Fair Data Mining?
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How far should data mining be taken? Is this an example of data mining going too far?
When I was studying economics in college, tiered pricing was one of those concepts that always seemed a little shady to me. The example I was given to illustrate where this takes place in the real world (since so many economics lessons seem to take place in some far away theoretical world) was of movie theater tickets.
If you've ever stopped to think about it, there are usually 4 or 5 prices to go see a movie at a theater. There's the kids price, usually a few dollars off what I pay. Then there's the senior price, usually close to or the same as the kids price. There's usually some "matinee" price, which rewards people who go to the movies at a slow time. Lastly there's the regular price, which seems to be aimed squarely at the working DBA 🙂
All of these prices are different, but the service is the same. A seat and a movie. But the theaters think they can get more business by discounting tickets to certain groups. Or maybe they think they can get more out of us working DBAs and are charging us more.
It's interesting to note that businesses do this differently. Airlines don't discount their seats for your kids. They're more a time sensitive and restriction discount oriented business. But they practice pricing whereby people sitting next to each other might have paid dramatically different prices.
I've had the Amazon pricing change occur to me and it was fairly obvious to me when it happened in my cart. I'd added books to my cart and then left them there for a few weeks. Maybe it's happened other times and I didn't realize it.
But are they looking at supply and demand? Are others adding the same book and they raise the price? Are they examining your profile and think you're likely to buy the book, so they're trying to make 5% more? They don't disclose why and when they decide to raise prices, and probably would be looking to prosecute any employees that did.
Is that fair? Is it fair that people grab PS3s, Harry Potter 5, or anything else that is in short supply and sell it on eBay? Is is less ethical for companies to profit than it is for individuals?
In some ways it is because companies control the supply, or a portion of it. I hate to see scalpers or other small enterprises expanding the supply lines and costing me more money, but it's a valid business model.
I definitely don't like to think I can't buy something from Amazon at the price they quoted, but I do realize things change. As consumers we're always shopping for better prices and many of us don't hesitate to return something if we can get a better price elsewhere. It's a thorny problem and one I'm not sure of the "ethical" way to go.
I've decided to either buy things right away or leave them out of my cart.
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The other example of dynamic pricing is ice cream in movie houses. The point here is that it is fairly difficult to bring in your own ice cream so they have a protected market. This is basically exploitation because the customer has no option but to buy from the movie house. Effectively, the movie house has a local monopoly.
The airline example raises a separate issue. Once you decide to run a plane service, you have x seats available. The only seats you know you can sell are presumably your business customers who can afford the "full" price. You next aim to maximise your revenue, so you sell the rest of the seats at whatever you can get for them. The closer to take off it gets, the more likely you are to take (much) less for them.
You get a similar situation when a surgeon charges lower prices for poorer people - it looks good but effectively if (s)he is going to do one operation, he has staff, a theatre etc etc so (s)he has spare capacity which (s)he can sell at whatever the market will bear.
When it comes to books, the book has been printed. The cost of the book is effectively fixed. The only reason to raise the price would be if there was some other bump in the transmission chain e.g. an increase in fed ex rates. This would apply to all books rather than to one title. If you get bumped on one title, then it seems fair to look elsewhere for a cheaper alternative.
The question of scalping raises different issues. In the UK there is talk of differential pricing in supermarkets to spread the load - shop mid week when the stores are relatively empty and get good prices, shop at weekends when the stores are busy and the discounts go. You get the same principle with stores that offer discounts to pensioners for mid week shopping. This is a trade off between cash and time. If a product is in short supply and you don't use price as a rationing mechanism, then you have to queue. If you don't want to queue, then you could pay somebody to queue for you, that's effectively what is happening when somebody gets a PS3 and sells it on e bay - they're getting paid for queuing for somebody else. The problem arises when ticket agencies or others get access to e.g. large blocks of tickets ahead of the normal customers - again the local monopoly problem. Then you get disquiet because the distribution is perceived as unfair.
