Which Price is Right?

slashdotNum2Big2Register writes "An interesting article at fastcompany about how things are being priced nowadays. The only drawback that concerns me is how each item and price can be connected to an individual. Amazon was already found to be doing this with their prices."

Comments

Airline Pricing..and others

[RaboKrabekian]

The idea of pricing products is to charge every consumer the maximum amount they're willing to pay. The trick is that it's usually very hard to have a purshasing system that allows such price variance. Airline pricing is one example - the closer you are to the date you wish to fly, the higher the price. (This is a vast oversimplification, but you get the idea). This is because business travelers, who need to fly at a moment's notice, are willig to pay much more than a recreational traveler, who's planning vacations 6 months in advance and shopping for the best deal. Businesses like Amazone are going to try and use every edge they can to increase their margins. From their point of view it's a great idea to use the technology they already have.

Re:Airline Pricing..and others

[callipygian-showsyst]

The idea of pricing products is to charge every consumer the maximum amount they're willing to pay.

This turns the conventional (American) model of retailing on its head! Typically, the POORER you are, the MORE you pay for things.

Think of the services that we offer to poor people:

• Rent-to-own furniture stores
• Check-cashing stores
• Payday loans
• Car loans
• 19% Credit Card interest (on secured cards!)

Conversely, better-off people never pay for anything! For example I can't remember the last time I paid for an airline ticket! My company flys me around a couple of times a month, and that keeps me well-stocked in frequent flyer miles. I get samples of new computers, software, etc, because companies think I'll influence developers and purchasers.

The super-rich get even more freebies. For example, I know a bunch of folks here who got free electric cars from GM because GM wanted people in affluent neighborhoods to see others driving them.

Now, I'm not implying something's wrong here--I think many people are poor because they make bad financial choices (like payday loans!) and not because the "system" is against them. But it's true that the RICHER you are, the LESS you pay for things. If Amazon (or whoever) manages to reverse this by charging more to people who won't notice, it'll turn American marketing on its head!

Re:Airline Pricing..and others

[Hentai]

Now, I'm not implying something's wrong here--I think many people are poor because they make bad financial choices (like payday loans!) and not because the "system" is against them.

You think maybe they wouldn't HAVE to make those "choices" if maybe they weren't poor? And maybe they wouldn't BE poor if they didn't have to make those "choices"? Christ, man, can't you recognize a feedback loop when you see one?

I'd say about 50% of poor people are poor because they're stupid, and the other 50% are poor because they're oppressed. I've nearly slid into poverty twice now, and I assure you, the further down the slope you slide, the harder it is to find purchase and keep from sliding further.

I'd also say that about 20% of rich people are rich because they're shrewd, and the other 80% are rich because they're priveleged. I've nearly "made it big" three times now, and I assure you, it's not WHAT you know, it's WHO you know.

"To those that have, much shall be given. To those that have not, even that which they have shall be taken away." Why is one man's fundamental human will "worth" more just because his daddy can fund his entrepeneuralship and get him the right connections to land 50 million dollar deals, while another man - with just as much talent and integrity - is forced to work at McDonalds and get nickeled-and-dimed to death, paying rent on a house he'll never own, taking loans just to feed himself, until one day a computer glitch fucks up his credit rating and his only two choises are starve or steal?

There's gotta be a better way.

pricing discussions

[mgkimsal2]

There are a few forums I used to frequent, one for webmasters. It was mostly freelancers or one-man shops, from what I could tell, but the forum moderators were strict to the point of being stupid over 'pricing discussions'. "We can be sued for supporting price fixing" is the standard response.

One person asked what it was customary to charge for a certain type of service. I replied back that I've seen people charge anywhere from $50 to $1500. *THAT* was considered 'potential price fixing'. How a number with a variation of hundreds of percents could be 'fixed' is well beyond my comprehension.

You'd think then that magazines or websites which have pricing on them (like, for example, ecommerce sites) would be collaborating in price fixing, as they can see info from other companies, and those companies can see their info, and adjust things accordingly.

