Sunday, June 19, 2005

The case for transparency in pricing

It's Suspiciously Cozy In the Cybermarket

In September 2000, got headlines when customers found that the same DVDs were being offered to different buyers at discounts of 30, 35 or 40 percent. Amazon insisted the discounts were part of a random "price test," but critics suggested they were based on customer profiling. After weeks of bad press, the firm offered to refund the difference to buyers who had paid the higher prices. The company vowed it wouldn't happen again.

Frequent computer users I've talked to -- like my fairly hip students -- don't really believe such assurances. Frankly, it's hard for any dispassionate observer to believe there's no "price customization" when associates from the influential McKinsey consulting firm write in a 2004 Harvard Business Review article that online companies are missing out on a "big opportunity" if they are not tracking customers and adjusting prices accordingly -- either to attract new buyers or get more of their money.

Secret police market research is ghastly PR. No one likes to be spied on.

Your customers talk to each other; if you treat them differently they will find out. Post your prices openly, put them on your marketing literature. Systems Integrators tell me they can’t do that because every installation is different. Perhaps, but in most cases 80% of their installations will consist of the same configuration with the same installation, training and maintenance package. Nothing inspires more confidence than transparent pricing.

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