on a daily basis. Sure a few dollars for a system can mean millions in the larger scheme of things, but screwing around neednessly with customers in a competitive sales environment is asking for trouble.
I found whenever I talk to our purchasing rep, they give is different prices based on how many you buy anyways, or special deals based on what they have available or the university default configuration. Isn't this extending normal sales practices to an automated system? Calum
Dunno how the law works where you are, but in the US an offer accepted is a deal. Your wife would have been obliged to pay the 15 pounds.
Imagine what happens if these vendors all vary their own prices based on each other's prices. That could get amusing.
Which begs the question if this is to be considered defrauding a Coke machine.
ich bin der musikant
mit taschenrechner in der hand
kraftwerk
I think it's a bad idea myself, but the key here is informing the customers. If they realize that this is going on, and is a condition of doing business with them, then it's not a big deal. Amazon's problem was that they didn't tell anyone this was happening. When people find out post facto, that's when it goes from bad to "screw you."
The Blaster Master Fighting for Truth, Justice, and Evil Pie since 1979
Capitalism + Communism = ...Dynamic Pricing?
Each customer pays according to his ability in order to get the hardware that each customer needs.
Hmm, I think I just killed Dynamic Pricing in the Western Hemisphere.
You see? You see? Your stupid minds! Stupid! Stupid!
I can just picture people clicking reload a hundred times on Dell's website trying to get a lower price for their new laptop.
And notice how everyone hates that.
Not a bad point. However, allow me to make a few of my own:
A company simply cannot admit that they are trying to maximize their profits by milking every cent out of their customers
Uh, why can't they? Although I don't see why you use the term "milking", a company saying that they're trying to maximize their profits isn't inherently bad. In fact, that's what being a business is all about.
I simply don't believe that markets for most components are such that it would require intraday updates
First of all, I'd like to see you explain your belifs here. Secondly, nobody said anything about "intraday" updates. Thirdly, there's really no "intraday" time period here; the price changes whenever it changes, and the consumer pricing system reflects that.
And on what basis should I buy Dell's assertion that they pass on savings "in almost real time?"
So don't. If you think Dell or anyone else is deliberately trying to skew prices for their advantage, then don't buy from them.
However, it's not like Dell is committing a crime by charging a higher price on their components than what they buy them for. It's called "markup".
You mention PriceWatch later on in your post. That's all the information you should need. If you can find a better deal for whatever you're buying, then buy from there, and quit whining about IBM not disclosing enough information.
But I have no faith that they are operating in my best interests
They're not... their operating in their own best interests. Their interests revolve around making a sale. One of the ways they do this is to offer a product at a price that best competes with all the other vendors out there. They're not trying to do you a favor.
I hope you were just trolling; if you were, let me congratulate you.
IMHO, this isn't a bad thing. Prices on computer components generally (but not always) tend to fall. This just means that your system supplier isn't overcharging for parts because they haven't updated the price to reflect the new wholesale cost yet.
IIRC, the furor over Amazon's dynamic pricing scheme was mostly because Amazon wanted to offer different customers different prices for the same item.
We all wanted computers to be commodity items. Here's the result. More than one hundred times the power and capacity at half the price, not even adjusting for inflation. I don't know why anybody would complain about it.
"The price is a little high today. I'll have to wait until tomorrow to get that 1.7Ghz, 1Gb RAM, 100Gb HD, 64Mb video, 5 channel surround-sound, 21" flat panel plasma display."
Oh, cry me a river!
- - - If the sun is a star, why can't I see it at night?
The solution is simple. You get your quote and dell will honour that price for x days. Then you get more quotes over that time period. Order from the lowest quote.
hey thats how my local computer shops work!
Dang it, how dare they try to follow a basic tenet of Economics, how dare they try to run their business as Capitalists. Has their exposure to the GPL taught them nothing?
In the Consumer Packaged Goods (soda, beer, candy, cereal, ice cream etc) the price is low and a great deal of the cost for it is advertising and distribution. Here, prices reflect the customers will to pay; at the supermarket people choose the cheapest, at the airport they don't have much choice but to pay up.
For more expensive and high-tech comsumer products, the price reflect the current market price of components and stock levels. This is how the automobile business work, for instance. Ever seen a factory incentive ? Ever seen a silly rebate att Dell.com ? They already do this, but this new initiative will be more real-time (as if real-time is a relative concept...) instead of using some weekly average as the base for the price.
Oh, I can't help quoting you because everything that you said rings true
if i understand properly, amazon did this based on some sort of cookie-mojo in the client's machine.
how much is my new dell going to cost if i wipe all the cookies from my box except theirs?
