USA TODAY story about NETP:
Why the price is often right, By Elizabeth Weise, USA TODAY
The ability to compare one person's actions against a database of what thousands of others have done makes personalization and differential pricing possible. One company that does it is Net Perceptions, a Minneapolis firm that builds analytical database programs it calls "recommendation engines."
Say a merchant notices that, based on past buying behavior, a customer is interested in things on sale. "I might recommend that when you're on the site, I'd check to see what was on my overstock list that might be of interest to you, and offer you a 45% discount," says Steve Larsen, vice president for marketing.
That kind of offer won't work without recommendation programs that make a pretty good guess at what a given customer wants, because "giving you something at 45% discount with no relevance to you isn't going to work," he says.
Prices already are more fluid than we imagine, Larsen says. His company wrote an add-on program for auction site Bid.com that figures out what items you might need and offers you a discount on them.
It works by comparing the items in your shopping cart with similar purchases by other customers, then making a statistical guess about what else you want based on what others buying similar groupings have bought.
"If you buy one or two items and our recommendation engine comes up with a third item, it's usually 20% or 30% off," Larsen says. "The rationale is there's already a truck coming to your house and a box open, so it's OK to offer a discount because the company will still make money."
Differential pricing won't work for everything, says Michael Krupit, a technologist with CDnow.
With commodity items such as CDs, which are exactly comparable and low margin, price isn't the deciding factor.
Personalization can get his customers the content, merchandise and features that most interest them, but "it's not like we're going to give you a bargain that we wouldn't give to someone else," Krupit says.
That doesn't mean CDnow won't give you some incentives, says Krupit, whose company uses a recommendation program built by Net Perceptions. Visit too many times without buying and the site might pop up a "Hey, you haven't bought anything from us recently. Here's a $5-off coupon" notice on the screen, he says.
But beware: What can seem like individual pricing may be something entirely different.
One CDnow customer noticed that if he put items on his "wish list," the third or fourth time he stopped by the site they suddenly were on sale. While that might have seemed personal, it wasn't, Krupit says.
"If Melissa Manchester is on your wish list and we find her on a lot of people's wish lists, she'll go on sale -- for everyone." usatoday.com |