There's a difference between knowing what someone else charges and actively engaging numerous people to all sell at a particular price, but people don't seem to see the difference.

Re:pricing discussions

[MacJedi]

I'll tell you why they didn't want you to talk about it: asymmetric information benefits the supplier.

Amazons pricing

[Foofoobar]

I was a buyer at Amazon from 95-97 and helped build their buying dept and I can tell you that it is even more insidious than that. They buy straight from publishers/manufacturer when they can on almost all of the most popular items so they can get a 55-60% discount.

And thanks to me, they get a killer deal on shipping due to a little known program known as consignment shipping via UPS so they pay less than half of what they normally would pay; though they charge you for the full price of shipping, nearly all of this money goes straight into their pocket. They now claim it is for the manpower to ship your book but I have an Uncle that works for the warehouse down in Nevada and gets paid minimum and the time it takes to fill an order is less than 3 minutes ($10/hr x 3 seconds = approx 0.75).

Now, they then charge full price and have items that they overstocked pull up higher in searches with edited customer reviews to make them appear better than they are. True fact. They started editing reviews back when I was there.

Oh the horror stories I could tell...

"...people just like the feel of a dead tree in their hands." -Jeff Bezos

Then on top of that

All of this neglects to mention one thing

[Stubtify]

Well the article mentions how technology is helping the businesses, but not the consumer. Yes Amazon keeps track of your past purchases, yes if I search for anything there is a list of "suggestions" on the side. Yes I may not see the same prices as you do, but all of this doesnt matter for one reason.

I can go anywhere I want to buy anything amazon has to offer me. The internet allows me to shop around with minimal effort. "Memory sticks are $52 at amazon? Well I saw them at compusa for $42"

I'm not worried about this because I don't shop and expect to get the lowest price unless I do some work. That amount of work has lessend with pricewatch and other deal sites, and this is where I think technology is hurting companies. Its too bad that neither article mentioned this, I would like to see how they plan on combatting it. Remember when "price matching" was all the rage?

I mean, amazon.com's prices are usually very flexible, they flood the market with coupon codes, free shipping, and so what if they charge more to an idiot who is willing to pay it. If they notice you're only buying the things that you see as being cheapest from them they'll realize whats up or their software isn't worth jack.

Discriminatory pricing

[andy@petdance.com]

Am I the only one who has taken basic economics?

It's called "discriminatory pricing", and is not at all illegal or unethical. Look at your local movie theater. Say they charge $2 for kids and $7 for adults. Why? Because they'd have a family of four pay $18 dollars, rather than that family not go at all because it's $28. 1 x $18 > 0 x $28

Same thing with cheap night. Tuesdays, all seats are $2, because they'd rather have some people at $2/seat, rather than no people at $7/seat.

What really baffles me is that people think they're entitled to know what goes on behind the scenes when businesses set prices, or base buying decisions on that. "They're charging $7 for shipping when it only costs then a dollar!" So what? Is the total value of getting the items to your house worth it, or isn't it?

Re:Fleecing the poor

[sphealey]

Financial services to the poor have, all else equal, much higher default risk. And default costs swamp everything else. Consider that the margin over cost of funds for most consumer credit is 2-3%. A default rate of 1% destroys the profitability.

And the proof of this is in the market. Credit companies are neither bashful nor shy. If there was money to make, your friends and Cap One and First USA would divert some of 1 billion or so peices of mail then send.

The "higher risk" theory explains a difference in credit costs of up to x%. We can argue what x is: 10, 20, 50? But it does not explain differences in credit costs of 100, 200, up to 10,000%.

