Price Test Triggers Outrage on Internet
Will dynamic pricing become the next trend in e-commerce? Maybe, to unsuspecting consumers, it already is. The Internet provides consumers with many shopping advantages including the ease and availability of shopping from home, and the benefit of easily comparing merchandise and prices at various online retail locations. Dynamic pricing is a process where retailers (in this case, online) adjust their pricing according to information directly related to the purchasing consumer, or the conditions around them. An example of dynamic pricing in the physical world might be the local coffee shop charging more for hot coffee in the wintertime. This seems rather harmless, does it not? In e-commerce this kind of price fixing is worrisome because of the type of information a web site developer can retrieve from, or add to a visitor's computer using a variety of programming tools. There are few laws or regulations governing the use of the Internet, or protecting consumers' privacy. This creates a wide open door for online marketing schemes that take advantage of, or deceive the consumer.
David Sheffield, or the Washington Post, writes that Amazon.com, one of the leading online retailers, has been implementing a questionable pricing test. Using advanced technology, Amazon was able to place an electronic tag into the computer systems of all their web site visitors. When a consumer visited their web site, it would look for that tag on the visitors system to see if the visitor is a new or existing customer. By knowing this, the site would know what prices to display. Though one would think the repeat customer would benefit from this by getting price breaks, it was actually just the opposite. Amazon.com was charging higher prices for returning customers!
Bill Curry, spokesman for Amazon.com, is quoted as saying the price test "was done to determine consumers' responses to different discount levels." However, in an email exchange with a DVDTalk member, an Amazon customer service representative stated "I would first like to send along my most sincere apology for any confusion or frustration caused by our dynamic price test". Whether it was dynamic pricing, or not, the deeper issue of consumers' online privacy still remains.
Amazon.com was able to perform this "price test" because of a lack of laws regulating e-commerce, and consumer privacy. There are only a few laws now pertaining directly to Internet related issues, and most of these are state laws, not national.
Price discrimination can be defines as when a firm offers an “individual good at different prices to different consumers” The Library of Economics and Liberty elaborates on its pricing strategy, stating Comcast offers different pricing depending on what features the consumer desires. For instance, the cable company will charge a higher price to a person who uses several services as part of their cable package. Conversely, the firm charges a very low price to someone who would “otherwise not be interested” , providing basic services at a minimum price. It takes advantage of the regulation imposed on the cable industry by offering the required basic package at seemingly attractive prices. Using this pricing system allows for it to attract different consumers whose maximum price they are willing to pay differs. Recently, Comcast attempted a new billing strategy by introducing a data usage cap. It essentially expanded on the company’s existing price discrimination method by charging customers according to how much data they used each month. Comcast also utilizes penetration pricing, where it offers its product at low prices to attract new consumers, later raising the prices once the customer is subscribed for a certain amount of time. Generally it claims the original prices were promotional only, lasting only a small amount of
Amazon.com uses an internally developed system for its Website and substantially all aspects of transaction processing, including:
Have you ever wondered why do prices end with .99 or why it is that business are always making some kind of deal? Are these deals as beneficial as the customer thinks they are? What about the items priced higher than usually. Most people tend to think the higher the price the better quality right? Well, these are some of the topics this paper is going to help you better understand. Price points, Prestige Pricing, and Odd-evening pricing are all common price games used in the business world today. Price points are the different prices stores use to manipulate the consumers into buying what they want them to buy. I am sure everyone has wondered exactly what goes into the pricing of the items they purchase or what is it about these deals that keep luring me into the stores. Price gaming is a tricky business and businesses love how well it can manipulate the customer into believe and thinking a certain way. Showing you these three common price games will help you better understand and help you evaluate your purchasing decisions a little better.
Treanor, T.. (2010). Amazon: Love Them? Hate Them? Let's Follow the Money. Publishing Research Quarterly, 26(2), 119-128. Retrieved February 24, 2012, from ABI/INFORM Trade & Industry. (Document ID: 2377177581).
