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

Not defending them,

[MindlessAutomata]

Not defending anyone that uses this pricing scheme, but what makes people think they have a right to something at any price? A strong sense of entitlement. Anyone familiar with sales knows that the more someone wants something the higher they'll pay. All the complainers are going to have used their own knowledge of someone's desires to benefit themselves sometime in their life, and they'll still remain self-righteous and indignant.

Re:Not defending them,

[Todd Knarr]

It's not that we expect things at any particular price. It's an expectation of basic fairness: that the store won't quietly double their normal prices just because I'm wearing a suit when I walk in, in the hopes of getting me to pay more than they'd normally charge.

And I've seen price discrimination backfire. When I lived up in northern Nevada, I remember the story (straight from the cowboy involved) of the scruffy cowboy who'd pulled up to the lot in a rusted-out beater truck and started looking at the expensive trucks. The new salesguy who'd "got stuck with him" tried arguing with him and pushing him towards the used cars. The cowboy was pretty adamant, and finally got mad and left. The salesguy figured no great loss, and he didn't have to deal with the stink of cowpies anymore.

Next day, the owner called all the salesguys in and called the new guy up front to congratulate him. On costing the dealership the sale of 15 brand-new pick-up trucks to a ranch's fleet. Plus loss of the maintenance on that ranch's fleet. Oh, and the loss of all business from one of the local drilling companies. Turns out, that scruffy cowboy? Was the owner of the ranch and drilling company in question. He'd just come in from helping fix a broken truck and bringing in some cows that'd gotten out, and was looking to replace all his trucks before he had more breakdowns. He was driving the beater truck because that was the one available to run out and take care of the problem, and he'd decided if that was the way he was going to be treated then he'd just take all his business somewhere where they had better manners. Oops.

Now imagine the owner of your company listening to a couple of his friends complain that when they went to buy something for their kids from his company, they were seeing prices a lot higher than what they knew other people were paying, and they weren't happy about it. Do you think the owner's going to be happy with you for getting his friends mad at him because of this new pricing scheme? Didn't think so.

price discrimination a.k.a. price differentiation

[nluv4hs]

This is merely a new way to implement a ubiquitous and venerable concept: price discrimination. There is hardly a thing in the world that some man can not make a little worse and sell a little cheaper.

evil?

[Yakasha]

It takes advantage of people not knowledgeable about what they're doing.

Personally, I consider that evil. It is why I quit my job working for a payday loan company. They prey on poor, stupid people.

However, technically, it can also lead to lower prices for some people. If the real price is slightly too high for you, they'll lower it for you without losing money on every single sale and the lowered price will probably make you inclined to come back... at which point the price will probably go back up and like everything else just fluctuate like a pendulum.

And legally... I think it falls in line with what is accepted practice. Businesses have always fluctuated their prices based on consumer demand. This just lets them get more personal.

Re:Translation: "Milk Your Biggest Fans"

[redneckmother]

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.

Amen. 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 with access to improved equipment or services [cough] -HughesNet- [cough].

Re:The good side of software patents

[ceoyoyo]

Ha ha ha ha. I was waiting for the first person to suggest this. Google, the world's greatest data aggregation and advertising company, patents using aggregated data to sell people stuff at the maximum price, and you think they're doing it so it can never be used? Yeah right.

Re:Translation: "Milk Your Biggest Fans"

[west]

More to the point, it's the *opposite* of unscrupulous - the poster is fulfilling his place in the marketplace and the company programs are operating as intended.

He gets cheap stuff because price is important to him and the company makes some minimal profit, while the rest of us who prefer leisure time to saving a few bucks pay more. These discounts are meant to allow a company to capture both ends of the market at the same time, rather than going with only the low end and making little money, or going with the high-end, and losing a bunch of price sensitive customers.

Nothing wrong with having a program with a few holes in it, as long as the customers have to work for the discount.

That said, while price discrimination tends to increase customer satisfaction over all, human logic is dysfunctional enough that many people feel enraged when they learned they paid more than someone else instead of simply enjoying their consumer surplus.

Kind of like the people who sell a little early in a rising market, making millions, and then when the markets kept going up, become distraught because they could have made many more millions.