More Dynamic Pricing Is on the Way

 
 
By Peter Coffee  |  Posted 2002-09-16 Email Print this article Print
 
 
 
 
 
 
 

Retailers who don't use dynamic pricing will be leaving money on the table.

Remember the scene in "Casablanca," when a bazaar merchant is trying to sell Ingrid Bergman a set of lace napkins? In a matter of seconds, the original 700-franc price tag is replaced, not once but twice, with others bearing lower figures. "For special friends of Ricks, we have a special discount!"—and the price falls to 100 francs.

What makes this scene stick in my mind is the sight of the merchant swapping one price tag for another and then another. The form of the transaction is Western: marked prices, the same price for any buyer. The substance of the transaction, though, is suggested by a proverb so old that its origin is unknown: "The value of a thing is whatever it will bring."

We may be coming to the end of what will someday be remembered as a short-lived, rather quaint 20th-century experiment in transactions that are not conducted as one-on-one negotiations between wily sellers and wary buyers. We need to prepare ourselves, I suggest, for a general move toward more dynamic pricing. Retailers who dont use it will be leaving money on the table, and buyers who wont face up to it will do likewise.

Were used to the idea of signing a complicated contract, with any number of price adjustment clauses, when buying massive custom-made capital equipment items. I remember once discussing the likelihood of a military coup in an African country when pricing equipment that depended on exotic materials. But we expect to buy a box of detergent for the price that pops up on the checkout scanner. Simple goods, simple transactions, right?

But if you hate the idea that the person sitting next to you on an airliner may have paid $50 less for a seat, how will you feel about the discovery that your box of detergent would have cost you 50 cents less at the same-named store on the other side of town? What will we pay to lubricate the flow of real-time data on the buying side, as smoothly as on the selling side, to minimize our regret without becoming full-time shoppers?

Some people find it easy to ask and answer the question, "What is this worth to me, right here, right now?" If the price of an offered good or service is less than that value, they make the deal—and dont look back. But the cost of such conviction is on the rise.

Tell me how you track moving-target prices at peter_coffee@ziffdavis.com.

 
 
 
 
Peter Coffee is Director of Platform Research at salesforce.com, where he serves as a liaison with the developer community to define the opportunity and clarify developers' technical requirements on the company's evolving Apex Platform. Peter previously spent 18 years with eWEEK (formerly PC Week), the national news magazine of enterprise technology practice, where he reviewed software development tools and methods and wrote regular columns on emerging technologies and professional community issues.Before he began writing full-time in 1989, Peter spent eleven years in technical and management positions at Exxon and The Aerospace Corporation, including management of the latter company's first desktop computing planning team and applied research in applications of artificial intelligence techniques. He holds an engineering degree from MIT and an MBA from Pepperdine University, he has held teaching appointments in computer science, business analytics and information systems management at Pepperdine, UCLA, and Chapman College.
 
 
 
 
 
 
 

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