Graham, there's a line to be drawn and it usually falls at how we fare in relation to the next person. When I hear the phrase "value-based" applied to pricing, I assume that refers to the value placed by the buyer on a given transaction. It evokes an image where the buyers differentiate value in their own context. That's true for the shopper who knows prices are higher between 5pm and 7pm at the local grocery and chooses to shop there anyway. It is decidedly NOT true for the online retail buyer whose prices are decided by the vendor based on the degree to which they price shop. But if that is what it means, then the value in "value-based" refers to the value of the buyer as a raw resource to the seller who can refine that resource to a purer form so as to extract more value from it. "Dynamic Pricing" based on criteria such as time of day or proximity to a fixed service delivery time is generally considered fair. "Value-based pricing" if used to describe a competitive market such as an auction where the buyer makes their own assessment of value is generally considered fair. "Value-based pricing " if used to mean "we figure out how much of a premium we can charge you before you become price sensitive and start to shop around" is generally considered unfair. Differential pricing based on characteristics of the individual buyer will be an arms race between sellers devising new ways to hide their practices and buyers devising new ways to make them visible. It is the implementation in software of the haggling that used to go on in an open-air market between buyers and sellers. Except that rather than a negotiation between individuals, it is now a negotiation between software agents. Because those agents require R&D on both sides, the advantage goes to the side with the most money to invest up front - sellers. However, the delta of that advantage represents incentive to invest on the buyer's side. Once the premium extracted by sellers reaches a tipping point, buyers invest in counteractive technology. Sellers are competing with each other on which of them can most efficiently extract and refine value from the raw commodity that is people, reducing people in the process to quanta of price sensitivity along myriad axes. Nearly all of this depends on secrecy and outright deception because people don't like being the subject of these practices and tend to punish sellers when they discover they have been subjected to them. Left unchecked, the runaway positive feedback loop will have sellers and buyers forever spiraling up in this arms race of software agents. The highest role of VRM here is in its ability to provide sufficient negative feedback as to stop the runaway feedback loop that exists today. Which is yet another reason why I believe VRM will first sell to buyers and that the business case on the seller side is not to make them tons more money but rather for the seller's business to remain viable when the consumer side has more power in the relationship. The reason why we can't sell VRM is the disbelief on the seller side that consumers will have sufficient power to disrupt the market any time soon, if ever. They are waiting to see proof that there is anything disruptive on the consumer side that they cannot easily counter. When there is, value-based pricing disappears in a puff of smoke. Kind regards, -- T.Rob From: Graham Hill [mailto:
] Hi T.Rob Value-based pricing is a difficult area. On the one hand there is no logical reason why a person with a greater contextual need for a product should not be charged more than someone with a lesser need. This is the simple economic principle behind the widespread use of yield management by airlines, cruise lines, hotels and other companies with seasonal, perishable or variable value assets. And it works; airlines are estimated to increase their revenues by 4-6% through yield management without increasing their operating costs. On the other hand it can easily cause moral outrage and even lead to legislation enshrining pricing fairness. Amazon was roundly pilloried for its earlier crude experiments with variable DVD pricing (http://edition.cnn.com/2000/TECH/computing/09/13/amazon.reaction.idg/index.html?_s=PM:TECH). And the State of New Jersey has persecuted hundreds of companies for price gouging in the wake of Hurricane Sandy (http://www.njconsumeraffairs.gov/press/11282012.htm). Not everybody thought price gouging was unfair (http://www.forbes.com/sites/artcarden/2012/11/04/want-to-end-sandy-shortages-let-gougers-gouge/); which incidentally, rather raises the question whether economists live on the same planet as the rest of us. It also sparked a debate about what constitutes price gouging (http://www.nj.com/business/index.ssf/2012/11/bamboozled_after_sandy_a_debat.html). Value-bsed pricing will most likely increase in usage. The conditions under which it works best are now well understood (http://www.insead.edu/facultyresearch/research/doc.cfm?did=925). I wonder how this should apply to VRM. Should customers in the most need by charged higher prices? It's good for sellers but not so good for customers. Should all customers be charged the same price?It's good for customers but not so good for vendors. As the witches in Macbeth chant, "fair is foul an foul is fair"! What do you think? Best regards from Cologne, Graham On 17 Feb 2014, at 18:41, "T.Rob" <
