People will get mad at this but no one will ever reject a personal coupon in the basis that it is unfair for other customers.
I have had customers get annoyed when they find out we are charging more on Amazon (simply passing on the amazon fee). As a customer you will likely find on the amazon marketplace that an seller that also sells from a website will be doing a better price on the website. I guess in this case though the extra price is buying you some protection as the marketplace is very customer friendly.
For a simple introduction to the economics of price discrimination from a tech startup's point of view, Joel on Software has a great article [1] which, although it's from 2004, is still quite relevant. That article notes:
"[Charging different people different prices for the same product] pisses the heck off of people. People want to feel they're paying a fair price. They don't want to think they're paying extra...it seems like customers would rather pay $100 when everyone else is paying $100 than pay $79 if they know there's someone out there who got it for $78."
Once this becomes common place, I wonder if we will see proxy services that runs the same item through 100 different area codes to find the one with the cheapest results.
Oh absolutely. But there are lots of ways to figure out who you are. We had that discussion about Formalyzer and the 42floors article, a number of sites have it on their web pages. See http://news.ycombinator.com/item?id=4954972
Isn't this the ultimate goal, though? To be able to charge people exactly what they're willing to pay, no more, no less? The method they're using (your geographic location) is a little crude, for sure, but surely as retailers are able to build a better profile of their customers this is only going to happen more often.
Price discrimination, setting the price of a given product
for each customer individually according to his valuation
for it, can benefit from extensive information collected
online on the customers and thus contribute to the
profitability of e-commerce services. Another way to
discriminate among customers with different willingness to
pay is to steer them towards different sets of products
when they search within a product category (i.e., search
discrimination). Our main contribution in this paper is to
empirically demonstrate the existence of signs of both
price and search discrimination on the Internet, and to
uncover the information vectors used to facilitate them.
Supported by our findings, we outline the design of a
large-scale, distributed watchdog system that allows users
to detect discriminatory practices.
The paper only has preliminary results (hotnets targets fairly early ideas), but so far has only detected discrimination based on location and search terms.
This begs for a follow up paper from a psychological perspective, on psychological reaction by customers on finding out that somebody else paid a different price based on their shopping behavior.
If there is a very price sensitive shopping behavior this will lead to a strong increase of data noise by people trying to play the algorithms, e.g. fake accounts, deletion of accounts, groomed accounts towards specific deals, etc.
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Here's the thing- if it's based on location, social data, influence, hair color, none of that is illegal. Two things are illegal: 1) discrimination in the -ism sense of the word, and 2) price discrimination based on proximity to competitors in the markets wherein the company doing the price fixing holds a monopoly. #2 is what Staples could be running afoul of here. In the US, it's not illegal to have a monopoly (ie be the only Staples in a small town without an Office Depot/OfficeMax etc). It's also not illegal to engage in anti-competitive (ie under-cutting your competition in price, signing exclusivity contracts etc.) or anti-consumer (ie price discrimination, restriction of choice, etc.) practices. What IS illegal is engaging in anti-competitive practices in situations where you hold a monopoly, and that's what Staples may be in danger of doing here. And yes, I know Staples doesn't hold a monopoly over the entire internet but the value of brand identification / trust and convenience of in-store pickup shouldn't and won't be overlooked by regulators.
How about a simplistic argument against location-based pricing? (Yes, simplistic, but sometimes such an argument serves a purpose.) You're shopping "on the Internet", where there is no physical, "bricks and mortar" retail outlet. [1]
At most, put real differences in shipping costs into the "shipping" portion of the final total. (Something readily auditable.)
Anything else should get a long, hard look.
(I'd consider it akin the "redlining" in the real estate marketplace. Geographically based, but having an outsized impact upon specific demographic/cultural/racial groups.)
--
[1] Certainly, in the U.S., retailers have loved to embrace precisely this argument, from the perspective of avoiding state sales taxes.
12 comments
[ 4.3 ms ] story [ 17.5 ms ] threadI have had customers get annoyed when they find out we are charging more on Amazon (simply passing on the amazon fee). As a customer you will likely find on the amazon marketplace that an seller that also sells from a website will be doing a better price on the website. I guess in this case though the extra price is buying you some protection as the marketplace is very customer friendly.
"[Charging different people different prices for the same product] pisses the heck off of people. People want to feel they're paying a fair price. They don't want to think they're paying extra...it seems like customers would rather pay $100 when everyone else is paying $100 than pay $79 if they know there's someone out there who got it for $78."
[1] http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
Abstract:
The paper only has preliminary results (hotnets targets fairly early ideas), but so far has only detected discrimination based on location and search terms.If there is a very price sensitive shopping behavior this will lead to a strong increase of data noise by people trying to play the algorithms, e.g. fake accounts, deletion of accounts, groomed accounts towards specific deals, etc.
At most, put real differences in shipping costs into the "shipping" portion of the final total. (Something readily auditable.)
Anything else should get a long, hard look.
(I'd consider it akin the "redlining" in the real estate marketplace. Geographically based, but having an outsized impact upon specific demographic/cultural/racial groups.)
--
[1] Certainly, in the U.S., retailers have loved to embrace precisely this argument, from the perspective of avoiding state sales taxes.