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And wine in restaurants, which costs 10 times as much as at the supermarket...
Steve, the only way your decision not leave things in the cart will make any difference is if you persuade everyone else (or at least those with the same taste as you in books) to do the same thing. Even so, I've made the same decision...
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An interesting quandry, but the increase in cost could be due to you effectively blocking the sales chain. If they reserve the book for you and you leave it there in your basket without checking out, they have to hold it in a warehouse and the flow of their product is not as swift, since it could have been shipped to someone else, hence a penilisation, effectively to cover their (potential) losses.
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Thats an interesting idea, but I bet they hold 'hold' the book for you - and so no real cost to them.
I'm also not sure that just omitting from the cart is enough, after all you searched for it, read the comments, etc. Perhaps better is to search as one identity, purchase (or at least check price) as another. You'd think they would want to use your purchasing history/interest to close the deal and keep you coming back, not try to make another 5% for showing some brand loyalty.
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Thanks for the comments.
They don't "hold" the book for you. At least not for me. I've added stuff to my cart and then been notified that it's out of stock or on back order.
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Playing devils advocate, even if it is out of stock they may forward order it if saved in basket
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Here's another one for you:
I'm pretty sure that in some cases, professional sellers skim auctions on Ebay for items offered by private persons that are fairly current but that would sell under the "market" price. They take these items off the market by offering their own regular sales price or thereabouts. If they win the auction, the postage costs are a loss but they can continue selling their own stock at a high price and margin. If they're outbid, that's even better.
That's fair ?
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Think about it, they don't just lose the postage they lose their (high) margin. So they lose twice.
The seller gains because (s)he gets nearer the "market" price.
You, maybe, lose because you don't get the opportunity of a "bargain".
For this to make a major impact on sales and prices, they have to have a corner on the market in the first place so that the sales on e bay only represent a tiny proportion of the market and they can buy up the one or two items that slip throught the net. otherwise the numbers don't add up.
Alternately they are offering some sort of security.
The position is similar to buying a used car. You can go to a dealer and expect various protections and services in return for a premium price. Or you can go to a private buyer with no protection and a bargain price.
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The prices of these items were never about "ethics." Prices set by any company are about getting the maximum that the customer will pay; on the flipside, we all do this with our salaries, which are just a product of labor. We all know that's the point, so in a sense, when we're dealing with any business that doesn't adequately mine its data, we're coasting if we're one of the people who would be willing to pay more -- the masses of lower-paying people bring the "safe" price down. It's irrational to get upset about the companies' motivation at this point, since we've been under no delusions about it before.
In Amazon's case in particular, I often buy there because their price is so much lower, while still offering good service and reliability. If they raise their price, say, 10% on some books, it'll *still* be the lowest price for me, and they'll still get the sale. Are we claiming that Amazon offering me a book for the lowest price around -- though higher than it had been in the past -- is unethical? I think the major question for Amazon -- and others who adopt tiered pricing -- is that of diminished brand loyalty as a result.
But yeah, if you want to sidestep their mining figures, add your prospective items to a third-party wishlist, like Wishbin. They can link right back to Amazon, anyway. (Given the amount of searching I and others do on random things, I doubt Amazon has a low threshold on idle searches for increasing prices.) Leaving things out of your cart, doing more arbitrary searches, searching anonymously, adding tons of things to your wish list for long periods and not buying them, and other forms of obfuscation of their data is just a new way of tricking them into thinking you'll spend less. On the street, it's called haggling.
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Ironically, it seems to me that movies should have one more pricing tier - a close to movie time discount for prime times. This is because the closer it gets to a movie, the more the good seats fill up, so someone getting into the theater with 5 minutes until the movie** is likely to get a very poor seat. These poor seats, however, were built into the theater and are supposedly just as good as other seats (after all, they cost the same), but everyone knows they aren't. I guess this discount is indirectly applied via the matinee discount - those who don't want to fight with the primetime crowds just go at a slow time.
