[ZDNet] Amazon's preferential pricing

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From: Linda (joelinda1@home.com)
Date: Sun Sep 24 2000 - 05:25:17 PDT

[Another side to their "instant personalized recommendations."]


Behind Amazon's preferential pricing
Are some Amazon.com customers more equal than others?

By David Coursey, ZDNet News
September 11, 2000 7:45 AM ET

An interesting story in Computerworld last week detailed yet another
of the wonders of the Internet.

The story, "Amazon charging different prices for some DVDs," informs us
that the premier online retailer sometimes charges people $10 more for
the same item than other people buying it at the same time!

According to the newspaper, Amazon's DVD pricing depended on "many
different factors which browser was being used, whether a consumer
was a repeat or first-time customer, and which Internet service
provider a customer was using."

I hate to quote so much, but Linda Rosencrance, the reporter on the
story, tells it pretty well:
"Computerworld also checked the price of the "Men in Black" DVD and
discovered that on Netscape the quoted price was $25.97, while it cost
$23.97 on Internet Explorer.

After completely flushing the cache and cookie files of the PC being
used, the price remained $25.97 using the Netscape browser but had
risen to $27.97 with Internet Explorer."

Testing our patience

The company confirmed that different customers could be charged
different prices, describing the practice as a "test" but declining
to say exactly what was being tested or how long the tests would last.

Here's what I think Computerworld caught Amazon doing: It's called
"dynamic pricing," and in this case it involves putting customers
into groups based on how price-sensitive they appear to be. If someone
acceptsthe $10-higher price, say, three times in the row, maybe that's
all they will ever get in the future. Customers who always turned down
the higher price could always be given lower prices. I can't prove it,
but it wouldn't be the most underhanded thing a retailer has done. And
this dynamic pricing is perfectly within the capability of today's

Another potential for dynamic pricing: I've read an article in Fortune
that talks about Coca-Cola investigating how to build soft drink
machines that increase its prices as the outdoor temperature goes up.
Apparently, a Coke is worth more on a hot day than a cool one. (Pepsi
responded saying it would never consider "exploiting" consumers in
this manner, which I take to mean they regretted not thinking of it

My friend Richard Hart likened Amazon's pricing to walking up to the
counter at Safeway and having your items ring up higher than the person
just ahead of you.

What's the difference between you and the next guy? "This is what we
think you're willing to pay," the checker responds. Given the slow but
steady move to electronic shelf labels, we can soon expect groceries
to cost more at busy times and less at slow ones.

No, I don't go to Amazon for great prices but I don't like the idea
that someone is paying less than I am for the same item at the exact
same instant. If I want that, I can compare ticket prices with the
person next to me on the airplane. But thanks to the wonders of
Internet personalization, I can get higher prices from Amazon, just
for being the special person -- or sucker -- that
I am.

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