(not that i'd buy one anyway, but for example...)
hey, maybe apple will start doing this. then they'll realize what poor motherfuckers most of their customers are and finally drop their prices.
--saint----
This is EXACTLY the same as offering discounts to students and seniors at restaurants and movie theaters (or alternatively, charging more to people who are NOT students or seniors). It's the same as computer companies selling their wares at university campuses for substantial discounts if you can produce a student card. It's the same as stores in tourist districts that give discounts if you are a local customer. Few would argue that these discounts are unfair or predatory. But it is important to note that in these cases, students/seniors/locals are NOT being charged lower prices out of the goodness of the hearts of the companies, they are being charged lower prices as a result of price discrimination, and the motivations are purely profit-oriented. And that is how things should be.
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--Got Lists? | Top 95 Star Wars Line
It looks like I had a typo in there. The math goes like this:
$1,499 x 150 customers = $224,850 in added revenue, where in the example, those new customers would not have bought at the higher price of $1,500.
--CTH
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--Got Lists? | Top 95 Star Wars Line
The issue here is not that dynamic pricing is good or bad, but, how to implement it in markets where it has not previously been used.
The idea here is for companies to be able to sell to customers they would not otherwise have rached, by selling their product at a price the customer is willing to pay. For example, Dell sells a particular model of computer at $1500. At that price they may have 20,000 customers. Now, how about the next customer? There has cot to be a customer willing to buy the computer if only it was sold for $1,499. How many customers who would not otherwise have bought this model of computer, are now buying at the new price? This might bring in another 150 customers. Now, would it have been cost effective for dell to sell all 20,150 computers at $1,499? No They would have been losing almost a quarter of a million dollars in potential revenue ($244,850 to be exact). You can not reasonably expect a company to willfully choose to forego that revenue, and in order to generate that revenue when selling at the lower price, they would have to sell to another 163 customers - where in our example there are only 150 customers who will buy at the $14,99 price. In fact, that quarter of a million dollars in projected revenue might be the deciding factor in weather or not to produce this model of computer. This is an example of marginal revenue - which would have been simplified with graphs, but ayway...)
Now, lets look as the consumer/social value in this proposition. 150 users who would not have bought a Dell computer (of a certain quality) now have done so, thus enhancing their lives (to whatever degree having a Dell computer enhances your life).
I realize the numbers in the above example are way off, but it serves to demonstrate my point about marginal revenue. If the company could not make a predetermined percentage of proffit from the sale of this model of computer, they simply would not bother to sell it. This would negatively impact 20,150 consumers who would not have the opportunity to buy this Dell computer.
Marginal pricing and marginal revenue have been counted on for years in numerous industries, for example, when pricing gasoline. Oil companies charge different prices to gas stations in different parts of the country, and even different parts of a city. YOu can go to a bad neiborhood and get gas more cheeply than if you go to the good neiborhood. Interestingly, the net proffit made on the sale, by the independant gas station owners in this case might actually be exactly the same. Oil companies use a complex dynamic pricing model to determine the price at which gas is sold to various different gas stations. This has been the case for 50 years.It's only when dynamic pricing becomes visible to consumers on a one to one basis, are there any objections.
Not to put too fine a point on it, but we have been conditioned to believe that we have the right to be charged the same price as the next guy, for goods and services that we buy. This is simply not the case.
--CTH
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--Got Lists? | Top 95 Star Wars Line
Which is why you enter a zip code for a city in Arkansas, then place your order and have it shipped to your home in Connecticut. If the price changes, you cry foul and sic the AG on them. Whether or not you have a case, the publicity will do them no good. Victoria's Secret pulled this same crap with different editions of their catalog in different parts of the country. Guess what? People compared notes, got pissed, and the practice stopped. I predict more of the same.
CEE5210S The signal SIGHUP was received.
Many posters have already joked about writing a script to poll sites waiting for the best price. But, seriously, stocks are traded this way now. If this trend continues, there will be a time when consumers have intelligent agents on our sides, too, scouting prices for everything from guns to butter. And I think that the last thing these large vendors really want is a theoretically perfect market--because that will minimize their profits.
CEE5210S The signal SIGHUP was received.
But I digress--thanks for the link; it's good reading. I particularly liked
CEE5210S The signal SIGHUP was received.
I love this quote:
Of course it's hard! There is not any! If the goal is to "optimize profits" then it's against customers. However air tickets are already all sold with "dymnamic pricing" thanks to centralized electronic ticketing database. So I guess this is the future.