However, the same doesn't apply for plays, musicals, etc., which do have different pricing depending on where the seats are.
**Well, until the previews - which I like but which I can see may annoy people who have to wait through 20 minutes of them.
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Me I stick it to the theaters by going to my local drive-in which shows 2-3 movies for 8 by the car load. I shop the local used bookstore and search clearance. I am the guy who waits until Christmas stuff goes on sale (love my $10 7 foot fir from Target). But conversely I usually purchase more regularly than most folks and donate my existing items to shelters. There are no ethics when Money is involved regardless of what folks may say especially when dealing with a publically traded company, they have to answer to the market or pay the price. Good example is I bought a fan at WalMart for $5 but the next season it was on sale for $10. Many other companies have been caught recently making claims of 33% of retail and such by using the suggested price and not their price to provide the difference thus you may not be saving as much and in a few rare cases actually pay more than their normal price. Companies understand that their are key phrases that attract folks and use them to their advantage.
Remember if it says "Rare, Hard To Find, One of a Kind" on EBay it most likely is a dime a dozen.
But then you also have to add that people have become lazy and don't tend to shop as well when times are great. They tend to shop like they don't have common sense until they run into a bump and times are bad. Companies know this and they want the government to show good numbers to encourage buying regardless of need or ability to afford by the consumer.
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The movie theatres don't set their prices, the studios do. All the movie revenue goes to the studio, that's how they know how much money a movie made on the weekend. The theatre just gets the concession (popcorn etc) They might receive a fee for playing a movie, or have to pay a fee to get a movie. Since the silent films of the 20s the studios have never been good at running theaters, but it doesn't stop them from endless tinkering for your last dollar. With so many forms of entertainment today it's tougher than ever!
I'm more concerned about China manufacturing everything and North America consuming everything - how long can this be sustainable?
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Businesses have a responsibility to try to collect the highest price they can for whatever it is that they do. Consumers have a responsibility to try to drive that price down, by manipulating demand. Companies try to control demand by advertising, and manipulating supply (example: PS3 pre-releases, PS2 also did it), but ultimately consumers are responsible for demand. I think people should more carefully consider their purchases, because we do fall victim to unnatural market manipulation (like the movie example). For example, I would really like an HD camcorder, but at 1700 bucks for an entry-level unit, demand is low. Prices will be high until demand is higher, and to some degree a higher demand will result in improvements of the technology to make it cheaper. So what's a person to do? Avoid the movies... tell Hollywood that we won't pay inflated prices for inferior goods. If people would actually do this, the price would go down. Aside from Pirates of the Carribean, I don't think I've watched an American movie in 6 months. Foreign films are just giving me a better cost/benefit ratio right now. Eat it, Hollywood
As for data mining... how else are companies to judge demand? Demand can sort of be estimated by sales, but data mining techniques can be used to estimate non-sales demand. That is, as Acme CEO, I want to know how many people would buy my camcorder not at 1700, but 1200, 800, at 400? Then I need to estimate if that increased sales justifies a price drop. Data mining in that situation isn't Evil... it's responsible. Of course, when that data is used to raise prices, it feels a little weird to consumers, but read my first sentence again.
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Interesting article. Looks like capitolisim in action. I think it's completely fair that Amazon has the ability to do what they are doing.
I might research the prices for a digital camera, flat panel television, or other Big Ticket items and purchase them at a later date. Most things I'm going to find the lowest current price be it Amazon or anywhere online and make the purchase when I find it. Should I happen to cart the item and wait, and if they raise the price by an extreme case (like the $75) I will probably be inclined to re-evaluate the available current prices. If it's in and around a buck or two...I doubt I'd look twice. It's also possible the item may be cheaper than it was before.
I say Let the market work. If you don't like Amazon's buisness practices don't patronize their establishment. That option of the consumer is equally fair.
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