Joho the Blog
An Entry from the Archives

On the other hand, in 2000, Amazon got itself into a power of trouble by trying to discriminate prices on a geographical basis. They figured, correctly, that not only could people on Nob Hill in Boston afford higher prices for a book, they were used to paying them. Therefore it seemed reasonable to use the zip codes in logged in members' records to price the books differently in boston from Bug Tussle Arkansas.

What they forgot is that, while netizens give up their privacy to play in this game, businesses give up their distance from their competitors. Imagine that your business has to survive in a place where it is surrounded by all of your competitors where comparison shoping costs nothing, in fact My Simon will do that for me. Imagine too that I can, at trivial cost, compare the costs of your products with all of your other customers.

The knife cuts both ways and will continue to distort business models based on a calculation that says if the marginal cost of my finding and shopping somewhere less expensive exceeds the difference in price, you get the sale.

Earl's axiom for this is "Profits are the cost to the customer of their ignorance". When the cost of education falls to almost nothing, that business model gets much harder to play.

Just to clarify one minor point in the last comment… it’s beacon hill in boston… though it’s very similar to nob hill in sf… anyway, with regards to the price/heat sensitive coke machine, people absolutely hated the idea…. I think it’s more the idea of a machine deciding the price they hated… If my mom&pop store changes the price I might be disturbed, but not enough to stop coming back… gee they still maintain their price premium, I’m a smart guy sometimes, but I still will go to the mom&pop store and pay a 40% premium over driving to the Super Stop for the same Coke… though I’m at a loss to see how this premium pricing model can be put into practice on the web… no amount of service can make me but my DV camera when it’s $300 cheaper on a site that’s been rated with an OK service….

Very few services can support dynamic pricing… the travel industry and mobile phone industry being two of the more success stories for price obscurity… still they are dealing time sensitive goods, where as I don’t really care if my DV camera shows up in 3 or 4 days, I still can use anytime… with the travel industry model, it’s like buying a DV camera for $200, but you can use it only on Saturdays and my girl would not be allowed to use it…. Though what might work to some degree, is that if I’m a website and you shop between 12am and 6am your local time, my prices are 10% cheaper…

Thanks Steve, goptta bone up on US geography. Nob, SF, Beacon/Boston, knob/SF Bacon/Buns.

I think it is also the overt gouging implied. If M&P hedge the price a little from day to day, they also probably give a little extra discount to good customers and so forth. The Coke machine sent a completely cynical message, "you want cool on a hot hot day? Pony up sucker"

Apart from shortchanging you, I'd bet nothing is more likely to get your vending machine kicked in than a ripoff programme in the pricing mechanism

I always thought that the temperature-sensitive Coke machine was a good idea*, just badly packaged. They should have billed it as a machine that lowers the price of Coke when the temperature gets cooler.

*Inasmuch as anything that accepts money in exchange for something that tastes like, as Berke Breathed put it, "malted battery acid", is a good thing.