And no, SuperBank isn't going to jump in to the low end market just because there is a profit to be made, for two reasons: historical under-the-table handshake agreements not to do so (see Crabgrass Frontier, referenced in another post, for an example of how this was done with home mortgages for 90 years) and the fact that buttoned down, upper-middle-class bankers flat out don't like to do business in less savory neighborhoods. If they don't feel comfortable driving the BMW there, they won't make a loan there either, regardless of the potential profit.

sPh

Too bad Coke pricing isn't weather sensitive

[fname]

For those that read the article, I think it's a shame that Coke's weather sensitive pricing model failed. If it had worked, then often a Coke would cost less (who would want to drink it on a cold day), other times it would cost more. But here's the beneficial part. Now, I bet Coke machines are a lot more likely to go empty on hot days than they are on cold days, because people buy more. Have you ever been in a situation where you would gladly pay $3.00 for a Coke/ bottle of water, if only one were available. Well, with weather sensitive (and inventory sensitive) pricing you could. Once stock gets too low, the price rises, and only the truly thirsty drink. Brilliant!

Personally, I've paid $3+ for a bottle of water before, usually b/c I'm really thirsty and that's the only option. Now, if I'm dieing due to dehydration, it's certainly immoral to charge more than a fair/ standard price. Otherwise, let me make the decision.

Last note on bottled drink prices. They are expensive at sporting events, airports and rock concerts. Why? Scarcity of supply, which drives up prices, increases profits, which either go to maintain the airport and line the owner's pockets;. Note that the vendor doesn't relly make a killing. The rent (and other fixed costs) that he pays reflect the fact that he can maintain very high profit margins. I have no problem with that.

However, it makes my blood boil when I go to an event or place that charges $4+ for any sort of drink, and does not have drinking fountains available. I think it's a matter of time before some public parks decide to remove their water fountains (at some indeterminable savings), and gives the monopoly soft-drink contract to Coke or Pepsi, who then proceed to charge $1 for every drink in a public place. The park rangers/ city councilors will claim it's a win-win-win b/c 1) The city "saves" money by removing the water fountains, 2) the city is paid for giving the monopoly contract, 3) the consumers have a wider variety of drink choice! HAH!

I'd actually be fine with the scenario if there were no monopoly contract, b/c then the pricing would likely be reasonable. Ever notice how cheap Coke is in a Coke machine when it's next to a Pepsi machine? That's why the vendor wants the monopoly contract, and why public entities should NEVER give a true monopoly soft-drink contract (i.e, monopoly contract and water fountain removal).

Re:Fleecing the poor

[milo_Gwalthny]

First, just for kicks, I'd like to see an example of a 10,000% difference in credit cost. A very cheap mortgage, one of the cheapest of consumer credits, is about 6%, all in. That would mean there is someone charging 600% to some poor devil. Doubtful--yes, illegal--almost certainly. If you're talking about "no interest" car loans, you should read the financial statements of a car company with a finance division, and try to seperate credit cost from price. You'll find that the credit cost GMAC records is not what you see in the flashy Pontiac ad.

Second, plenty of SuperBanks are trying to do business in less affluent neighborhoods while making money, but quietly. For instance, many large banks have been trying to buy into the storefront check cashing business. They try to stay low profile because the vig these places extract is insultingly high, and they don't want to insult anyone. On the other hand, if they opened their own, they realize they could not charge much less and make money.

There are plenty of places that even you wouldn't want to drive your car (despite your superior attitude) that greedy capitalists have been happy to invest in--think Nigeria, Colombia and some of the grittier ex-Soviet republics: you will certainly see the familiar red of the Coca-Cola logo and perhaps the golden arches, and you probably won't see the oil/arms company exec behind the tinted glass of his armored Mercedes.

If there is money to be made, believe me, someone will be there to make it.

PERFECT competition - Re:Rehash

[SpikeSpiff]

I agree. No market is perfectly competitive. Most markets fit somehwere on the continuum between perfection and complete regulation.

This has no impact on the arguement at a Micro-Economic level.

Hypothetically, imagine that you are a clever entrepreneur, and start your own restaurant. The restaurant is doing well, so you decide to hire a IT person. You advertise on Monster and get 50 resumes. (In this economy you get 500 resumes). You winnow the list to the 10 qualified applicants, and then discover that 4 of them want 30% less money. Which do you hire?

This decision certainly does not depend on anonymity, identical applicants, or PERFECT competition. It just depends on smart people doing a good job of hiring.

I don't believe that we have a gender gap in productivity or ability. I believe we have a statistics gap.