And what about when demand is low? Then you can get a bargain. It works both ways. In case you haven't noticed, most things in life are like this. Gas prices change daily, if not more often. Prices for food and clothing fluctuate. Computer prices fluctuate now for the same reasons, just slower. So this really isn't anything more revolutionary than the big boys using the technology they've been advertising for years in their own business (you know the ads: Our E-Business links your inventory to your web site!!)
I feel this same feeling of uncertainity would keep me off these Dynamic prices where I could miss a $100 bargain by a second. It can only attract the kind of bargain player that we have for traditional shopping but I wonder whether people like to be on the edge while shopping, that too a thing like a computer where you are buying it perhaps only once or at least not so often like clothes or such.
There's always sufficient, but not always at the right place nor for the right folks.
It sounds as if for the purpose of this exercise that Dell, Compaq and IBM jump to the conclusion that the purchaser and end-user are invariably the same.
In this industry, hardware specifications and prices are often checked and reported by consultants for their small business or corporate customers. It isn't untypical for the consultancy to cut orders for hardware and software, typically from separate suppliers, and deliver a bundled fully-configured system ready to transfer live data onto.
In this type of scenario it's unusual for the end-user to take a quote and turn around immediately and say "that's a good idea". More often it takes a few days to clarify it into a definite commitment. Radical price fluctuations in that kind of timeframe play havoc not only with consultancy profit margins, but the viability of transactions in that entire business sector.
Blowing off the website and going back to the telephone era isn't going to save MickeyD or Gerstner any money. These guys should read some of their own advertising and:
Use the power of the Information Superhighway for business to drive new transaction models, synergize new partner dynamics in the online community, queef on their swivelchairs and blah, blah, blah.
give me a
Emily Andren, a senior analyst at Boston-based Aberdeen Group, warns that IBM must communicate with its customers to avoid confusion and a potential backlash, similar to what happened with Amazon.com's failed dynamic pricing experiment. "It's hard to see the benefit to the customer," Andren said.
If you can't beat them, embrace and extend them.
better catch them prices quick!
samrolken
in certain cases!
When I was doing web design and hosting, I had something I call a "headache fee". This is where you charge those problem clients extra for being a complete pain in the ass!
A vacuum is a hell of a lot better than some of the stuff that nature replaces it with. - Tennessee Williams
- Dan I.
$1200-$1500 for a computer?!?
Build your own for half of that and show them where they can stick thier 'Dynamic Pricing'.
Even if you can't build it yourself almost everyone knows someone who can and probablyly would for next to nothing.
RA7
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"Consistency is the hobgoblin of small minds" - RWE
If you think the price it to high for a commodity, be it a Coke or a PC, then reevaluate your need for the commodity.
As far as the supplier of the commodity, it is in his/her best interest to charge as much as the market will bear, as long as he/she does not monopolize the market and/or act in collusion with other suppliers to artificially create a scarcity.
As far as the consumer of the commodity, it is in his/her interest to pay as little as possible for the commodity, and he/she will seek the lowest-priced supplier.
This is the concept of supply and demand.
I am all for that sort of dynamic pricing with the consumer.
(ever been to a swap-meet or a flea-market?)
The reality is that pricing is arbitrary. The people who set the price sit in an office on the 23rd floor of a concrete and glass building, and they do not know the reality of the consumer.
All I would say to potential users of this system is that they should give a complete daily history (with charts maybe) of the price of the item since it was first offered for sale (kind of like the stock market) and that they should give potential customers the opportunity to say how much they would be willing to pay (as a guideline, not auction-like where the item goes to the highest bidder).
If 30 people buy something one day, and the machine thinks that's a good return, then the machine may raise the price. The next day, with a higher price, 30 people buy the product, the computer thinks that's good and raises the price. The next day only 11 people buy the product, and the pc thnks that's bad, then lowers the price, and the next day 30 people buy the product and the machine thinks that's good, and raises the price, and then 35 people buy the product, the machine thinks that's good, and raises the price, and the next day 20 people buy the product and the machine thinks that's okay and leaves the price unchanged, and the next day 10 people buy the product and the machine thinks that's bad and lowers the price, and the next day 12 people buy the product and the machine thinks that's bad and lowers the price (and the factory gets a production reduction order) and 45 people buy the product and the machine thinks that's good and raises the price...
Well, you get the idea.
"Piter, too, is dead."
First off, you need to take more economics before you start marching out terms and mis-using them. In economic parlance, NOTHING can be just plain "elastic". It has to respond to something.