">
> wrote: A live demonstration of differential pricing. Congratulations, you've won the Amazon price-insensitive lottery. Kind regards, -- T.Rob From: Lionel Wolberger [mailto:lwolberg@gmail.com] (Hope all these emails are not too annoying--I am just sharing this differential pricing on the part of Amazon) I have Hardcover $20.15 Kindle, $14.85 All my unprotected browsers show the higher price. And get this--after I log in to Amazon in Mozilla--the price goes down to 14.85. Very strange, screenshots attached. On Mon, Feb 17, 2014 at 8:23 PM, T.Rob <
" target="_blank">
> wrote: > , and the water sweeter than that of any of their large competitors. Which I think makes my point. If the criteria for good service is relative to everyone else then it is possible to be enormously successful and yet provide terrible service. (i.e. insert cable company name of choice here.) I didn't say Amazon's service is not the best, only that when viewed on an absolute rather than relative scale it doesn't rise to the level of good unless your purchases consistently fall within the peak of their bell curve. I'm happy to state the yardstick. For starters, I'd like my vendors to refrain from coercion when attempting to trap me within their walled garden. I have every right to do whatever I want with my transactional data, including maintain databases of my collection of media. However, it'd be nice if I wasn't required to enter that data by hand so I asked Amazon whether I could use their API to fetch the detail of my past book purchases. Not only am I not allowed to fetch that data, but I was told that if it ended up on Goodreads - even if I entered it by hand - that I might find all my digital book purchases rescinded. The folks at Goodreads, who at the time were not owned by Amazon and had been battling with them over data issues, were so intimidated that they threatened to close my account just for talking in the forums about populating my profile with Amazon purchase data. > I'm sure they'd be interested if we gave them a well-thought out business case. I'm sorry, but I refuse to articulate a business case to not blackmail me. It's the wrong discussion to have and not one I'll participate in. But setting that aside for a moment, one of the issues that I have is the standard strategy of very large companies to clear customer service cases by having a primary filter tier which assumes the customer is a total idiot. Now, I've worked in customer service and realize that you do clear a lot of cases this way but at some point it should be possible to earn sufficient reputation to bypass this tier. Then when, for example, you send in a customer service query concerning the Amazon MP3 player the response is not that a trained monkey (probably an autoimated program) sends you back a link to the MP3 FAQ rather than someone with high reading comprehension scores takeing the time to actually understasnd and respond to the complaint. I would think that there's a business case to be made for not treating all customers as if they are not total idiots but this may by my customer-oriented thinking and not market-oriented thinking. It may be that the reason most large companies treat all initial customer service inquiries as if they come from total idiots is that it is profitable to do so. But by the same token, so long as it is profitable to treat customers like total idiots we will never see a race to the top in customer service. And this to me is the essence of the tension on this list regarding the viability of VRM. So long as it is profitable to treat customers like total idiots, then there is no business case for VRM and VRM will not primarily be a tool with which companies increase their profit margin. However, VRM in the hands of consumers can make policies that treat people like total idiots become unprofitable. So given a choice between expending lots of effort to get utilities to do smart meters the right way versus just buying a Neurio and lots of Ube (rebranding to Plum) devices, I'll get the stuff that meets my needs today. And since I have the data I need, I'll probably participate in protests against the utility's smart meters, especially if they continue to deploy them with no security whatsoever. Amazon is so deeply entrenched that there are fewer opportunities to disrupt them but I recently participated in two Kickstarter campaigns which netted me dozens of books in hardcopy, digital and audio formats. True there are some I won't read but those two purchases offset 10 or more Amazon/Audible purchases. I'll build out on the Enterprise side wherever and whenever I can. I won't stop approaching my Enterprise customers with VRM proposals. But even the early Enterprise adopters are positioning to ride a wave that won't ever come if this isn't built out on the customer side. The market cannot differentiate on something the customer cannot see, measure or influence. VRM has to be built out on the customer side before we can have a race to the top in customer service. Amazon being a prime example of that. Kind regards, -- T.Rob From: Dan Blum [mailto:
