Google Patents Profit-Maximizing Dynamic Pricing

theodp writes "A newly-granted Google patent on Dynamic Pricing of Electronic Content describes how information gleaned from your search history and social networking activity can be used against you by providing tell-tale clues for your propensity to pay jacked-up prices to 'reconsume' electronic content, such as 'watching a video recording, reading an electronic book, playing a game, or listening to an audio recording.' The patent is illustrated with drawings showing how some individuals can be convinced to pay 4x what others will be charged for the same item. From the patent: 'According to one innovative aspect of the subject matter described by this specification, a system may use this information to tailor the price that is offered to the particular user to repurchase the particular item of electronic content. By not applying discounts for users that may, in relation to a typical user, be more inclined to repurchase a particular product, profits may increase.' Hey, wasn't this kind of dynamic pricing once considered evil?"

Comments

Translation: "Milk Your Biggest Fans"

[crazyjj]

This guy has bought every Madden game ever: No discount on Madden 13 for him.
This guy has never bought a Madden game: Give him a $10 discount to incentivize him.

Sounds great in theory. Sounds ever better in a Google ad pitching the idea. But the reality is that you're about to screw over your biggest fans and supporters. And if they get wind of it, you consequently risk LOSING some of your biggest fans and supporters. Penalizing your fans for being your fans could result in an epic backlash.

Now there are some fan groups (not mentioning any names here), whose members would probably respond to this kind of abuse with a smile an a "Thank you sir, may I have another?!?" But I imagine most people would be none-to-happy to learn that their loyalty to a product line has been rewarded with a backhanded insult.

Not to mention the fact that you can bet that some of the more unscrupulous and technically-minded people out there will quickly learn how to game the system.

BTW, I've never bought a Madden game. Can I get a coupon, EA?

Re:Translation: "Milk Your Biggest Fans"

[schnell]

I find it extremely frustrating when a service to which I've subscribed (for years!) offers extreme discounts to new customers, but won't help me

Here's the deal. I work for an extremely large megacorporation which essentially has the same policies. Why? Because it's understood that it costs money (in terms of advertising or special deals) to steal a customer from a competitor, whereas keeping an existing customer is a presumption. Do you know why? Because most customers of service providers in even marginally competitive industries - whether that's cellphones, magazine subscriptions, TV service, home security systems, even home grocery delivery services - stay with their current provider ad infinitum unless they get REALLY p***ed off or someone else gives them a really good incentive to change. All these service providers (if they're smart) give you a (financially speaking) EXCESSIVE discount upfront to bring you on board just because it's a pain in the butt (usually) to switch once you've signed up. No evil involved necessarily, just regular consumer inertia.

So, to get the best deal, you need to get out of being a presumptive renewal for your service provider and become a potential customer loss. As soon as your contract is up, call your service provider and tell them you're cancelling. If they are not brain dead - or unless they're super polite - they will not say "sure, sorry to see you leave us forever." Instead, because these businesses understand that if you leave they will have to lay out those EXACT SAME DISCOUNTS to replace you, you will get them offered to you. It may take a little haggling and an escalation in customer care, but you will eventually get roughly equivalent deals.

Theoretically it shouldn't be this way in terms of rewarding customer loyalty... but from a bottom line perspective, it's (unfortunately) the logically correct thing to do. If you look at it from the company's perspective, they are "leaving money on the table" with every existing customer to whom they offer the discount who wasn't a risk to leave. Make sense?