Now, in your example, I think you are trying to refer to price-elasticity. You are correct in saying that soda supply is price-elastic, but it IS effected by the weather. Hotter weather=>more demand=>higher prices=>more supply.
Now, I was also just flipping through the copy of "Microeconomics" by Katz and Rosen that is sitting on my desk.
Funny, but the defenition of a firm that sells its product based on demand alone is that of a "price-taker", i.e. a producer in a perfectly competitive market. You are wrong again--this is not the soda situation!
The situation with soda machines is akin to restaurants--each company produces a slightly different product that people have preferences for. Thus, producers "price-descriminate", that is, they charge the highest price that the market will take.
This is called smart business, supply and demand, and profit-maximization.
"Chill, Orrin!"---Trent Lott
If it wasn't for "dynamic pricing" a 386 would still be worth $3,000. Sometimes, rather than looking for a conspiracy, maybe we should consider how a process like this can still help us.
What do you people think a sale is? It's dynamic pricing... and it's to our advantage.
My other half has a great way of buying things at Junk Sales... When she sees somthing she wants, the conversation goes somthing like:
Wife: How Much?
Seller: £20
Wife: I'll give U £15
Seller: Ok, no probs
Wife: £12 it is then.
Seller: Ermm, Hang on,
She then gives them a tenner and takes away the goods, She usually gets away with it for the cheek!
I Wonder if this can be applied to Dynamic pricing.... They Say a PC's $1000, and you get it for somewhat less if you offer.
except when it's in retail sales. The price of 1,000,000 chips will vary from day to day. It also varies with the size of the order and with the seller's previous experience with the buyer. Dell and IBM are dealing with variable prices everyday with the stuff they buy. There was a time when every retail sale was negotiated -- if you wanted to buy one potato, you'd have to pick one out and argue with the grocer about the price. Some people enjoyed haggling, some hate it, but in any case you can waste a lot of time that way -- and if the grocer stands there negotiating with you for 10 minutes, he's going to have to make up the lost work time in higher prices somehow... So in the USA for a century or so retail sales have mostly been fixed price, except for items like cars and houses where there's enough money at stake to be worth it.
But computers make it easier to move back to a system where the price not only changes every few hours, but also depends on the seller's impression of the buyer, or some substitute for that. For instance, in buying an airline ticket you'll see a wide variety of prices for the same service -- the point being that if you are desperate to find _some_ flight going the right way at the right time, or are so rich that hunting through the mess isn't worth your time, the airline can get $1,000 out of you, while if you can go anytime and you put enough effort into looking up prices, you might spend $400 for the same seat.
But dynamic pricing does bother Americans, and I think it is worse when it's done by computer, since you can't haggle with it. In the old days, the ultimate argument was like "You only charged Mary Beth 3 cents for a potato this morning", and you'd either get a 3 cent potato or some (possibly valid) reason for the increase: "Her potato was smaller", or "I wasn't running out of potatoes this morning." But Amazon's computer would charge you a different price than it charged your friends, with no explanation and no one to listen to your complaints. That you could log in twice and get wildly different prices yourself just made it worse.
IBM and Dell are doing just partly dynamic pricing: changing the price as often as the price of parts or the load on their assembly line changes, but charging everyone ordering the same system at the same time the same price. It can get people a little confused, but it's not like Amazon's system. There is one thing that is crucial to keeping customers happy when you change prices frequently -- you give them a firm quotation that is good for a certain time period. If you look at Dell and the computer you want is $1,095 now, then go to other vendors to check prices, and when you come back to Dell it's now $1,195, you are quite likely to prefer the guys that have been quoting $1,200 all along. So what Dell should do is to give you a way to lock in the first price for a few days if their prices go up. I don't know if they are doing that or not -- but they'll lose customers if they don't.
What it is called is yield management. It works quite well. Based on the idea that if you have a finite inventory (this case a voyage or trip with xyz amount of space), you should be able to pre-sell most of it early, what is required to sell the space is small adjustments in the price.
The problems/joy comes when inventory approaches the extremes (very few seats, very open seating, or few days left before take off). The pricing model will adjust the prices so rapidly that 2 consumers can have 2 different prices and the difference could be huge percentages, 10 ? 40% in some cases and the tickets were purchased minutes apart.
For that reason, people should never book flights with less than 2 weeks or greater than 8 weeks from takeoff, unless they know that the flights will be booked out. Example is spring break, you can book that flight in December and pay less than if you booked in January. Same thing for USA to Europe, in June and July book 6 weeks in advance. For Hong Kong out of NYC, Cheapest flights are in September, October, & November and you can wait until the last 3 weeks to arrange it.