" target="_blank">
] But if you judge Amazon by what they actually do, I think the glass is half full, at least, and the water sweeter than that of any of their large competitors - First big company to sell songs as MP3's for 99 cents - Twice I had problems with a Kindle. Both times they answer the phone and one time they just sent me a new Kindle - Once I accidentally bought two copies of the same book. I easily found the link to deal with the problem and not only did they give me a refund they didn't trouble me to mail them the second book back. - Yesterday I got a copy of Uncle Tom's Cabin (free on the Kindle) and 99 cents for whispersync to audible.com - I have a free linux virtual machine to play around with in AWS - they never stalk me or bother me in any way that I've noticed The message I'm replying to seems to question Amazon's motives and hold them up against some unstated yardstick. I think we would do well to examine companies like Amazon from this perspective - "how could more VRM in their business model, or more focus on high-quality customer relationships, make them more money?" I'm sure they'd be interested if we gave them a well-thought out business case. Dan On Mon, Feb 17, 2014 at 9:58 AM, T.Rob <
" target="_blank">
> wrote: > There is no doubt that Amazon is good to its customers. Seriously? They are my go-to example of being too-big-to-care. In my experience they are "good to customers" only so long as the customer is near the peak of the bell curve. Do anything in the shoulder and you begin to see the customer service unravel. Get out in the long tail and there is none. I know there are Amazonians in our community and I hope they don't take this the wrong way. What amazon does well they do extremely well. But if they are to fix the things they fall down on they must, as in the famed 12-step program, first admit there's a problem. I'm happy to provide an extensive (but hardly exhaustive) list of issues I've personally found, all of which I guarantee to be substantive, but I do not think it is on topic for this thread. > Everybody I know who works for the company, from Jeff Bezos on down, talks about how the company puts customers first. Whether they do this because they believe it to be true would be an interesting discussion to have with Bezos. He has to know there's a percentage of people like me. If he thinks our issues are substantive and truly wants to put the customer first, you'd think he'd be reaching out to us. However, if he thinks there is no substance to our issues and claims, then he's surprisingly clueless. I suspect the truth is somewhere in the middle. Perhaps he doesn't know how to make VRM work in such a way as to effectively solicit our feedback. > They do that, I think, mostly with low prices and efficient delivery. But one does wonder about other costs, such as the ones cited below. To the extent that you pay a higher price if they believe you are price insensitive, that whole "low prices" thing is a myth. Those who care and price shop are detected with a high degree of effectiveness and become the public voice attesting to the low prices. Those who are less likely to notice pay more and - by definition - they don't notice. The argument in favor of this practice is that the people paying more value other things such as service. But I bristle over that claim because a) it's based on deception; and b) you have to deliver great service to make the claim. That leaves efficient delivery. You cannot *be* an online retailer if you cannot deliver the products people buy. Is the ability to deliver the products really the bar we set for exceptional quality of an online retailer? I thought that would be the table stakes. There is something to be said in minimizing exceptional cases but at the end of the day what defines great customer service is how you handle exceptions. Amazon seems to me to be so focused on minimizing the exceptions that they figure they do not need to set a high standard when it comes to resolving them. One would hope that any discussion of good companies would include their internal policies, but if we are limiting to Johannes' original criteria of companies that are good to their customers Amazon aint it. When he posed the original question I was unable to think of a single company to nominate. Part of the problem is that I'm old and my experience of great customer service was the indoctrination I received when I hired on at Publix. They never aspired to be better than the competition. They aspired to be great as measured on objective criteria. Nowadays companies seem to measure their performance relative to other companies. Those who have become King of the Hill don't seem to notice it's a dung hill, but oh how they celebrate being on top. Kind regards, -- T.Rob T.Robert Wyatt, Managing partner IoPT Consulting, LLC +1 704-443-TROB -- Dr. Graham Hill UK +44 7564 122 633 DE +49 170 487 6192 Partner Optima Partners Senior Associate Nyras Capital |
Archive powered by MHonArc 2.6.19.