Treanor, T. (2010). Amazon: Love them? hate them? let's follow the money. Publishing Research Quarterly, 26(2), 119-128. doi:http://dx.doi.org/10.1007/s12109-010-9162-7
Scenario: Customers rave about the vast selection, fast shipping, and customer review option for each and every product on the Amazon.com website. The Fortune 500 e-commerce website, headquartered in Seattle, Washington, is the largest internet-based retailer in the United States. Customers are well informed about their purchase with customer reviews and Amazon has competitive prices. Amazon is one of the most successful businesses of our era and most valuable retailer of the country (Kantor & Streitfield, 2015). Amazon Prime members, a program with a yearly membership charge, receive special perks such as free shipping, unlimited streaming of television shows and movies, music streaming, downloads of free books, and many other deals and discounts
Bezos’ vision and mission statement for Amazon is “Our vision is to be earth 's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.” For the most part, this vison has been achieved, Amazon is the “top revenue maker in online retail worldwide” and is geared towards giving consumers the ability to find what they want on their marketplace site. In 2014, Amazon’s mission statement was changed “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” This was due to Amazon’s expansion of their range of consumers from only customers to customers,
Helgeson, James G., and Eric G. Gorger. "The Price Weapon: Developments In U.S. Predatory Pricing Law." Journal Of Business-To-Business Marketing 10.2 (2003): 3. Business Source Complete. Web. 15 Apr. 2014.
When Amazon.com first began in 1995, as strictly a book retailer, Bezos knew he had discovered an excellent company. After all, a physical bookstore cannot stock anywhere close to the number of books Amazon can offer online. Within a year, the company had a customer base of approximately 340,000 consumers and daily site visits were huge as well. But Bezos wanted to expand the company to offer music and DVDs, because he realized there was little or no barrier of entry. In the next years Amazon would emerge as a marketplace, expanding the company globally offering products from toys to kitchenware. Because of the relatively cheap prices Amazon was offering and also the growing number of online shoppers, the company was doing tremendous amounts of sales and creating profits.
Amazon’s macro-environment is made up of six external factors: political, economic, environmental, technological, social, and legal conditions. These factors are important because they shape how the company operates and you must know each piece to be able to compete within the retail and eCommerce industry. An evolving political factor are the efforts the government has made toward punishing offenders of cyber-crime. This kind of thief wasn’t walking into your store, but hacking into your computer. This type of crime wasn’t possible before the internet. The government has started to take these crimes more serious as technology evolves. Technology is a factor that Amazon.com must invest heavily in. They are reliant on having top of the line technology to survive against cyber-crime and to stay relevant in the tech world. ECommerce is everywhere now and competition is very high. This brings in legal conditions; Amazon must know what laws exist in which countries because they are a
Amazon is a growing and trending brand, giving consumers the unique shopping experience they have always wanted. The company that was started by 1999 man of the year, Jeff Bezos, has taken 44 percent market share in online sales and purchases. (http://bloomreach.com/2015/10/survey-amazon-is-burying-the-competiton-in-search/) That makes consumers more inclined to search for products through Amazon, before the well-known search engine powerhouse, Google. The Seattle, Washington based company was started in 1995. During the well-anticipated start-up, the company’s focus was on book sales online. Over time, Amazon has set many trends in Consumer Behavior, expanding products across every product pool imaginable. "Amazon.com puts the customer
.... Amazon uses the internet to allow customers to make content searches, for instance inside books. In addition it has used e-commerce to enable customers to buy online access to certain books through its upgrade program (Webanalyticsbook.com, 2007).
Amazon.com was a venture into an emerging market of internet and had to face hidden and unexpected hurdles in order to survive and excel in the market. Therefore, Amazon.com kept modifying its strategies with their focus on enhancing customer experience of online shopping and to delivery exceptional services with complete convenience to their customers. One of the major strategic decisions was to compromise on cost saving stragegy when Amazon.com started to maintain its own warehouses in different countries in order to ensure timely and accurate delivery to their customers
Another part of Amazon’s retail strategy is to serve as the channel for other retailers to sell their products and take a percentage of cut of every purchase. Amazon does not have to maintain inventory on slower-selling products. This strategy has made Amazon a ‘long tail’ leading retailer, expanding its available selection without a corresponding increase in overhead costs.
Amazon’s customer philosophy can be traced from a letter extracted to the 1997 Annual Report that stated their focal points by offering customers products that they think is worth buying. Amazon tries to set apart their operations by suggesting extraordinary way in doing transaction and start by offering online books whereby they can get access to it anytime they want. Other value-added offers include 1-ClickSM shopping, customer’s gift certificates and immensely reviews, browsing options, content and suggested features. Amazon strategy focuses on reducing the price. Thus, increase the customer value. Amazon became the market online bookselling leader by encouraging customers repeating purchases through the advertising strategy that is proven effective which was word of mouth approach.