ONEPOINT
if you see me, smile and say hello.
Can we mod down this whole story submission as -1 Troll (or maybe Flamebait)?
1. Don't change prices too quickly. Small changes on the order of a day might be reasonable (e.g. the 5% daily wiggle in wholesale memory prices making 0.8% change in a computer's retail price) but large changes should not induce people to try to beat the system by buying at 9:45 p.m. on Saturday night. That just leaves people who bought right after lunch on Tuesday feeling they got ripped off because of some joker who doesn't have a life.
2. Price-protect. If a buyer finds the identical item for less at your site or a competitor's site within a week or 30 days or whatever, refund the difference. Those buyers who make the effort will be satisfied by your refund, and those who don't will never notice.
--Blair
You can rest assurred that if i buy a computer from Dell that the price goes down later THAT SAME DAY that i'm going to be pist and that i'm going to want the difference back. And that's bound to happen to a lot of people since the price is determined by what the in-stock and demand is like. Variables that are both being changed by my having made my purchase. Yes, i realize that both those variables will tend to push the price upwards, but then that's bound to piss someone off who saw a cheaper price earlier and then when he went to buy it was more expensive.
I think this is a pretty retarded idea, and i can't see how anyone like the marketing people at dell, and IBM that have marketing degrees or MBAs, and are supposedly smart people would think this is a good idea.
I'm not sure if adjusting your pricing to demand levels makes any sense when the economy is perceived as slowing down or stagnant... Or am I oversimplifying?
Your pizza just the way you ought to have it.
Really, this is nothing new. The retail term for what we're talking about is "Zone-Based Pricing." It's the same thing as when I go to McDonald's in Boston and pay $4.35 for the double cheeseburger combo, and in Nebraska I pay $3.25. It's just that there is a cost-of-living difference that retail chains will definately take advantage of.
Case in point, Staples.com. Nobody mentions it much, but Staples has zone-based pricing, not only in the stores, but now it has been implemented on their website. Didn't you ever wonder why they ask you for your zip code before you can browse their selections? It's because they will charge you different prices based upon your living area.
capitalism, capitalism.
...or maybe, like me, their time is more valuable than the small sum of money they might save if they shopped around. If the computer seems as if it's priced fairly, then that's all I care about. Why should I care that someone else got it cheaper? If it's within my budgeted amount, and it does what I want it to do, then I buy it. Possibly, the fact that I bought it at $2000 is the reason someone else could buy it for $1900. If it takes me 40 hours of research and 3 weeks of waiting to save $100, then it's not worth it. Everyone's time has a price. Otherwise convenience stores wouldn't exist. Noone would pay someone else to do their laundry. I myself think it's worth it to pay $35 to get my Saturday back.
If you fall off a building, go real limp, because maybe you'll look like a dummy and people will be like hey, free dummy
All we'd need is for someone to build a widget like the ones that track prices on auction sites or stock prices. You tell it to notify you via email when the price of the system you want drops below $2000, for example, and then just wait to buy your computer until you get the price you want.
Your fantasies contain the seeds of important concepts.
Is to create some kind of forum where people can share the "deal" they each got from IBM. If you go to your account rep and say, "I know so-and-so got the same hardware for $2000 less, give me that deal or else", most good account reps will find a way to get you that same deal.
Dynamic pricing is based on ignorance -- that you didn't know you could get a better deal. It is easily combatted with information. And becauase we're talking about large $ items here, not books and CD's, you can factor in the human element (i.e., the relationship between the customer and the company/account rep).
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Stay in school, kids! Peace out, Dubya
If I remember correctly, Amazon used their concept of dynamic pricing to gouge returning customers. This model seems to be set up to give the best price to customers based on inventory, availability, etc.
Who knows it may be a good thing.I'm a programmer, I don't have to spell correctly; I just have to spell consistently
Only in poor countries would you see this type of price shennanegans taking place.
What is this, e-bartering? What's next? E-Hunterer-and-Gatherer?
Most american's won't understand this, since they are for the most part sheep that will just hop on dell's site and price the computer, never thinking that compaq and ibm are doing the same price jacking....so it looks like a good deal...if they WERE aware, this would go over like a turd in a punch bowl....
Sent from your iPad.
that anyone here buys computers over the self, or online, from the big computer retailers. Most of them come with non-standard components that aren't compatible with Linux or most other non-Win/Mac OS's. Roll yer' own I say. It isn't hard at all.